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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1999
REGISTRATION STATEMENT NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BEACON CAPITAL PARTNERS, INC.
(Exact name of registrant as specified in its charter)
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MARYLAND 04-3403281
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
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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
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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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.
THIS REGISTRATION STATEMENT ON FORM S-3 AMENDS POST-EFFECTIVE AMENDMENT NO.
5 TO THE REGISTRATION STATEMENT ON FORM S-11 (NO. 333-56937) OF BEACON CAPITAL
PARTNERS, INC. FILED WITH THE COMMISSION ON AUGUST 27, 1999. THE SHARES
REGISTERED HEREBY WERE ORIGINALLY REGISTERED ON THE REGISTRATION STATEMENT ON
FORM S-11 (NO. 333-56937) OF BEACON CAPITAL PARTNERS, INC. FILED WITH THE
COMMISSION ON JUNE 16, 1998. AS A REGISTRATION FEE WAS PAID ON THE SHARES
REGISTERED HEREBY IN CONNECTION WITH THEIR ORIGINAL REGISTRATION, NO
REGISTRATION FEE IS BEING PAID IN CONNECTION HEREWITH.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 18, 1999
20,394,843 SHARES
BEACON CAPITAL PARTNERS, INC.
COMMON STOCK
------------------
Beacon Capital Partners, Inc., is a real estate investment trust (a "REIT")
that conducts real estate investment and development activities.
This Prospectus relates to 20,394,843 shares of our Common Stock which may
be sold by certain Selling Stockholders. We are registering these securities on
behalf of Selling Stockholders. We are not selling any of these securities and
we will not receive any proceeds from the sale of these securities.
Our principal executive offices are located at One Federal Street, 26th
Floor, Boston, Massachusetts 02110. Our telephone number is (617) 457-0400.
INVESTING IN THESE SECURITIES INVOLVES CERTAIN RISKS. THE FOLLOWING
DISCUSSION SUMMARIZES SOME OF THESE RISKS. YOU SHOULD CAREFULLY CONSIDER THE
INFORMATION SET FORTH IN "RISK FACTORS" BEGINNING ON PAGE 4.
- We rely upon two key personnel.
- We have a limited operating history.
- There is currently no market for our Common Stock and we do not currently
plan to list our Common Stock on an exchange or on The Nasdaq Stock
Market.
- We intend to leverage our assets, and may, under our current guidelines,
borrow up to 60% of our total market capitalization. This may compound
losses. Our organizational documents contain no limits on our ability to
leverage our assets.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is November , 1999.
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TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS.................................. 1
PROSPECTUS SUMMARY.......................................... 2
Selling Stockholders...................................... 2
Summary Risk Factors...................................... 2
The Offering.............................................. 3
The Company............................................... 3
RISK FACTORS................................................ 4
Economic and Business Risks............................... 4
We Depend on Key Personnel Whose Continued Service is
Not Guaranteed......................................... 4
We May Not Successfully Implement Our Growth Strategy... 4
Additional Financing May Not Be Available............. 4
We May Fail to Effectively Manage Our Rapid Growth.... 4
Complex Acquisitions Have a Greater Risk of Failure... 4
Development or Redevelopment of Assets is Costly and
May Not Yield Economic Benefits...................... 5
Conflicts of Interest Exist Between the Company and
Others................................................. 5
Conflicts Relating to the Operating Partnership....... 5
Conflicts Relating to the BCP Sister Corp............. 6
Conflicts Relating to the Incentive Return............ 6
Policies With Respect to Conflicts of Interest........ 7
Leverage Can Reduce Income Available for Distribution to
Stockholders........................................... 7
Risks Associated With Hedging Investments and
Investments in Derivatives............................. 7
The Company's Insurance Will Not Cover All Losses....... 8
Property Taxes Decrease Returns on Real Estate.......... 8
Compliance with Americans with Disabilities Act and
Other Changes in Governmental Rules and Regulations May
Be Costly.............................................. 8
Adverse Effect on Results of Operations Due to Possible
Environmental Liabilities.............................. 9
BCP Sister Corp. Will Have Separate Financing, Which May
Not Be Available....................................... 9
We Are a Newly-Organized Corporation With a Limited
Operating History...................................... 10
Investment Activity Risks................................. 10
Appropriate Investments May Not Be Available............ 10
Real Estate Is Illiquid and Value Is Dependent on
Conditions Beyond the Company's
Control............................................... 10
We Must Compete With Other Companies For Acquisitions... 11
We Must Be Able to Pay Off Our Financing................ 11
Real Estate Investment Risks............................ 11
Risks Relating to Our Investment in Beacon Capital
Strategic Partners, L.P................................ 11
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The Terms of Our Investment Potentially Reduce
Potential Profits to the
Company From Individual Investments................. 11
We Are Restricted From Making Certain Types of
Investments.......................................... 12
Risks Related to Investments in Mortgage Loans.......... 12
Commercial Mortgage Loans May Involve a Risk of
Loss................................................. 12
Volatility of Values of Mortgaged Properties May
Adversely Affect the Company's Mortgage Loans........ 13
General Default Risks................................. 13
Our Multi-Sector Investment Strategy is More Complicated
Than a Single-Sector Investment Strategy............... 13
Geographically Concentrated Assets Are Vulnerable to
Downturns in Local Economic Conditions................. 14
New Markets May Have Conditions Unlike Our Existing
Markets................................................ 14
We Will Not Have Full Control Over Investments Made
Through Partnerships and Joint Ventures................ 15
We Will Not Have Full Control Over Investments Made
Through Subsidiaries................................... 15
Foreign Real Properties Are Subject to Currency
Conversion Risks and Uncertainty of Foreign Laws....... 15
Legal and Tax Risks....................................... 16
Tax Risks............................................... 16
Adverse Impact of Future Legislation Regarding REITs.... 17
Aggregate Stock Ownership Limit May Restrict Business
Combination Opportunities.............................. 17
Foreign Investors Should Consider Tax Risks Under
FIRPTA................................................. 18
Plans Should Consider ERISA Risks of Investing in Common
Stock.................................................. 18
Changes in Management May Be Deterred................... 19
Board of Directors May Change Certain Policies Without
Stockholder Consent.................................... 19
Loss of Investment Company Act Exemption Would Adversely
Affect the Company..................................... 19
Limitation on Liability of Officers and Directors of the
Company................................................ 19
Other Risks............................................... 20
Risk that Market for Common Stock Will Not Develop...... 20
ABOUT THIS PROSPECTUS....................................... 21
WHERE YOU CAN FIND MORE INFORMATION......................... 21
USE OF PROCEEDS............................................. 22
SELLING STOCKHOLDERS........................................ 22
PLAN OF DISTRIBUTION........................................ 32
LEGAL MATTERS............................................... 33
EXPERTS..................................................... 33
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FORWARD-LOOKING STATEMENTS
This Prospectus, including the information incorporated by reference into
this Prospectus, contains statements that are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. When we use the words "anticipate," "believe,"
"estimate," "expect" and other similar expressions in this Prospectus, they are
generally intended to identify forward-looking statements. In connection with
such forward-looking statements, you should consider that they involve known and
unknown risks, uncertainties and other factors which are, in some cases, beyond
our control and which could materially affect our actual results, performance or
achievements. Factors that could cause our actual results, performances or
achievements to differ materially from those expressed or implied by our
forward-looking statements include, but are not limited to, the following:
-- potential developments or acquisitions or dispositions of properties;
-- our qualifications as a real estate investment trust under the Internal
Revenue Code;
-- the real estate markets in Seattle, Washington, Sunnyvale, California,
and Boston, Massachusetts;
-- the implementation of our plan to address Year 2000 issues;
-- the anticipated operating performance of our investments;
-- the availability of debt and equity financing;
-- interest rates;
-- availability of qualified personnel;
-- trends affecting our financial condition or result of operations;
-- changes in, or the failure or inability to comply with, governmental
regulation;
-- the impact of pending or future litigation; and
-- international, national, regional and local economic and political
changes.
We caution you that, while forward-looking statements reflect our estimates
and beliefs, they are not guarantees of future performance. These
forward-looking statements were based on information, plans and estimates at the
date of this Prospectus, and we disclaim any obligation to update or revise any
forward-looking statements to reflect changes in underlying assumptions or
factors, new information, future events or other changes.
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PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
BECAUSE THIS IS A SUMMARY, IT MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY BEFORE
DECIDING WHETHER TO INVEST IN OUR COMMON STOCK.
SELLING STOCKHOLDERS
We are not selling any of the securities offered by this Prospectus, and
will not receive any of the proceeds from their sale. We are registering the
Common Stock on behalf of certain Selling Stockholders.
The Selling Stockholders may sell these securities directly to purchasers or
they may sell these securities to purchasers through agents, underwriters or
dealers pursuant to this Prospectus. The Selling Stockholders will receive all
of the proceeds from the sale of their securities and will pay all underwriting
discounts, selling commissions and transfer taxes applicable to any sale.
Registration of these securities does not necessarily mean that any Selling
Stockholder will actually sell their securities.
SUMMARY RISK FACTORS
An investment in our Common Stock involves various risks. You should
carefully consider the matters discussed under "Risk Factors." Such risks
include, among others, the following:
-- We rely upon two key personnel.
-- We have a limited operating history.
-- There is currently no market for our Common Stock and we do not
currently plan to list our Common Stock on an exchange or on The Nasdaq
Stock Market.
-- Our management may earn substantial compensation from certain incentive
plans, which, if paid, could substantially reduce cash available for
distribution to you.
-- We have a management incentive plan with an incentive reward based upon
our performance over a specified period. Management's interest in the
return over this period would conflict with your interests if you have
shorter or longer term investment goals.
-- We intend to leverage our assets, and could, under our current
guidelines, borrow up to 60% of our total market capitalization. This may
compound losses. Our organizational documents contain no limits on our
ability to leverage our assets.
-- In order to insure compliance with the REIT qualification requirements,
we have placed limits on the amount of stock any stockholder may own. One
of these limits generally prohibits any person from owning more than 9.8%
of our stock. This could inhibit a change of control of the Company.
-- We may be subject to income tax at regular corporate rates if we fail to
qualify as REIT. This would substantially reduce the amount of cash
available for distribution to you.
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THE OFFERING
The principal terms of our Common Stock are summarized below. The Selling
Stockholders will receive all of the proceeds from any sales of the Common Stock
offered by this Prospectus. We will not receive any proceeds from this Offering.
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Common Stock:
Issuer.................................... Beacon Capital Partners, Inc.
Securities Offered (1).................... 20,394,843 common stock
Common Stock Outstanding.................. 20,973,932 shares
Voting Rights............................. Each share of Common Stock has one vote.
Listing................................... The Common Stock is not currently listed on any exchange
or on any Nasdaq market. We do not currently plan to
list the Common Stock.
Trading................................... The Common Stock has been accepted for trading in the
PORTAL Market.
Stock Ownership Limits.................... No single Stockholder may beneficially own more than
9.8% of the Common Stock.
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(1) This Offering of our Common Stock excludes 579,089 common stock and shares
underlying 225,201 Operating Partnership Units which the Company sold to
Alan M. Leventhal and Lionel P. Fortin in connection with the formation of
the Company.
THE COMPANY
Beacon Capital Partners, Inc. is a Maryland corporation established to
conduct real estate investment and development activities. We formed on January
21, 1998 as a Massachusetts corporation and reincorporated (through a merger) in
Maryland on March 17, 1998. The Company is the general partner of the Operating
Partnership. The Operating Partnership is a Delaware limited partnership. Our
principal executive offices are located at One Federal Street, 26th Floor,
Boston, Massachusetts 02110. Our telephone number is (617) 457-0400. We have
regional offices in Chicago, Illinois and Los Angeles, California. We have
qualified and intend to remain qualified as a REIT for federal tax purposes.
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RISK FACTORS
In addition to other information contained in or incorporated by reference
in this Prospectus, you should carefully consider the following risk factors
before investing in our Common Stock:
ECONOMIC AND BUSINESS RISKS
WE DEPEND ON KEY PERSONNEL WHOSE CONTINUED SERVICE IS NOT GUARANTEED
We believe that our success depends in large part upon the experience of
Alan M. Leventhal, Lionel P. Fortin and other members of our senior management
whose continued service is not guaranteed. We have executed employment and
non-competition agreements with Messrs. Leventhal and Fortin, but we cannot
guarantee that these agreements are judicially enforceable. If we lost the
services of either Mr. Leventhal or Mr. Fortin, our operations might suffer.
Until we found a qualified replacement, we would be less capable of:
-- obtaining real estate investment opportunities;
-- capitalizing upon relationships in the real estate industry; and
-- structuring and executing potential investments.
We cannot assure you that we would replace Mr. Leventhal or Mr. Fortin with
someone who has equivalent knowledge and experience. We may not be able to
successfully recruit additional personnel. Any additional personnel we do
recruit may not have the requisite skills, knowledge or experience necessary or
desirable to enhance our incumbent management. In addition, we do not currently
intend to maintain key-man life insurance on any of our executive officers.
WE MAY NOT SUCCESSFULLY IMPLEMENT OUR GROWTH STRATEGY
ADDITIONAL FINANCING MAY NOT BE AVAILABLE
Our ability to implement our growth strategy depends on access to the
capital necessary to invest in Assets. Since the Company formed recently, we
have a limited operating history. If we fail to obtain the necessary capital,
our ability to acquire assets could suffer.
WE MAY FAIL TO EFFECTIVELY MANAGE OUR RAPID GROWTH
To successfully implement our acquisition strategy, we must integrate
acquired assets into our existing operations. As such, we must consolidate
functions and integrate the departments, systems and procedures of the acquired
assets with our operations. Integration presents a significant challenge to us.
If we fail to effectively integrate new assets, our results of operations and
financial condition could suffer.
COMPLEX ACQUISITIONS HAVE A GREATER RISK OF FAILURE
We intend to acquire multiple assets in a single transaction. This technique
reduces acquisition expenses and provides us with operating leverage. However,
portfolio acquisitions are more complex than single-property acquisitions. The
risk that a multiple property acquisition will not close is greater than in a
single-property acquisition. In addition, the cost of a failed portfolio
acquisition closing is greater than the cost of a failed single-property
acquisition closing. If one of our portfolio acquisition closings failed, we
would incur a charge against our earnings for the costs related to that failed
acquisition.
Our portfolio acquisitions may result in the acquisition of assets located
in geographically dispersed markets that are geographically removed from our
principal markets. This geographic diversity could strain our ability to manage
such dispersed assets. In addition, a seller may demand that we purchase a group
of properties together despite one or more failing to meet our investment
criteria. If this were to occur, we would attempt to either:
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-- make a joint bid with another buyer; or
-- purchase the portfolio with the intent to subsequently dispose of those
assets which do not meet our investment criteria.
This strategy presents two problems:
-- If we participate in a joint bid, the other buyer may default on its
obligations and increase the risk that the acquisition may not close.
-- If we intend to dispose of assets that we do not wish to own, there can
be no assurance as to how quickly we could sell or exchange such assets
or the terms on which they could be sold or exchanged.
DEVELOPMENT OR REDEVELOPMENT OF ASSETS IS COSTLY AND MAY NOT YIELD ECONOMIC
BENEFITS
We intend to develop and construct Real Estate-Related Assets in accordance
with our development and underwriting policies. Risks associated with such
development and construction activities include the risks that:
(i) we may abandon development opportunities after expending resources to
determine feasibility;
(ii) construction costs may exceed original estimates;
(iii) occupancy rates and rents at a newly completed property may not be
sufficient to make the project profitable;
(iv) financing may not be available on favorable terms;
(v) construction and lease-up may not be completed on schedule and thus
result in increased debt service expenses and construction costs;
(vi) we may be unable to obtain (or be delayed in obtaining) all necessary
zoning, land-use, building, occupancy, and other required governmental
permits and authorizations;
(vii) since new projects require a substantial portion of management's time
and attention, management may be significantly preoccupied with these new
projects (regardless of whether or not they are ultimately successful);
(viii)permanent financing may not be available or may only be available on
unfavorable terms; and
(ix) our losses may exceed our investment return if the project is
unsuccessful.
CONFLICTS OF INTEREST EXIST BETWEEN THE COMPANY AND OTHERS
CONFLICTS RELATING TO THE OPERATING PARTNERSHIP
The Company (as the General Partner of the Operating Partnership) will have
fiduciary obligations to the limited partners of the Operating Partnership that
may conflict with the interests of our stockholders. In addition, the 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.
The limited partners' voting rights may be exercised in a manner that
conflicts with your interests if you should acquire shares of our Common Stock.
Under the terms of the Operating Partnership Agreement, the General Partner
(currently the Company) must obtain approval from the partners of the Operating
Partnership to engage in certain transactions if, pursuant to the Maryland
General Corporate Laws or our organizational documents, a
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transaction would require a vote of our stockholders. As such, approval of the
stockholders and the partners would be necessary before certain transactions
could be consummated. The partners' interest in approving any such transaction
may or may not align with the stockholders' interest in approving the
transaction. Thus, the partners may prevent consummation of a transaction which
the stockholders believe is in their best interest.
CONFLICTS RELATING TO THE BCP SISTER CORP.
Certain of our officers and directors may also serve as officers or
directors of a BCP Sister Corp. (if and when formed). This may create
conflicting demands on the time of those officers and directors serving both the
Company and the BCP Sister Corp. If (as expected) ownership of the BCP Sister
Corp. and the Company ultimately differ, conflicts of interest may develop. We
cannot assure you that conflicts between the Company and the BCP Sister Corp.
will not arise concerning short-term or long-term business plans, investment
strategy, geographic concentration or services provided.
In addition, provisions in the BCP Sister Corp.'s formation documents are
expected to:
(i) enable the BCP Sister Corp. to enter into transactions with the Company
to the extent deemed beneficial by their respective boards of directors;
and
(ii) generally prohibit the BCP Sister Corp. from engaging in activities or
making investments appropriate for a REIT unless:
-- the Company is first given the opportunity to engage in the activity or
make the investment; and
-- the Company elects to not engage in the activity or make the investment.
We cannot assure you that any agreement will prevent conflicts between the
Company and the BCP Sister Corp. regarding which person or entity may pursue
potential business opportunities (if any).
CONFLICTS RELATING TO THE INCENTIVE RETURN
Our Long-Term Incentive Plan consists of a Convertible Unit issued to Beacon
Capital Participation Plan on March 16, 1998. The Participation Plan is an
entity owned and controlled by our management. Beacon Capital Participation Plan
was established to receive the Convertible Unit of the Operating Partnership.
Messrs. Leventhal and Fortin control and own equity interests in Beacon Capital
Participation Plan and certain members of our management also hold minority
interests in Beacon Capital Participation Plan.
If we meet certain earnings goals, the Convertible Unit will convert into a
number of Incentive Units of limited partnership interest in the Operating
Partnership ("Incentive Units"). The earnings goals are measured at the end of
the three-year period following January 1, 1999. The value of the Incentive
Units will be equal to the Incentive Return. The Incentive Return is calculated
based on the growth of the Company's Funds from Operations above a specified
benchmark (measured at the end of a specified period). Thus, management has an
incentive to maximize growth during this period. However, management's interest
in the return over this period may conflict with the interests of stockholders
with shorter or longer investment goals.
The Long-Term Incentive Plan was designed to align the interests of our
management with the interests of our stockholders by having members of
management purchase an equity interest in the Beacon Capital Participation Plan.
However, we cannot assure you that conflicts will not arise between management's
interests and stockholders' interests.
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POLICIES WITH RESPECT TO CONFLICTS OF INTEREST
We intend to adopt policies designed to eliminate or minimize conflicts of
interest. One such policy would require that all transactions in which officers
or directors have a conflicting interest must be approved by a majority of our
Independent Directors. However, we cannot assure you that any policy will
successfully minimize or eliminate conflicts of interest. If our policies fail,
decisions could be made that do not fully reflect the stockholders' interests.
LEVERAGE CAN REDUCE INCOME AVAILABLE FOR DISTRIBUTION TO STOCKHOLDERS
We intend to leverage our assets by borrowings through bank credit
facilities, mortgage loans on real estate and other borrowings. Our return on
investments and cash available for distribution to stockholders might suffer by
changes in market conditions which cause the cost of the financing to exceed the
income from the asset. We have obtained an interim financing facility that bears
interest at a variable rate. If we do not engage in a successful hedging
strategy with respect to this financing, an increase in the interest rate
payable on such financing could cause higher debt payments and could materially
adversely affect liquidity and results from operations.
Leverage creates an opportunity for increased returns on equity, but also
creates risks. For example, debt service payments can reduce the net income
available for distributions to stockholders. We cannot assure you that we will
be able to meet our debt service obligations and, to the extent that we cannot,
we may lose some or all of our assets to foreclosure or sale to satisfy our debt
obligations. Interest rate changes can affect our income by affecting:
-- the spread between the income on our assets and interest-bearing
liabilities;
-- the value of our interest-earning assets; and
-- our ability to realize gains from the sale of assets.
We have adopted guidelines to maintain a debt to total market capitalization
ratio not in excess of 60%. This policy enables us to incur additional
indebtedness as our stock price increases even though there has not necessarily
been a corresponding increase in our ability to service our indebtedness. For
purposes of this policy, our debt to market capitalization ratio is calculated
as:
-- our proportionate share of total consolidated and unconsolidated debt as
a percentage of the sum of the market value of outstanding shares of our
capital stock and our units in the Operating Partnership; plus
-- our proportionate share of total consolidated and unconsolidated debt.
Our Charter and Bylaws do not limit the amount of indebtedness we can incur.
Accordingly, our Board of Directors could alter or eliminate this policy. They
would do so, for example, if it were necessary for us to continue to qualify as
a REIT.
RISKS ASSOCIATED WITH HEDGING INVESTMENTS AND INVESTMENTS IN DERIVATIVES
Interest rate changes may adversely affect our 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 our control.
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We may employ a hedging strategy to limit the effects of interest rate
changes on our operations, including engaging in interest rate swaps, caps,
floors and other interest rate exchange contracts. Our use of these types of
derivatives to hedge our assets and liabilities carries certain risks, such as:
-- losses on a hedge position may reduce the funds available for
distribution to stockholders; and
-- losses on a hedge position may exceed the amount invested in such
instruments.
We have no formal policy with respect to hedging investments or investments
in derivatives. There is no perfect hedge for any investment, and a hedge may
not perform its intended use of offsetting losses on an investment. Moreover, we
are exposed to the risk that the counter parties with whom we trade may stop
making markets and quoting prices in such instruments. If this happened, we
would be unable to enter into an offsetting transaction with respect to an open
position.
Any losses incurred may be amplified if the hedging vehicle moves more or
less than the price movement of the asset being hedged. We cannot assure you of
a correlation between price movements in a hedging vehicle and an asset being
hedged. This presents the risk that both the hedging vehicle and the hedged
asset may decline in value at the same time. In addition, if a party to a
hedging transaction defaults, we may only have contractual remedies (which may
be limited by bankruptcy, insolvency or similar laws) pursuant to the agreement
related to the transaction. Our profitability may be adversely affected during
any period as a result of changing interest rates or due to losses incurred in
hedging transactions. This could possibly result in a material adverse impact on
our liquidity and results from operations.
THE COMPANY'S INSURANCE WILL NOT COVER ALL LOSSES
We intend to maintain comprehensive insurance on each of our significant
assets. This coverage includes 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. We will endeavor to obtain
coverage of the type and in the amount customarily obtained by owners of similar
properties. However, certain losses are generally uninsurable or not
economically insurable:
-- catastrophic losses such as fire, flood and hurricane;
-- economic conditions such as inflation;
-- legal conditions such as changes in building codes and ordinances;
-- environmental considerations; or
-- other conditions or considerations which may make it infeasible to use
insurance proceeds to replace an asset if it is damaged or destroyed.
Under such circumstances, the insurance proceeds we received might not be
adequate to restore our economic position with respect to the affected asset.
PROPERTY TAXES DECREASE RETURNS ON REAL ESTATE
Each of our assets will be subject to real and (in some instances) personal
property taxes. The real and personal property taxes on our assets may increase
or decrease as property tax rates change or as the assets are assessed or
reassessed by taxing authorities. If property taxes on our investments increase,
our cash available for distribution to our stockholders would 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 we acquire
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may not be in compliance with the ADA. If a property is not in compliance with
the ADA, we will be required to make modifications to such property to bring it
into compliance. If we fail to comply, we face the possibility of an imposition
of fines or an award of damages to private litigants. In addition, we could face
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. If we were required to make substantial
modifications to our properties to comply with the ADA or other changes in
governmental rules and regulations, our ability to make expected distributions
to stockholders could be adversely affected.
ADVERSE EFFECT ON RESULTS OF OPERATIONS DUE TO POSSIBLE ENVIRONMENTAL
LIABILITIES
Our operating costs may be affected by the obligation to pay for the cost of
complying with existing and future environmental laws, ordinances and
regulations. Environmental problems could materially impair the value of assets.
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable (often regardless of knowledge or responsibility) for the costs of
removal or remediation of hazardous or toxic substances releases at its
property. These costs could be substantial. The presence of such substances (or
the failure to properly remediate the contamination) may materially and
adversely affect the owner's ability to borrow against, sell or rent the
affected property.
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. In addition,
certain environmental laws and common law principles impose liability for
releases of hazardous materials into the environment, including
asbestos-containing materials ("ACMs"). These laws may impose liability for
release of ACMs and may provide for third parties to seek recovery from owners
or operators of real properties for personal injury associated with exposure to
released ACMs or other hazardous materials. In connection with our ownership and
operation of certain assets, we may potentially be liable for such costs.
Environmental laws may also impose restrictions on the use or transfer of
property and on the manner in which a business is operated. These restrictions
may require expenditures. We may be liable for any such costs in connection with
certain of our assets. In addition, 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 our results of
operations and financial condition.
In connection with the acquisition of Real Estate-Related Assets, we intend
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 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 assets may be subject to material environmental liabilities of which we are
unaware.
BCP SISTER CORP. WILL HAVE SEPARATE FINANCING, WHICH MAY NOT BE AVAILABLE
We anticipate that the BCP Sister Corp. (if and when formed) will obtain its
own financing, separate from that of the Company. We cannot assure you 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, we cannot assure you that it
would be able to obtain sufficient financing to cure such default. We also
cannot ascertain the full impact of such default on the Company.
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WE ARE A NEWLY-ORGANIZED CORPORATION WITH A LIMITED OPERATING HISTORY
We formed on January 21, 1998 and re-incorporated (through a merger) in
Maryland on March 17, 1998. We depend upon the experience and expertise of our
senior management in administering our day-to-day operations. We cannot assure
you that our management will be able to implement successfully the strategies
which we intend to pursue. In addition, as a newly-organized company, our
policies and procedures are subject to change over time.
INVESTMENT ACTIVITY RISKS
APPROPRIATE INVESTMENTS MAY NOT BE AVAILABLE
Although we may invest in other assets as opportunities arise, we intend to
focus primarily on acquiring Real Estate-Related Assets consistent with our
investment strategy. We cannot assure you that:
-- we will identify assets that meet our investment criteria;
-- we will be successful in acquiring any assets that may be identified; or
-- acquired assets will produce a return on our investment.
We will have broad authority to invest in assets consistent with our
investment strategy. We may invest in highly-leveraged assets, which may
increase the likelihood of a loss of our assets through foreclosure. No
assurance can be made that our 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,
our inability to identify appropriate assets may have an adverse effect on our
results of operations and hinder our growth rate.
REAL ESTATE IS ILLIQUID AND VALUE IS DEPENDENT ON CONDITIONS BEYOND THE
COMPANY'S CONTROL
We expect 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. Our ability to vary investments in response
to changes in economic and other conditions will be limited. We cannot assure
you that the fair market value of any Assets we acquire will not decrease in the
future. The underlying value of our assets, our income and our ability to make
distributions to stockholders are dependent upon our ability to operate our
assets in a manner sufficient to maintain or increase revenue in excess of
operating expenses and debt service. Our revenue may be adversely affected by
the following:
-- 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;
-- impact of present or future environmental legislation and compliance
with environmental laws;
-- 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 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 our
control either in whole or in part.
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WE MUST COMPETE WITH OTHER COMPANIES FOR ACQUISITIONS
We intend to invest in real estate industry sectors which are highly
competitive. We may compete for assets with entities which have substantially
greater economic and personnel resources than the Company and better
relationships with sellers of assets, lenders and others. These entities may
also generally be able to accept more risk than we can prudently manage.
Competition may generally reduce the number of suitable prospective assets
offered to us and increase the bargaining power of property owners seeking to
sell, thereby increasing prices.
WE MUST BE ABLE TO PAY OFF OUR FINANCING
We are subject to the risks normally associated with debt financing. This
includes the risk that our cash flow will be insufficient to meet required debt
service. In addition, we may be unable to refinance our existing indebtedness.
If we do refinance, the terms of the financing may not be as favorable as the
existing indebtedness terms.
REAL ESTATE INVESTMENT RISKS
Real property investments have varying degrees of risks. Our cash flow and
ability to make distributions to stockholders will be adversely affected if our
assets do not generate revenues sufficient to meet operating expenses, including
debt service and capital expenditures. An asset's revenues and value may be
adversely affected by the following:
-- 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 expenditures associated with an equity investment are
generally not reduced when circumstances cause a reduction in income from the
investment. These include mortgage payments, real estate taxes, or insurance and
maintenance costs. In addition, we face numerous competitors for development and
acquisitions of properties which may have greater resources than the Company.
RISKS RELATING TO OUR INVESTMENT IN BEACON CAPITAL STRATEGIC PARTNERS, L.P.
Pursuant to the limited partnership agreement of Beacon Capital Strategic
Partners, L.P. ("BCSP"), we must make all of our real estate investments through
BCSP until the earlier of October 1, 2001 or when 85% of the capital has been
invested. We have committed to invest the greater of (i) 20% of the aggregate
capital commitments and (ii) $50 million as a limited partner in BCSP, which has
a funding maximum of $500 million. Our investment in BCSP entails risks
including the following:
THE TERMS OF OUR INVESTMENT POTENTIALLY REDUCE POTENTIAL PROFITS TO THE
COMPANY FROM INDIVIDUAL INVESTMENTS
We will only be entitled to a pro rata portion of the profits of BCSP which
are distributed to limited partners, based upon the proportion that our
investment in BCSP as a limited partner bears to the aggregate capital
commitments of all limited partners in BCSP. Since individual real estate
investment opportunities are often of fixed size, the Company may have to share
profits of individual investments with its partners in BCSP which, absent its
arrangement with BCSP, it might otherwise secure for itself by making a larger
investment on its own behalf than is represented by its share of BCSP's
investment.
WE ARE RESTRICTED FROM MAKING CERTAIN TYPES OF INVESTMENTS
A wholly-owned subsidiary of the Company is the general partner of BCSP and,
as general partner, is entitled to a portion of the profits of BCSP. While our
wholly-owned subsidiary, as general partner,
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exercises investment control over BCSP in most instances, BCSP's limited
partnership agreement places certain restrictions on the general partner which
may be waived, with respect to a particular investment, by limited partners in
BCSP representing a voting interest of the limited partners in excess of 50%
(not including any Beacon affiliate). These restrictions include the following:
-- the general partner shall not make an investment if the amount of such
investment would exceed 25% of the aggregate capital commitments for a
period of more than 180 days after such investment has been made, unless
the general partner obtains the prior approval of the board of advisors
of BCSP for such investment; provided that at no time may the amount of
capital invested in any single investment exceed 35% of the aggregate
capital commitments;
-- with respect to an investment in an operating company, the general
partner shall not make such an investment if the amount invested in all
such operating companies would exceed 20% of the aggregate capital
commitments divided by 35%;
-- with respect to an investment in new development, the general partner
shall not make such an investment if the amount invested in all such new
development would exceed 20% of the aggregate capital commitments divided
by 35%; and
-- the general partner shall not make an investment in any real estate
assets located outside of the United States, or in companies organized,
headquartered or having substantially all of their assets outside of the
United States.
In addition, unless waived as set forth above, BCSP may not:
-- engage in speculative investment activity involving derivatives that
would subject BCSP to unlimited exposure;
-- make any investments in an entity that invests primarily in oil or gas
development or in any collective investment entity whose constituent
documents provide for the payment of incentive compensation based on the
investment returns of the collective investment entity to a person other
than BCSP, unless the general partner or BCSP has the power to direct the
investment decisions of such collective investment entity or prevent
investments from being made by such collective investment entity;
-- make non-influence bearing investments in publicly traded securities if
the amount invested in all such securities would exceed 5% of the
aggregate capital commitments divided by 35%; or
-- incur indebtedness if, immediately after giving effect to the incurrence
of such indebtedness, the aggregate indebtedness of BCSP would exceed 65%
of the sum of (a) the aggregate amount of all uncontributed capital
commitments plus (b) the aggregate value of BCSP's investments,
determined on the basis of the most recent valuations available.
We would not face these restrictions if we were not obligated to make our
investments through BCSP. As a result, our arrangement with BCSP may prohibit us
from making investments that we might otherwise make absent such arrangement.
RISKS RELATED TO INVESTMENTS IN MORTGAGE LOANS
Mortgage loan investments have certain risks that other types of investment
do not, including without limitation the following:
COMMERCIAL MORTGAGE LOANS MAY INVOLVE A RISK OF LOSS
Commercial mortgage loans have a high degree of risk because of a variety of
factors, including:
-- the loans are dependent for repayment on successful operation of the
mortgaged property and any tenant businesses operating on the property;
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-- the loans are usually non-recourse to the borrower;
-- the loans have terms that include amortization schedules longer than
stated maturity.
-- the loan terms provide for balloon payments at stated maturity rather
than periodic principal payments; and
-- the value of the property underlying the loan can be affected
significantly by the supply and demand in the market for that type of
property.
VOLATILITY OF VALUES OF MORTGAGED PROPERTIES MAY ADVERSELY AFFECT THE
COMPANY'S MORTGAGE LOANS
Commercial real estate values and the net operating income derived from the
property 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;
-- willingness and ability of the property's owner to:
(i) provide capable management,
(ii) provide adequate maintenance,
(iii) make capital expenditures and improvements, and
(iv) provide leasing concessions;
-- construction quality, age and design; and
-- increases in operating expenses (such as energy costs).
GENERAL DEFAULT RISKS
With respect to our investments in mortgage loans, we face the risks of
borrower defaults, bankruptcies, fraud and special hazard losses (which are not
covered by standard hazard insurance). If a borrower defaults, we bear a risk of
loss of principal to the extent that the value of the collateral is less than
the amount due on the mortgage loan. In addition, failure to receive interest
payments because of borrower default could have a materially adverse effect on
our cash flow from operations. If a borrower declares bankruptcy, we face the
following risks:
-- the bankruptcy court determines the value of the underlying collateral
at the time of bankruptcy;
-- the bankruptcy trustee may avoid the lien securing the mortgage loan;
and
-- the debtor-in-possession may avoid the lien securing the mortgage loan
to the extent the lien is unenforceable under state law.
If we have to foreclose a mortgage, the process can be expensive and
lengthy. These costs could adversely affect our anticipated return on the
foreclosed mortgage loan.
OUR MULTI-SECTOR INVESTMENT STRATEGY IS MORE COMPLICATED THAN A SINGLE-SECTOR
INVESTMENT STRATEGY
Our current strategy is to acquire assets in a variety of real estate
product-types within a variety of geographic locations. Initially we will
emphasize office assets. Accordingly, we will be required to maintain expertise,
relationships and market knowledge across a broad range of product-types and
geographic regions.
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In addition, we face market conditions that affect each such product-type in
the various markets, including such factors as:
-- local economic climate;
-- business layoffs;
-- industry slowdowns;
-- changing demographics; and
-- local supply and demand issues affecting each such market.
Our multi-sector approach could require more management time, staff support
and expense than a company focused upon a single product-type in fewer
jurisdictions than contemplated by the Company.
GEOGRAPHICALLY CONCENTRATED ASSETS ARE VULNERABLE TO DOWNTURNS IN LOCAL ECONOMIC
CONDITIONS
The economic performance and value of our assets are subject to all of the
risks incident to the ownership and operation of real estate. These include the
risks normally associated with changes in national, regional and local economic
and market conditions. Such conditions can affect tenants' ability to make
rental payments. Our assets are located in five markets-East Cambridge,
Massachusetts; South Boston, Massachusetts; Sunnyvale, California; Dallas,
Texas; and Seattle, Washington. We have no limits on becoming more
geographically concentrated.
Local real estate market conditions may include a large supply of competing
space and competition for tenants, including competition based on:
-- rental rates;
-- attractiveness;
-- location of property; and
-- quality of maintenance, insurance and management services.
Other factors may adversely affect the performance and value of an asset,
including:
-- changes in laws and governmental regulations (including those governing
usage, zoning and taxes);
-- changes in interest rates; and
-- availability of financing.
If the assets do not generate sufficient income to meet operating expenses,
our income and ability to make distributions to stockholders may be adversely
affected.
NEW MARKETS MAY HAVE CONDITIONS UNLIKE OUR EXISTING MARKETS
Although our management has historical experience with Real Estate-Related
Assets and other assets and investments in a variety of geographic areas of the
country, our expertise in those markets may not assist us in new markets. In
such event, we may be exposed to risks associated with:
-- lack of market knowledge and understanding of the local economy;
-- inability to access land and property acquisition opportunities;
-- inability to obtain construction tradespeople;
-- sudden adverse shifts in supply and demand factors; and
-- unfamiliarity with local governmental procedures.
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WE WILL NOT HAVE FULL CONTROL OVER INVESTMENTS MADE THROUGH PARTNERSHIPS AND
JOINT VENTURES
Instead of purchasing properties directly, we may invest as a partner or a
co-venturer. Partnership or joint venture investments may involve risks not
otherwise present, including:
-- our partner or co-venturer might become bankrupt;
-- our partner or co-venturer might at any time have economic or other
business interests or goals which are inconsistent with our business
interests or goals; and
-- our partner or co-venturer may be in a position to take action:
(i) contrary to our instructions or requests; or
(ii) contrary to our policies or objectives, including our policy with
respect to maintaining our qualification as a REIT
These investments may also have the potential risk of impasse on decisions
because neither we nor our partner or co-venturer would have full control over
the partnership or joint venture. We will seek to maintain sufficient control of
such partnerships or joint ventures to achieve our objectives. Our
organizational documents do not limit the amount of available funds which we may
invest in partnerships or joint ventures.
WE WILL NOT HAVE FULL CONTROL OVER INVESTMENTS MADE THROUGH SUBSIDIARIES
The common stock of six of our subsidiaries, BCP Millennium Residential,
Inc., Cambridge Kendall SPC, Inc., Tenant Communications, Inc., BCP Lodging,
Inc., Shared Communications Spaces, Inc. and Fort Point Place, Inc. consists of
two classes: voting and nonvoting. Of the voting common stock,
Messrs. Leventhal and Fortin hold 91% and the Operating Partnership holds 9%.
The Operating Partnership holds all of the nonvoting stock. The Operating
Partnership owns 99% of the economic interest in these subsidiaries and Messrs.
Leventhal and Fortin jointly own 1% of such economic interest. As holders of 91%
of the voting common stock, Messrs. Leventhal and Fortin have the ability to
elect the board of directors of these subsidiaries. We are not able to elect the
directors, which means that we may not be able to influence the day-to-day
decisions affecting these subsidiaries. As such, the board of directors of these
subsidiaries may implement business policies or decisions that would not have
been implemented by persons controlled by the Company and may be adverse to our
interests and could adversely impact our results of operations.
FOREIGN REAL PROPERTIES ARE SUBJECT TO CURRENCY CONVERSION RISKS AND UNCERTAINTY
OF FOREIGN LAWS
In addition to making investments in domestic assets, we may invest in
assets located outside the United States. Risks inherent in investing in real
estate located in foreign countries generally include:
-- unexpected changes in regulatory environments;
-- longer accounts receivable payment cycles;
-- potentially adverse tax consequences; and
-- the burden of complying with a wide variety of foreign laws.
Moreover, investments in foreign Assets may be exposed to the risk of
fluctuations in the foreign exchange rates between the US dollar and the
currency in which a transaction is conducted.
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LEGAL AND TAX RISKS
TAX RISKS
We intend to operate in a manner that will enable us to qualify as a REIT
for federal income tax purposes. Although we do not intend to request a ruling
from the Internal Revenue Service (the "IRS") as to our REIT status, we received
(in connection with the original Registration Statement) an opinion from our
counsel, Goodwin, Procter & Hoar LLP, dated October 16, 1998. Their opinion
stated the following:
-- that the Company has been and will be organized in conformity with the
requirements for qualification as a REIT; and
-- that the Company's proposed manner of operation will enable it to
qualify as a REIT
This opinion was based on certain factual and other assumptions and
representations with respect to the Company's past and expected ongoing
businesses and investment activities and other customary matters. No assurances
can be given to you as to the accuracy of such assumptions or that the Company
has been able to comply with the representations it made to Goodwin, Procter &
Hoar LLP or will be able to comply with them in the future. Furthermore, this
opinion is not binding on the IRS or any court, and no assurance can be given
that we will operate in a manner so as to qualify or remain qualified as a REIT.
This opinion of Goodwin, Procter & Hoar LLP represented only their view, as of
the date of their opinion, based on their review and analysis of existing law,
which included no controlling precedent and which is subject to change (possibly
on a retroactive basis). The opinion has not been updated since it was issued in
October, 1998.
Furthermore, both the validity of this opinion and the Company's continued
qualification as a REIT will depend on the Company's satisfaction of certain
asset, income, organizational, distribution and stockholder ownership
requirements on a continuing basis. Our operations have not been and will not be
monitored by Goodwin, Procter & Hoar LLP to ensure continued compliance with the
REIT requirements.
If we were to fail to qualify as a REIT in any taxable year, we would be
subject to federal income tax (including any applicable alternative minimum tax)
on our taxable income at regular corporate rates, and distributions to
stockholders would not be deductible by the Company 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) our Common
Stock. Unless entitled to relief under certain REIT provisions of the Code, we
also would be disqualified from taxation as a REIT for the four taxable years
subsequent to the year during which we ceased to qualify as a REIT.
We must distribute annually at least 95% of our net taxable income
(excluding any net capital gain) in order to avoid corporate income taxation of
the earnings that we distribute. In addition, we will be subject to a 4%
nondeductible excise tax on the amount, if any, by which certain distributions
paid or deemed paid by the Company with respect to any calendar year are less
than the sum of:
-- 85% of the Company's ordinary income for that year;
-- 95% of the Company's capital gain net income for that year; and
-- 100% of the Company's undistributed taxable income from prior years.
The amount of any net long-term capital gains that we elect to retain and
pay income tax on will be treated as distributed for purposes of the 4% excise
tax.
We intend to make distributions to our 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 the Company to borrow funds or sell assets on
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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
the Company's net taxable income could cause the Company:
-- to sell assets in adverse market conditions;
-- to distribute amounts that represent a return of capital; or
-- 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.
It is anticipated that we may purchase mortgage loans. If we purchases such
Assets and are 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 the Company is considered a "taxable
mortgage pool," the Company's status as a REIT generally should not be impaired,
but a portion of the Company's taxable income may be characterized as "excess
inclusion income" and allocated to stockholders. Any excess inclusion income:
-- could not be offset by net operating losses of a stockholder;
-- would be subject to tax as "unrelated business taxable income" to a
tax-exempt stockholder;
-- 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
-- would be taxable (at the highest corporate tax rate) to the Company
(rather than its stockholders) to the extent allocable to shares of stock
of the Company held by disqualified organizations (generally, tax-exempt
entities not subject to tax on unrelated business taxable income,
including governmental organizations).
ADVERSE IMPACT OF FUTURE LEGISLATION REGARDING REITS
The Company's ability to qualify as a REIT, the benefits of REIT
qualification, and/ or our ability to use a BCP Sister Corp could be adversely
impacted by future legislation.
AGGREGATE STOCK OWNERSHIP LIMIT MAY RESTRICT BUSINESS COMBINATION OPPORTUNITIES
To maintain our qualification as a REIT, five or fewer individuals may not
own (directly or indirectly) more than 50% of our Common Stock at any time
during the last half of our taxable year. As such, our Charter contains an
aggregate stock ownership provision which generally prohibits any single
stockholder from owning more than 9.8% of our Common Stock. In addition, our
Charter contains a look-ownership limit that permits certain mutual funds and
certain other widely-held (other than pension plans as described in Section
401(a) of the Code) to own up to 15% of our Common Stock. The Board of Directors
may waive or modify either of these two provisions if it is satisfied (based
upon the receipt of a ruling from the IRS or the advice of tax counsel) that
ownership in excess of this limit will not jeopardize our status as a REIT. In
addition, these ownership limits may inhibit or impede a change in control. Such
inhibitions and impediments could adversely affect stockholders' ability to
realize a premium over the then-prevailing market price for our Common Stock in
connection with such a transaction.
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FOREIGN INVESTORS SHOULD CONSIDER TAX RISKS UNDER FIRPTA
If the Company is not a domestically controlled REIT, non-U.S. Stockholders
who own and then sell our Common Stock will be taxed according to the Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA"). We will be a
domestically controlled REIT if non-U.S. persons own (directly or indirectly)
less than 50% of our Common Stock during specified testing periods. We cannot
assure you that we will continue to be a domestically-controlled REIT. Even if
not subject to FIRPTA, non-U.S. stockholders are subject to taxation under
certain other circumstances.
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") 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 our
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:
-- the diversification and prudence requirements of ERISA;
-- the requirement that the decisions be in the best interests of the
participants and beneficiaries of the ERISA Plan; and
-- the requirement that the decisions 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 interest" 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 our 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).
We intend to take such steps as may be necessary to qualify the Company 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, we
will use our reasonable best efforts to qualify as a "real estate operating
company" (within the meaning of the Plan Assets Regulation) at least until such
time as our 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., we 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).
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CHANGES IN MANAGEMENT MAY BE DETERRED
We are subject to the Maryland General Corporation Law (the "MGCL") because
we are incorporated in Maryland. Certain provisions of the MGCL:
-- impose restrictions and require procedures with respect to business
combinations, including (but not limited to) transactions with holders of
more than 10% of the voting power of our equity securities; and
-- limit voting rights for holders of 20% or more of the voting power of
our stock.
These provisions could discourage a takeover or other transaction involving
a change in control. Our Charter exempts from the MGCL 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. In addition, the right of the Participation Plan to
receive an Incentive Return in the event of a change of control of the Company
(as defined in the Operating Partnership Agreement) may deter third parties from
entering into transactions with the Company.
BOARD OF DIRECTORS MAY CHANGE CERTAIN POLICIES WITHOUT STOCKHOLDER CONSENT
Our policies will be determined by our Board of Directors.The Board of
Directors may amend or revise these policies, or approve transactions that
deviate from these policies without a vote of the stockholders. These changes in
policy may be positive or negative.
LOSS OF INVESTMENT COMPANY ACT EXEMPTION WOULD ADVERSELY AFFECT THE COMPANY
We intend to avoid regulation 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" (the "Qualifying Interests"). The commission currently
interprets the Investment Company Act to exempt companies that:
-- maintain at least 55% of their Assets in Qualifying Interests, and
-- maintain an additional 25% in Qualifying Interests or other Real
Estate-Related Assets.
As such, the Assets we may acquire are limited by this exemption. In
addition, we could be required to either:
-- change the manner in which we conduct our operations to avoid being
required to register as an investment company; or
-- register as an investment company.
Either of these possibilities could have an adverse effect on the Company
and the market price for our Common Stock.
LIMITATION ON LIABILITY OF OFFICERS AND DIRECTORS OF THE COMPANY
Our Charter limits the liability of a director or officer to the Company and
our stockholders for money damages, except for liability resulting from:
-- actual receipt of an improper benefit or profit in money, property or
services; or
-- active and deliberate dishonesty established by a final judgment as
being material to the cause of action.
19
<PAGE>
OTHER RISKS
RISK THAT MARKET FOR COMMON STOCK WILL NOT DEVELOP
Our Common Stock presently has no established trading market and there is no
assurance one will develop. Our Common Stock has been accepted for trading in
the PORTAL Market, a real-time electronic National Association of Securities
Dealers marketplace that facilitates trading in securities offered pursuant to
Rule 144A transactions. We cannot assure you that an active trading market for
our Common Stock will develop in the PORTAL Market or elsewhere. In addition,
access to the PORTAL Market (unlike other prominent stock exchanges or Nasdaq
markets) is restricted to certain parties and can only be used for the trading
of certain restricted securities. Accordingly, we cannot assure you as to:
-- the likelihood that an active market for our Common Stock will develop;
-- the liquidity of any such market;
-- your ability to sell your Common Stock; or
-- the prices that you may obtain for your Common Stock.
20
<PAGE>
ABOUT THIS PROSPECTUS
This Prospectus is part of a Registration Statement on Form S-3 that we
filed with the Securities and Exchange Commission under the Securities Act of
1933. This Prospectus and any accompanying Prospectus supplement do not contain
all of the information included in the Registration Statement. For further
information, we refer you to the Registration Statement, including its exhibits.
Statements contained in this Prospectus and any accompanying prospectus
supplement about the provisions or contents of any agreement or other document
are not necessarily complete. If the SEC's rules and regulations require that
such agreement or document be filed as an exhibit to the Registration Statement,
or if we otherwise filed such agreement or document, please see such agreement
or document for a complete description of these matters.
This Prospectus provides you with a general description of the offered
shares. Each time a selling stockholder sells any of the offered shares, the
selling stockholder will provide you with this Prospectus and a prospectus
supplement, if applicable, that will contain specific information about the
terms of that offering. The prospectus supplement may also add, update or change
any information contained in this Prospectus. You should read both this
Prospectus and any prospectus supplement together with additional information
described under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or at
the SEC's regional offices 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. Our SEC filings are also available at the SEC's
Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The SEC also maintains a website with filings at
http://www.sec.gov.
The SEC allows us to incorporate by reference the information we file with
them into this Prospectus, which means that we can disclose important
information to you by referring you to these documents. The information
incorporated by reference is an important part of this Prospectus, and
information that we file later with the SEC will automatically update and
supersede the information in this Prospectus and listed below. We are
incorporating by reference the documents listed below, which we have already
filed with the SEC, and any future filings we make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until the
selling stockholders sell all of the securities.
- our Annual Report on Form 10-K for the year ended December 31, 1998;
- our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999;
- our Proxy Statement dated April 12, 1999 prepared in connection with our
Annual Meeting of Shareholders held on June 22, 1999;
- our Current Reports on Form 8-K dated October 14, 1999, September 13,
1999, July 1, 1999, June 14, 1999 and November 17, 1999; and
- the description of our common stock contained in our Registration
Statement on Form 8-A, filed on September 23, 1998.
You may request a copy of the information incorporated by reference in this
Prospectus, as well as any exhibit we have specifically incorporated by
reference as an exhibit in this Prospectus, at no cost by writing to us at the
following address: Beacon Capital Partners, Inc., One Federal Street, 26th
Floor, Boston, Massachusetts 02110, Attention: Secretary. Telephone requests may
be directed to (617) 457-0400.
You should rely only on the information incorporated by reference or
contained in this Prospectus or any supplement. We have not authorized anyone
else to provide you with different or additional information. You should not
assume that the information in this Prospectus or any supplement is accurate as
of any date other than the date on the front of those documents.
21
<PAGE>
USE OF PROCEEDS
The Selling Stockholders will receive all of the proceeds from the sale of
the securities offered hereby. We will not receive any of the proceeds from the
sale by the Selling Stockholders of their Common Stock.
SELLING STOCKHOLDERS
The Common Stock was originally issued and sold to a predecessor of Banc of
America (the "Initial Purchaser"), in a transaction exempt from registration
requirements of the Securities Act. The securities were resold by a predecessor
of Banc of America to persons reasonably believed by the predecessor of 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, pledges, 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 common stock
beneficially owned by each Selling Stockholders that may be offered pursuant to
this Prospectus. We are obligated by the terms of a Registration Rights
Agreement to file this Registration Statement on behalf of each of the listed
stockholders. Each Selling Stockholder may offer and sell all of the securities
registered hereby. If such Stockholder sells all shares registered hereby such
stockholder will not beneficially own any securities of the Company after this
Offering. Inclusion on this list does not imply that any person or entity will
actually offer or sell any of the shares registered on his, her or its behalf.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THIS OFFERING
-----------------------
SELLING STOCKHOLDER NUMBER PERCENTAGE
- ------------------- ---------- ----------
<S> <C> <C>
1st Trust & Co.............................................. 5,000 *
FBO Glenn Bennett
FTC IRA Standard
1st Trust Co., TR........................................... 5,000 *
FBO Lawrence W. Gold IRA
ABKB/La Salle Securities.................................... 1,337,500 6.4%
David Abromowitz(1)......................................... 2,680 *
Louis R. Adimare............................................ 10,000 *
Richard Adler............................................... 7,500 *
Advantus Capital (MIMLIC Asset)............................. 500,000 2.4%
AETNA....................................................... 400,000 1.9%
AEW Capital Management...................................... 125,000 *
Gregory L. Alcroft & Leah Alcroft Comm. Prop.(1)............ 2,680 *
Bruce W. Altrock & Carolyn D. Altrock....................... 12,500 *
TR Altrock Living Trust UA 08/13/92
Adrash K. Arora............................................. 5,000 *
Michael Ashendorf(1)........................................ 5,361 *
Aslam International Inc. EBP................................ 500 *
Steven R. Astorve & David M. Astrove JT TEN(2).............. 1,340 *
Atlantic Trust Co. Tr....................................... 500,000 *
FBO Susan R.G. Revocable Trust UA 06/06/96
The American Century Real Estate Fund....................... 150,000 *
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THIS OFFERING
-----------------------
SELLING STOCKHOLDER NUMBER PERCENTAGE
- ------------------- ---------- ----------
<S> <C> <C>
Tony Avila & Jacquelyn Avila JT TEN (1)..................... 1,072 *
Robert A. Baffi & Rosemary G. Baffi......................... 2,680 *
TR Baffi Fam Rev Trust UA 01/17/94
Louis P. Bansbach III....................................... 10,000 *
Kevin Barnes (1)............................................ 3,753 *
Ray Barshick................................................ 25,000 *
David A. Baylor & Theresa L. Helmer (1)..................... 1,072 *
Bayside Development Corp. Ltd............................... 25,000 *
Douglas L. Becker........................................... 5,000 *
Jill Becker and Eric D. Becker TENENT....................... 5,000 *
Glenn Benentt & Christina JT TEN............................ 5,000 *
John A. Berg (1)............................................ 26,809 *
Zack B. Bergreen............................................ 10,000 *
Jon R. Berquist (1)......................................... 1,340 *
Berrard Hldgs LTD Partnership A Partnership................. 8,750 *
John R. Bertucci............................................ 5,000 *
Gordon M. & Adele H. Binder................................. 25,000 *
William D. Birch............................................ 6,250 *
William M. Birch............................................ 10,000 *
Guarantee & Trust Co. Tr.................................... 2,500 *
FBO Myron Blackman IRA Rollover
Thomas P. Bloch (2)......................................... 1,340 *
BNP Bahrain................................................. 590,000 2.8%
Timothy P. Brady............................................ 15,000 *
Kathleen Higgins Braun & Kurt George Braun JT TEN(1)........ 5,361 *
Steven Braverman TR......................................... 10,000 *
Braverman Fam Trust UA 12/26/96
MS Muni Bond
Rita Brightman.............................................. 20,000 *
Douglas Broyles............................................. 5,000 *
Bruce Brugler (1)........................................... 2,144 *
Lucretia A. Bryant.......................................... 5,000 *
Michael Burbank & Cindy Ann Roberts Community Property 1,072 *
(1).......................................................
Thomas C. Byrne............................................. 3,750 *
Vincent Campobasso & Colleen M. Campobasso JT TEN........... 5,000 *
J. Robert Casey (2)......................................... 5,361 *
Douglas A. Catalano......................................... 10,000 *
Chafetz Group LLC........................................... 5,000 *
Robert B. Champagne......................................... 5,000 *
Dominic K. Chan & Marsha Chan JT TEN........................ 10,000 *
Chase Asset Management...................................... 750,000 3.6%
Cole A. Chevalier & Katherine Chevalier..................... 15,000 *
TR Chevalier Trust UA 06/02/94
Matthew-Luc Clark (1)....................................... 1,072 *
Closefire Limited........................................... 5,000 *
Howard E. Cohen & Myra Muskant JT TEN....................... 5,361 *
Robert & Eileen Coltun JT TEN............................... 5,000 *
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THIS OFFERING
-----------------------
SELLING STOCKHOLDER NUMBER PERCENTAGE
- ------------------- ---------- ----------
<S> <C> <C>
Geary Cotton................................................ 10,000 *
Robert Currie & Linda Currie JT Ten......................... 5,000 *
Carl Curtis................................................. 5,000 *
DBA Pacific Auto
Cutler Group LLC............................................ 5,000 *
John H. Dailey III & Beth B. Dailey TR...................... 25,000 *
John H. Dailey Trust UA 05/17/89
Raju P. Dantuluri & Devi P. Dantuluri JT TEN................ 10,00 *
Nancy M. Davis (2).......................................... 1,340 *
DC Investment Partners...................................... 40,000 *
Allen Deary................................................. 5,000 *
Christel Dehaan Tr.......................................... 50,000 *
Christel Dehaan Trust UA 12/31/92
C.A. Delaney Capital Management............................. 150,000 *
FBO Spectrum United Canadian Growth Fund
Tom Denomme................................................. 5,000 *
Desert Mutual Benefit Realty Fund........................... 100,000 *
Barbara Devorzon Tr......................................... 5,000 *
Devorzon Family Trust UA 11/07/90
Timothy Dibble & Maureen Dibble JT Ten...................... 5,000 *
A/C 2
Daniel J. Doherty III....................................... 15,000 *
Atlantic Retail Properties
Neal M. Douglas............................................. 5,000 *
Gary L. Downey.............................................. 5,000 *
Stichting Bedrijfspensioenfonds voor de Metaalnijverheid.... 750,000 3.6%
EAG Enterprises Limited..................................... 5,000 *
Daniel H. Eakins............................................ 5,000 *
Elizabeth H. Edmunds........................................ 2,680 *
Jeffrey Elder............................................... 12,500 *
Merrick M. Elfman........................................... 7,500 *
Matthew E. Epstein & Deborah L. Hiatt JT TEN(1)............. 1,340 *
Dwight Evans................................................ 7,500 *
Lester J. Fagan (2)......................................... 1,875 *
Edward J. Faneuil & Eric Slifka & Alfred Slifka Ten Com..... 5,361 *
FLM Partnership/A Partnership............................... 8,042 *
First American Asset Management............................. 33,750 *
Fisher Group LTD Partnership--Fisher, Jerome................ 25,000 *
John P. Fowler.............................................. 5,361 *
Mary Lou Fox................................................ 5,000 *
Joseph Friscia & Laura J. Friscia JT TEN.................... 5,000 *
Lee Geiger (1).............................................. 1,072 *
General Electric Pension Trust.............................. 750,000 3.6%
Robert H. Gersky & Sue A. Gersky Community Property(1)...... 14,745 *
John W. Gildea.............................................. 5,500 *
Barry Ginsburg & Paul Lukopp Tr Merle Z. Gross.............. 2,500 *
William Shedd Glassmeyer (1)................................ 1,072 *
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THIS OFFERING
-----------------------
SELLING STOCKHOLDER NUMBER PERCENTAGE
- ------------------- ---------- ----------
<S> <C> <C>
Martin A. Glazer & Carol A. Glazer JT TEN(2)................ 1,340 *
Glenmeade Trust............................................. 500,000 2.4%
Global Property Advisors.................................... 125,000 *
FBO North American Property Securities Trust
Ernest G. Goggio............................................ 5,000 *
Bruce Goldman............................................... 5,000 *
William J. Goldsborough..................................... 10,000 *
Carol B. Good............................................... 1,787 *
Julian H. Good.............................................. 1,787 *
Louis K. Good III & Susan Good TEN COM...................... 1,787 *
Goldman & Co. Ltd........................................... 750,000 3.6%
Barry R. Gorsun............................................. 5,000 *
1988 GPH Fund LLC (2) 1,876 *
E.C. Grayson................................................ 5,000 *
Green Beacon LP............................................. 5,000 *
James B. Greenfield (1)..................................... 1,072 *
Lee B. Griffith............................................. 5,000 *
Grisanti, Inc............................................... 100,000 *
Merle Z. Gross-Ginsburg & Paul Lukoff....................... 2,500 *
TR Barry M. Ginsburg
1993 Fam Trust UA 09/30/93
Guarantee & Trust Co. TR.................................... 5,000 *
FBO Michael P. Last GTC IRA
Guarantee & Trust Co. TR.................................... 10,000 *
FBO Barry R. Devorzon GTC IRA
Guarantee & Trust Co. TR.................................... 5,361 *
FBO Dana C. Djerf
Guarantee & Trust Co. TR.................................... 7,238 *
FBO M. Allen Chozen
GTC IRA Rollover
Guarantee & Trust Co. TR.................................... 15,000 *
FBO Linda Lee Harper
Guarantee & Trust Co. TR.................................... 5,000 *
FBO Fred Backer GTC IRA Rollover
Guarantee & Trust Co. TR.................................... 5,000 *
FBO Jack G. Bryant GTC IRA Rollover
Guarantee & Trust Co. TR.................................... 5,000 *
FBO Thomas A. Okulski GTC IRA
Guarantee & Trust Co. TR.................................... 1,608 *
FBO Peter R. Pendergast GTC IRA Sep
Guarantee & Trust Co. TR.................................... 5,000 *
FBO Stephen A. Vogel GTC IRA Rollover
Sammy Hagar................................................. 5,000 *
Michael A. Hammer(2)........................................ 1,340 *
Hartford Capital Appreciation Fund.......................... 300,000 1.4%
Hartford Capital Appreciation Fund, Inc..................... 2,000,000 9.5%
K. Stephen Hasking.......................................... 10,000 *
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THIS OFFERING
-----------------------
SELLING STOCKHOLDER NUMBER PERCENTAGE
- ------------------- ---------- ----------
<S> <C> <C>
Peter P. Healy & Virginia Healy JT TEN...................... 6,166 *
H. David Henken (2)......................................... 1,340 *
Bernard and Jerome Herskowitz............................... 10,000 *
Wilson T. Hileman, Jr. (1).................................. 1,072 *
Rudolf C. Hoehn-Saric....................................... 5,000 *
Revell Horsey & Carrie S. Horsey JT TEN(1).................. 1,072 *
M. Benjamin Howe & Janet L. Howe JT TEN(1).................. 5,361 *
Jimmy C.M. Hsu.............................................. 5,000 *
Tommy C. Hsu................................................ 5,000 *
Douglas M. Husid (2)........................................ 1,340 *
Thomas J. Hynes, Jr......................................... 5,361 *
Invesco Realty Advisors, Inc................................ 115,000 *
Naveen Jain & Anuradha Jain JT TEN.......................... 10,000 *
JJ Newport.................................................. 5,000 *
Craig R. Johnson & Nichola Jo Johnson TR(1)................. 13,404 *
Johnson Revocable Trust UA 07/02/97
Gary Johnson................................................ 5,000 *
Donald G. Jones............................................. 15,000 *
Spirit Enterprise LLP
Jerry V. Jorge & Susan N. Jorge JT TEN...................... 5,000 *
John A. Jurenko............................................. 25,000 *
George S. Karas............................................. 5,000 *
Bruce Katzen & Diane Katzen JT TEN.......................... 5,000 *
Kempen/Ibus................................................. 40,000 *
John Bradford King & Pamela J. King JT Ten.................. 5,000 *
Gary C. Klein............................................... 12,500 *
Matt Klein (1).............................................. 8,041 *
William C. Kelin & Virginia A. Klein JT ENT................. 12,500 *
Gustav Koven................................................ 5,000 *
Jordan P. Krasnow & Jean H. Krasnow JT TEN (2).............. 5,361 *
Kresevich Capital Mgmt LLC.................................. 25,000 *
E. Floyd Kvamme & Jean Kvamme Comm Prop..................... 25,000 *
Raymond Kwasnick & Paul Kwasnick TEN COM(2)................. 2,680 *
Guy & Rita Lammle JT TEN.................................... 5,000 *
Richard Langerman........................................... 2,680 *
Leede Investments LLC....................................... 100,000 *
David Lechmann & Dawn Lehmann JT TEN(1)..................... 1,340 *
Mark Lehman (1)............................................. 2,680 *
James W. Lewis.............................................. 5,000 *
Doug Liman.................................................. 5,000 *
Ron & Susanne Lissak JT WROS (1)............................ 2,000 *
Elaine C. Lloyd............................................. 5,000 *
Donald A. Lobo.............................................. 15,000 *
Longleaf Partners Realty Fund............................... 2,075,000 9.8%
Richard E. Lucas............................................ 10,000 *
William Maidman Family LP................................... 5,000 *
Palu Malnati--Trans National................................ 5,000 *
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THIS OFFERING
-----------------------
SELLING STOCKHOLDER NUMBER PERCENTAGE
- ------------------- ---------- ----------
<S> <C> <C>
Kathleen M. Malo TR (1)..................................... 1,072 *
Kathleen M. Malo Trust UA 12/14/95
Sophia A. Mann.............................................. 5,361 *
Burt Manning................................................ 5,000 *
Steve Marcie................................................ 5,000 *
Irwin M. Marcus............................................. 5,361 *
Randall E. Marcus........................................... 5,361 *
University Orthopedic Assoc
Richard A. Marks & Jennifer E. Morrison JT TEN(2)........... 5,361 *
Bharat K. Marya & Radhesh Marya TR.......................... 10,000 *
Marya Revocable Trust UA 09/03/86
Bharat K. Marya & Radhesh Marya TR.......................... 15,000 *
B & R Charitable
RMDR Trust UA 08/28/95
Mass Financial Services Company............................. 292,925 1.4%
Karl L. Matthies (1)........................................ 10,723 *
Karl Matthies & Deborah Matthies (1)........................ 8,042 *
Community Property
Dan Maydan & Dalia Maydan TR................................ 7,500 *
Dan Maydan & Dalia Maydan Trust UA 03/26/81
James F. McCaffrey.......................................... 5,361 *
McGlinn Capital Management, Inc............................. 175,000 *
Mary E. McGoldrick.......................................... 10,000 *
Mees Pierson/Fortis Investments............................. 100,000 *
James L. Melsa & Katherine Melsa JT TEN..................... 5,000 *
Robert M. Melzer............................................ 5,361 *
Gilbert G. Menna & Janet L. Remien JT TEN (2)............... 4,021 *
Warren T. Mills & Gayle S. Mills TR......................... 5,000 *
Warren T. Mills & Gayle S. Mills Revocable Farm Trust UA
02/12/93
James Minchello & Linda Minchello JT TEN(1)................. 5,361 *
Robert V. Minchello, Jr. (1)................................ 1,340 *
Monte Toole TR.............................................. 10,000 *
Monte M. Tolle Gasonics Revocable Trust UA 04/06/94
Peter Moore & Christina Moore JT TEN........................ 35,000 *
Morgan Stanley Asset Management............................. 1,000,000 4.8%
Dennis R. Morin............................................. 5,000 *
Robert S. Morris............................................ 5,000 *
Alvin Murstein & Amie Murstein TR........................... 5,000 *
Alvin Murstein 2nd Fam Trust UA 10/01/95
John P. Murtagh & Gerladine M. Murtagh JT Ten............... 17,500 *
Joseph Nadel & Ann Nadel Tr................................. 5,000 *
Joseph & Ann Nadel Revocable Living Trust UA 08/23/95
NationsBank Collateral Account.............................. 25,000 *
FBO Central Florida Investments
Stephen Newberry & Shelley Newberry Tr...................... 12,500 *
The Newberry Livig Trust UA 06/18/90
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THIS OFFERING
-----------------------
SELLING STOCKHOLDER NUMBER PERCENTAGE
- ------------------- ---------- ----------
<S> <C> <C>
Bernard A. Newcomb TR....................................... 12,500 *
Bernard A. Newcomb 1997 Living Trust UA 01/29/97
Anna F. Ng TR............................................... 12,500 *
Anna F. Ng 1996 Trust UA 07/02/96
Steven Nielsen & Elizabeth Nielsen JT TEN................... 5,000 *
Northwestern Mutual Life.................................... 500,000 2.4%
Alfred J. Novak & Carol Novak JT TEN........................ 5,000 *
Joseph W. O'Connor.......................................... 25,000 *
Orchid Management Corporation............................... 10,723 *
Kenneth Olson & Ellen Berger JT Ten......................... 5,000 *
Jason Pedersen (1).......................................... 2,680 *
Kent Ryan Penwell (1)....................................... 1,340 *
Robert S. Pepper & Star Pepper TR........................... 10,000 *
Robert S. & Star Pepper Trust UA 04/25/86
David L. Pergola............................................ 5,361 *
Sandra J. Perkins........................................... 5,000 *
Robert J. Perriello......................................... 5,361 *
Robert Y. Pick Tr........................................... 5,361 *
Robert Y. Pick Self-Employed Profit Sharing Plan UA
01/01/85
Rudolph F. Pierce (2)....................................... 1,340 *
Guy C. Pinkerton & Nancy J. Pinkerton JT TEN................ 12,500 *
Points West INTL INVSTMTS LTD............................... 31,063 *
Bruce Pollock & Carol Pollock JT TEN........................ 5,000 *
Ponte Vedra Partners LTD.................................... 50,000 *
Bruce Potter (1)............................................ 13,000 *
Bruce G. Petter TR (1)...................................... 1,341 *
Alexandra Kelly Matthies 1997 Trust B UA 10/03/97
Bruce G. Potter TR (1)...................................... 1,341 *
Casey Elizabeth Matthies 1997 Trust UA 10/03/97
Franck Prissert (1)......................................... 1,340 *
Putnam Investment Management................................ 500,000 2.4%
Safi U. Qureshey & Anita Sue Qureshey TR.................... 5,000 *
Qureshey Fam Trust UA 05/21/84
Rainbow Partners, L.P....................................... 150,000 *
Rand Rosenberg (1).......................................... 5,361 *
Sol Rosenberg & Susan Rosenberg JT TEN...................... 5,000 *
Sol Rosenberg & Susan Rosenberg Tr.......................... 10,000 *
Rosenberg Fam Charitable Trust UA 10/11/96
Franklin Reider & Michelle Reider JT TEN.................... 5,000 *
James P. Reilly............................................. 5,000 *
Dana F. Rodin (2)........................................... 1,340 *
Edwin R. Rodriguez Jr. Tr................................... 5,361 *
Edwin R. Rodriguez Jr. Rovocable Trust UA 08/29/85
John R. Rollins & Cynthia A. Rollins TR..................... 20,000 *
Thomas B. & Rita Brightman Charitable Remainder Trust UA
05/12/93
Alan W. Rottenberg (2)...................................... 1,340 *
RREEF Venture Capital Fund, L.P............................. 1,500,000 *
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THIS OFFERING
-----------------------
SELLING STOCKHOLDER NUMBER PERCENTAGE
- ------------------- ---------- ----------
<S> <C> <C>
Eli Rubenstein (2).......................................... 1,340 *
Michael B. Rukin TR TTEE FBO................................ 10,000 *
The Concord Hill Group Trust
DTD 02/23/93
William Rutter.............................................. 50,000 *
Burton M. Sack.............................................. 5,000 *
William J. Sales............................................ 5,040 *
Sandler O'Neill Asset Management............................ 62,500 *
Thomas J. Sartory (2)....................................... 1,340 *
John R. Sasso............................................... 5,361 *
Sharam I. & Fariba S. Sasson, TR............................ 25,000 *
Ori Sasson & Susan Sasson Tr................................ 25,000 *
Sasson Trust UA 03/31/94
Donald L. Saunders.......................................... 5,000 *
John Schnugg (1)............................................ 5,361 *
Jack Schwartz............................................... 15,000 *
Edward H. Schweitzer & Chris A. Schweitzer TR(1)............ 1,072 *
Schweitzer Fam Rev Trust UA 02/13/95
Shawn Sedaghat.............................................. 25,000 *
Fred A. Seigel.............................................. 5,361 *
Uday Sengupta............................................... 5,000 *
Asia Quest
Richard Sherman............................................. 5,000 *
Donald L. Shulman (2)....................................... 1,340 *
Robert J. Siedlecki......................................... 5,000 *
John R. Silber.............................................. 5,361 *
Victoria Simms.............................................. 15,000 *
Michael Singer (1).......................................... 1,072 *
Vassilios Sirpoladis & Lynne Sirpoladis JT TEN.............. 25,000 *
Jeffrey S. Slowgrove & Toni A. Slowgrove TEN ENT............ 7,500 *
Slyman International LLC.................................... 5,000 *
Richard A. Smith & Mary Ellen Zweifel Smith TR.............. 13,404 *
Smith Family Trust UA 04/03/96
Mark C. Smith............................................... 25,000 *
Alan B. Snyder & Susan R. Katz-Snyder....................... 50,000 *
Jure Sola & Michelle Sola TR................................ 12,500 *
Jure & Michelle Sola Trust UA 12/18/92
Alan D. Solomont............................................ 5,000 *
Sasson R. & Eta Somekh TR................................... 5,000 *
Marvin Sparrow.............................................. 2,680 *
Harold Stahler & Dale I. Stahler JT TEN..................... 2,680 *
Standard Pacific Capital.................................... 750,000 3.6%
State Board of Administration of Florida.................... 500,000 2.4%
State Street Research Aurora Fund........................... 120,000 *
Stephens Inc................................................ 20,000 *
John G. Stewart............................................. 25,000 *
Marilyn L. Sticklor......................................... 2,680 *
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THIS OFFERING
-----------------------
SELLING STOCKHOLDER NUMBER PERCENTAGE
- ------------------- ---------- ----------
<S> <C> <C>
Michael E. Tacelosky TR..................................... 5,000 *
Michael E. Tacelosky 1994 Trust Fund UA 12/20/94
Richard W. Talkov & Susan P. Davis JT TEN................... 1,340 *
Andrew R. Tang (1).......................................... 1,072 *
Lester J. Tanner............................................ 5,000 *
Steven Taslitz.............................................. 5,000 *
Third Point Partners LP..................................... 67,315 *
Third Point Offshore Fund LTD............................... 45,877 *
Robert Tishman (1).......................................... 8,042 *
Daniel D. Tompkins.......................................... 5,000 *
Chester Tomsick............................................. 5,000 *
David Toole................................................. 5,000 *
Trans National Grp Svcs LLC................................. 5,000 *
Norvald L. Ulvestad TR...................................... 5,000 *
Norvald L. Ulvestad Trust UA 09/28/82
William V. Urone & Joyce A. Urone TR Urone Trust UA 15,000 *
10/26/93..................................................
US Die Casting & Development Company Inc.................... 10,000 *
E. Vittoria, J. Vittoria & A Vittoria....................... 25,000 *
J. Vittoria TR
Joseph Vittoria Irrevocable Trust UA 12/19/97
Ian Wallace................................................. 5,000 *
James F. Wallack & Rebecca Matthews JT TEN.................. 1,340 *
David N. K. Wang............................................ 10,000 *
Robert S. Washburn TR....................................... 10,000 *
Purchase Pension & Profit Keogh Plan UA 01/01/88
Craig Stephen & Jocelyn Weingart JT TEN..................... 1,072 *
Harris Weinstein TR......................................... 12,500 *
Harris Weinstein Revocable Trust UA 01/26/94
Frenchmans Creek
Mark Weinstein.............................................. 5,000 *
Thomas W. Weisel............................................ 23,215 *
Welch & Forbes Inc.......................................... 66,000 *
Wendelin White & Paul Feinberg JT TEN....................... 5,000 *
Lisa Mashihara Westley...................................... 1,072 *
Wigold Partners............................................. 5,000 *
Robert L. Williamson & Rebecca A. Williamson TEN COM........ 5,000 *
Fred Winograd (1)........................................... 1,340 *
Frederic E. Wittman..................................... 5,361 *
Geoffrey Y. Yang............................................ 5,000 *
Lewis Yaraborough & Paula M. Yarborough TR.................. 5,000 *
Yarborough Family Annual Gift Trust UA 01/17/94
Robin C. Yoshimura & Randy Yoshimura JT TEN................. 5,000 *
ZPG Securities LLC.......................................... 5,745 *
</TABLE>
- ------------------------
* Less than 1%
(1) Such Selling Stockholder is affiliated with Banc of America Securities, LLC
a predecessor of which was the Initial Purchaser in our March, 1998
Offering.
30
<PAGE>
(2) Such Selling Stockholder is affiliated with Goodwin, Procter & Hoar LLP or
Goulston & Storrs, PC, law firms that provide professional services to the
Registrant.
Except as shown above, none of the Selling Stockholders has, or within the
past three years had, any position, office or other material relationship with
the Company or any if 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.
31
<PAGE>
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Stockholders. As used herein, Selling Stockholders includes
donees and pledges selling shares received from a named Selling Stockholder
after the date of this Prospectus. 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 cross or block transactions)
-- on any national securities exchange or quotation service on which the
Offered Securities may be listed or quoted at the time of sale;
-- in the over-the-counter market;
-- in transactions otherwise than on such exchanges or in the
over-the-counter market; or
-- 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 we have 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.
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.
32
<PAGE>
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. We
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 common stock of the
Company.
EXPERTS
The consolidated financial statements and financial statement schedule of
Beacon Capital Partners, Inc. and the consolidated financial statements and
financial statement schedule of Beacon/PW Kendall LLC, both included in Beacon
Capital Partners, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1998, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their reports thereon included therein and incorporated herein
by reference. Such consolidated financial statements and financial statement
schedules are incorporated herein by reference in reliance upon such reports
given on the authority of such firm as experts in accounting and auditing.
The combined historical summaries of gross income and direct operating
expenses for Fort Point Place for the year ended December 31, 1998, The
Athenaeum Portfolio for the year ended December 31, 1997, and The Breunig
Portfolio for the year ended December 31, 1997; as well as 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 included in the
Company's Current Report on Form 8-K dated November 17, 1999, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their reports
thereon included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
33
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS,
INCORPORATED HEREIN BY REFERENCE OR CONTAINED IN A PROSPECTUS SUPPLEMENT.
NEITHER WE NOR THE SELLING STOCKHOLDERS HAVE AUTHORIZED ANYONE ELSE TO PROVIDE
YOU WITH DIFFERENT OR ADDITIONAL INFORMATION. THE SELLING STOCKHOLDERS ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS, OR
INCORPORATED HEREIN BY REFERENCE, OR IN ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS
OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Forward-Looking Statements............ 1
Prospectus Summary.................... 2
The Offering.......................... 3
The Company........................... 3
Risk Factors.......................... 4
Where You Can Find More Information... 21
Use of Proceeds....................... 22
The Selling Stockholders.............. 22
Plan of Distribution.................. 32
Legal Matters......................... 33
Experts............................... 33
</TABLE>
20,394,843 SHARES
BEACON CAPITAL
PARTNERS, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
NOVEMBER , 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated fees and expenses payable by us
in connection with the issuance and distribution of the securities registered
hereby:
<TABLE>
<S> <C>
Registration fee............................................ $120,330
Legal fees and expenses..................................... 250,000
Accounting fees and expenses................................ 200,000
Printing and duplicating expenses........................... 75,000
Miscellaneous............................................... 75,000
--------
Total....................................................... $720,330
========
</TABLE>
- ------------------------
(1) All amounts except the registration fee are estimated.
ITEM 15. 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
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
II-1
<PAGE>
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 [ ] 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-2
<PAGE>
ITEM 16. 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.(1)
2.1 Agreement and Plan of Merger by and between the Predecessor
and the Company.(1)
4.1 Specimen certificate for common stock, $.01 par value, of
the Company.(2)
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the validity of
the securities being offered.(3)
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax
matters.(4)
10.1 Beacon Capital Strategic Partners, L.P. Limited Partnership
Agreement.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1).(3)
23.2 Consent of Ernst & Young LLP.
24.1 Power of Attorney.(1)
24.2 Power of Attorney of Robert M. Melzer.(5)
</TABLE>
- ------------------------
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-11 (SEC File No. 333-56937) filed with the Commission on June 16,
1998.
(2) Previously filed as an exhibit to Pre-effective Amendment No. 1 to the
Company's Registration Statement on Form S-11 (SEC File No. 333-56937) filed
with the Commission on August 21, 1998.
(3) Previously filed as an exhibit to Amendment Pre-effective No. 2 to the
Company's Registration Statement on Form S-11 (SEC File No. 333-56937) filed
with the Commission on September 22, 1998.
(4) Previously filed as an exhibit to Pre-effective Amendment No. 3 to the
Company's Registration Statement on Form S-11 (SEC File No. 333-56937) filed
with the Commission on October 16, 1998.
(5) Previously filed as an exhibit to Post-Effective Amendment No. 4 to the
Company's Registration Statement on Form S-11 (File No. 333-56937) filed
with the Commission on June 22, 1999.
ITEM 17. 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.
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.
II-3
<PAGE>
(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.
(3) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(4) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(5) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, Commonwealth of Massachusetts, on this 18th
day of November, 1999.
<TABLE>
<S> <C> <C>
BEACON CAPITAL PARTNERS, INC.
By: /s/ LIONEL P. FORTIN
-----------------------------------------
Lionel P. Fortin
President and Chief Operating Officer
</TABLE>
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>
Chairman of the Board and
* Chief Executive Officer
------------------------------------------- and Director (Principal November 18, 1999
Alan M. Leventhal Executive Officer)
/s/ LIONEL P. FORTIN
------------------------------------------- President, Chief Operating November 18, 1999
Lionel P. Fortin Officer and Director
Senior Vice President and
* Chief Financial Officer
------------------------------------------- (Principal Financial and November 18, 1999
Randy J. Parker Accounting Officer)
*
------------------------------------------- Director November 18, 1999
Stephen T. Clark
*
------------------------------------------- Director November 18, 1999
Robert M. Melzer
*
------------------------------------------- Director November 18, 1999
Steven Shulman
*
------------------------------------------- Director November 18, 1999
Scott M. Sperling
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ LIONEL P. FORTIN,
--------------------------------------
Lionel P. Fortin
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1 Placement Agent Agreement between NationsBanc Montgomery
Securities LLC and the Company, as amended.(1)
2.1 Agreement and Plan of Merger by and between the Predecessor
and the Company.(1)
4.1 Specimen certificate for common stock, $.01 par value, of
the Company.(2)
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the validity of
the securities being offered.(3)
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax
matters.(4)
10.1 Beacon Capital Strategic Partners, L.P. Limited Partnership
Agreement.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1).(3)
23.2 Consent of Ernst & Young LLP.
24.1 Power of Attorney.(1)
24.2 Power of Attorney of Robert M. Melzer.(5)
</TABLE>
- ------------------------
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-11 (SEC File No. 333-56937) filed with the Commission on June 16,
1998.
(2) Previously filed as an exhibit to Pre-effective Amendment No. 1 to the
Company's Registration Statement on Form S-11 (SEC File No. 333-56937) filed
with the Commission on August 21, 1998.
(3) Previously filed as an exhibit to Amendment Pre-effective No. 2 to the
Company's Registration Statement on Form S-11 (SEC File No. 333-56937) filed
with the Commission on September 22, 1998.
(4) Previously filed as an exhibit to Pre-effective Amendment No. 3 to the
Company's Registration Statement on Form S-11 (SEC File No. 333-56937) filed
with the Commission on October 16, 1998.
(5) Previously filed as an exhibit to Post-Effective Amendment No. 4 to the
Company's Registration Statement on Form S-11 (File No. 333-56937) filed
with the Commission on June 22, 1999.
<PAGE>
EXHIBIT 10.1
EXECUTION COPY
BEACON CAPITAL STRATEGIC PARTNERS, L.P.
LIMITED PARTNERSHIP AGREEMENT
THE PARTNERSHIP INTERESTS OF THE LIMITED PARTNERS ISSUED PURSUANT TO THIS
LIMITED PARTNERSHIP AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE OR
OTHER JURISDICTION, AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THEY ARE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY OTHER
APPLICABLE SECURITIES OR "BLUE SKY" LAWS, OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH PARTNERSHIP INTERESTS ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER SET FORTH IN THIS AGREEMENT.
<PAGE>
BEACON CAPITAL STRATEGIC PARTNERS, L.P.
LIMITED PARTNERSHIP AGREEMENT
Table of Contents
<TABLE>
<S> <C> <C>
1. RECITALS AND DEFINITIONS..........................................................1
1.1 Recitals.................................................................1
1.2 Definitions..............................................................1
2. FORMATION OF LIMITED PARTNERSHIP..................................................8
2.1 Organization.............................................................8
2.2 Partnership Name.........................................................9
2.3 Purposes and Powers......................................................9
2.4 Principal Business Office, Registered Office and Registered Agent........9
2.5 Qualification in Other Jurisdictions.....................................9
2.6 Powers...................................................................9
3. AUTHORITY OF THE GENERAL PARTNER..................................................9
3.1 General Authority........................................................9
3.2 Authority for Specific Actions..........................................10
3.3 Investment Restrictions.................................................11
3.4 ERISA Matters...........................................................13
3.5 Foundation Partners.....................................................13
3.6 UBTI Matters............................................................14
3.7 REIT Matters............................................................14
3.8 Expense Reimbursement...................................................14
3.9 Coinvestments...........................................................15
3.10 Other Permitted Business................................................15
3.11 Exculpation.............................................................16
3.12 Indemnification.........................................................16
3.13 Payment of Indemnification Expenses.....................................17
3.14 Partnership Classification..............................................17
3.15 Reliance by Third Parties...............................................17
4. CAPITAL COMMITMENTS AND CONTRIBUTIONS............................................18
4.1 Payment of Capital Contributions........................................18
4.2 Defaulting Partners.....................................................21
4.3 Requirements for Admission as Limited Partner...........................23
4.4 Admission of Limited Partners...........................................23
4.5 Interest................................................................26
4.6 Assignees...............................................................26
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5. CAPITAL ACCOUNTS; PROFITS AND LOSSES; DISTRIBUTIONS..............................27
5.1 Capital Accounts........................................................27
5.2 Allocation of Net Income................................................27
5.3 Allocation of Net Loss..................................................28
5.4 Treatment of Certain Affiliated Partners................................29
5.5 Minimum Gain Chargebacks and Non-Recourse Deductions....................29
5.6 Qualified Income Offset.................................................30
5.7 Code Section 704(b) Allocations.........................................30
5.8 Code Section 514(c)(9)(E) Allocations...................................30
5.9 Special Allocations; Other Allocation Provisions........................30
5.10 Distributions...........................................................32
5.11 Deficit Restoration by General Partner..................................36
5.12 No Deficit Restoration by Limited Partners..............................36
5.13 Right of Set-Off........................................................36
5.14 Withholding.............................................................37
5.15 Excess Non-Recourse Liabilities.........................................37
6. BOARD OF ADVISORS AND INVESTMENT COMMITTEE.......................................37
6.1 Board of Advisors.......................................................37
6.2 Board of Advisors Meetings and Expense Reimbursement....................37
6.3 Quorum and Voting of Members of Board of Advisors.......................37
6.4 Investment Committee....................................................38
6.5 Partnership Meetings....................................................38
7. TRANSFERS OF LIMITED PARTNERSHIP INTERESTS.......................................38
7.1 Assignability of Interests..............................................38
7.2 Substitute Limited Partners.............................................40
7.3 Obligations of Assignee.................................................40
7.4 Allocation of Distributions Between Assignor and Assignee...............40
8. TRANSFER OF PARTNERSHIP INTEREST BY GENERAL PARTNER; WITHDRAWAL..................40
8.1 Assignability of Interest...............................................40
8.2 Voluntary Withdrawal....................................................41
8.3 Involuntary Withdrawal..................................................41
8.4 Removal of General Partner..............................................41
8.5 Payment of Expenses to General Partner Upon Withdrawal..................42
8.6 Reduction in General Partner's Interest upon Removal or Withdrawal......42
8.7 Further Consequences of Removal or Withdrawal...........................43
8.8 Continuation of Partnership Business....................................43
9. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS...................................44
9.1 Limited Liability.......................................................44
9.2 Authority of Limited Partners...........................................44
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9.3 Confidentiality.........................................................44
9.4 BHC Provisions..........................................................45
10. DURATION AND TERMINATION OF THE PARTNERSHIP......................................47
10.1 Duration................................................................47
10.2 Bankruptcy of Limited Partner...........................................47
10.3 Termination.............................................................47
11. LIQUIDATION OF THE PARTNERSHIP...................................................48
11.1 General.................................................................48
11.2 Priority on Liquidation; Distributions..................................48
11.3 Orderly Liquidation.....................................................49
11.4 Source of Distributions.................................................49
11.5 Statements on Termination...............................................49
12. BOOKS; ACCOUNTING; TAX ELECTIONS; REPORTS........................................49
12.1 Books and Accounts......................................................49
12.2 Records Available.......................................................49
12.3 Annual Financial Statements and Valuation...............................50
12.4 Quarterly Financial Statements..........................................50
12.5 Reliance on Accountants.................................................50
12.6 Tax Matters Partner; Filing of Returns..................................51
12.7 Fiscal Year.............................................................51
13. POWER OF ATTORNEY................................................................51
13.1 General.................................................................51
13.2 Survival of Power of Attorney...........................................51
13.3 Written Confirmation of Power of Attorney...............................52
14. MISCELLANEOUS....................................................................52
14.1 Further Assurances......................................................52
14.2 Successors and Assigns..................................................52
14.3 Applicable Law..........................................................52
14.4 Severability............................................................52
14.5 Counterparts............................................................52
14.6 Entire Agreement........................................................52
14.7 Benefit of Outside Agreements...........................................52
14.8 Amendment...............................................................53
14.9 Construction............................................................53
14.10 Force Majeure...........................................................53
14.11 Notices.................................................................54
14.12 No Right of Partition for Redemption....................................54
14.13 Third-Party Beneficiaries...............................................54
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14.14 General Partner as Limited Partner......................................54
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SCHEDULES AND EXHIBITS:
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Schedule A List of Limited Partners and Capital Contributions
Schedule B List of Properties in which BCP Affiliates have an Interest
Exhibit A Form of Guaranty of General Partner's Deficit Restoration Obligation
Exhibit B Illustration of Section 4.4(b)
Exhibit C Illustration of Sections 5.10(c) and 5.10(g)
Exhibit D Form of Power of Attorney
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BEACON CAPITAL STRATEGIC PARTNERS, L.P.
LIMITED PARTNERSHIP AGREEMENT
1. RECITALS AND DEFINITIONS
1.1 RECITALS. This Limited Partnership Agreement (this "Agreement") has
been entered into as of October 1, 1999 by and among BCP Strategic Partners,
LLC, as general partner, and those persons and entities listed on SCHEDULE A
hereto as limited partners (together with those limited partners subsequently
admitted pursuant to the terms of this Agreement, the "Limited Partners") (the
General Partner and the Limited Partners, hereinafter collectively, being
referred to as the "Partners"), to form a limited partnership (the
"Partnership") pursuant to the laws of the State of Delaware.
1.2 DEFINITIONS. Capitalized terms used in this Agreement shall have
the meanings set forth or referred to below.
"Act" shall have the meaning set forth in Section 2.1.
"Adjusted Capital Account" means, with respect to any Partner, such
Partner's Capital Account as of the date of determination, after giving effect
to the following adjustments: (i) credit to such Capital Account any amounts
that the Partner is obligated to restore (to the extent recognized under
Treasury Regulations Section 1.704-1(b)(2)(ii)(C)) or deemed obligated to
restore (under Treasury Regulations Section 1.704-2) with respect to a deficit
balance in its Capital Account and (ii) debit to such Capital Account the items
described in Treasury Regulations Section 1.704-1(b)(2)(ii)(D)(4), (5) or (6).
The foregoing definition of Adjusted Capital Account and the provisions of
Section 5.3(c) and Section 5.6 are intended to comply with the provisions of
Treasury Regulations Section 1.704-1(b)(2)(ii)(D) and shall be interpreted and
applied consistently therewith.
"Additional Capital Contribution" shall have the meaning set forth in
Section 4.1(d).
"Affiliate" of any Person means any Person that directly or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with, the Person specified. It is expressly agreed that each
member of the General Partner is an Affiliate of the General Partner.
"Agreement" shall have the meaning set forth in Section 1.1.
"Applicable Percentage Rate" shall have the meaning set forth in
Section 4.1(e).
"BCP" means Beacon Capital Partners, Inc., a Maryland corporation.
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"BCP Affiliate" means BCP, Beacon Capital Partners, L.P., the General
Partner or any Person controlling, controlled by or under common control with
BCP, Beacon Capital Partners, L.P. or the General Partner but shall exclude
Persons in which the Partnership makes an Investment.
"Board of Advisors" shall have the meaning set forth in Section 6.1.
"BHCA" means the Bank Holding Company Act of 1956, as amended.
"BHC Partner" means a Limited Partner that is a bank holding company,
as defined in Section 2(a) of the BHCA, or a non-bank subsidiary of such bank
holding company.
"Capital Account" shall have the meaning set forth in Section 5.1(a).
"Capital Commitment" shall mean the total amount of cash agreed to be
paid to the Partnership (whether or not yet paid) by each Partner pursuant to
Section 4.1 (other than Section 4.1(d)), as set forth on SCHEDULE A hereto.
"Capital Contribution" shall mean, as to each Partner, the amount of
cash actually contributed to the Partnership by such Partner as of the time the
determination is made. Capital Contributions include Additional Capital
Contributions.
"Carried Interest" shall have the meaning set forth in Section 8.6.
"Catch-up Interest" shall mean an amount equivalent to interest on
Catch-up Payments at the rate of 10% per annum, or such higher rate as is
determined by the General Partner in its sole discretion, plus any other amount
determined by the General Partner in its sole discretion, calculated as provided
in Section 4.4(b).
"Catch-up Payment" shall mean, with respect to a newly admitted Limited
Partner or an existing Limited Partner that is increasing its Capital
Commitment, an amount determined by multiplying (x) the aggregate amount of
Capital Contributions made by all Partners prior to the date of the relevant
Subsequent Closing, recalculated to reflect the amount of any distribution to
the General Partner or to a Fixed-Percentage Partner in accordance with Section
4.4(b)(iii) or 4.4(b)(vii) hereof, by (y) in the case of a newly admitted
Limited Partner, such Limited Partner's Equity Interest Percentage, or in the
case of a Limited Partner increasing its Capital Commitment, the additional
Equity Interest Percentage purchased at the Subsequent Closing, each calculated
after taking into account the adjustment, if any, to the Equity Interest
Percentage of the General Partner.
"Certificate" shall have the meaning set forth in Section 2.1.
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"Class A Limited Partner" shall mean any Limited Partner other than a
Class B Limited Partner.
"Class B Limited Partner" shall mean any Limited Partner who,
individually or as part of a group of related Limited Partners, has a Capital
Commitment of seventy-five million dollars ($75,000,000) or more. The
determination of whether a Limited Partner is a Class A Limited Partner or a
Class B Limited Partner shall be made as of the first Closing in which such
Limited Partner participates and thereafter adjusted retroactively as of any
Subsequent Closing, if applicable, to the first day of the calendar quarter that
includes the Subsequent Closing.
"Closing" shall mean the Initial Closing or any Subsequent Closing.
"Code" shall have the meaning set forth under "Internal Revenue Code"
in this Section 1.2.
"Confidential Information" shall have the meaning set forth in Section
9.3.
"Contribution Call" shall have the meaning set forth in Section 4.1(a).
"Default Date" shall have the meaning set forth in Section 4.2(a).
"Defaulted Interest" shall have the meaning set forth in Section 4.2
(b).
"Defaulting Partner" shall mean any Partner which fails to pay when due
any installment of its Capital Commitment or any Additional Capital Contribution
under Section 4.1 hereof.
"Disposition" shall mean, with respect to all or a portion of any
Strategic Investment, any complete or partial repayment, syndication of
interests, sale and/or other disposition, including sale upon liquidation of the
Partnership, of such Strategic Investment such that the Partnership ceases to
have an ownership interest in such Strategic Investment or such portion thereof.
"Disposition Proceeds" shall mean the proceeds to the Partnership from
the Disposition of any of its Strategic Investments, net of all related
expenses, taxes and liabilities (including expenditures and fees paid directly
or indirectly by the Partnership to the General Partner or any Affiliate of the
General Partner or to third parties in connection with such Disposition), and in
the case of any purchase money obligation or other interest (other than
marketable securities) received on the disposition of a Strategic Investment
shall mean both the principal thereof and interest thereon or other payments or
distributions with respect to such interest at the time when either is received.
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"Equity Interest" with respect to any Partner shall mean the entire
right, title and interest of such Partner in the Partnership and any appurtenant
rights, including, without limitation, any voting rights.
"Equity Interest Percentage" with respect to any Partner shall mean the
ratio that the Capital Commitment of such Partner bears to the aggregate Capital
Commitments of all Partners.
"ERISA" shall have the meaning set forth in Section 3.3(b).
"ERISA Partner" shall have the meaning set forth in Section 3.4(b).
"Estimated Value Capital Account" shall mean, with respect to any
Partner, the amount such Partner would receive in a hypothetical liquidation of
the Partnership following a hypothetical sale of all of the assets of the
Partnership at prices equal to their most recent valuations, and the
distribution of the proceeds thereof to the Partners pursuant to this Agreement
(after the hypothetical payment of all actual Partnership indebtedness, and any
other liabilities related to the Partnership's assets).
"Fiscal Year" shall have the meaning set forth in Section 12.7.
"Fixed-Percentage Partner" shall have the meaning set forth in Section
4.4(b)(vii).
"Formation Expenses" shall mean fees and out of pocket expenses
incurred in connection with the formation of the Partnership and the General
Partner and the consummation of the Initial Closing and any Subsequent Closings,
but not including any placement or underwriting fees, including, without
limitation, the placement fees due to Banc of America Securities LLC.
"Foundation Partner" shall have the meaning set forth in Section 3.5.
"General Partner" shall mean BCP Strategic Partners, LLC or any
successor thereto.
"GP Class A Priority Distribution Base" means:
(1) For each calendar quarter (or portion
thereof) prior to the end of the Investment
Period, the daily weighted average amount of
the aggregate Capital Commitments of the
Class A Limited Partners during such
calendar quarter; and
(2) For each calendar quarter (or portion
thereof) after the end of the Investment
Period, the daily weighted average amount of
the
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aggregate Unreturned Capital
Contributions of the Class A Limited
Partners.
"GP Class B Priority Distribution Base" means:
(1) For each calendar quarter (or portion
thereof) prior to the end of the Investment
Period, the daily weighted average amount of
the aggregate Capital Commitments of the
Class B Limited Partners during such
calendar quarter (or portion thereof); and
(2) For each calendar quarter (or portion
thereof) after the end of the Investment
Period, the daily weighted average amount of
the aggregate Unreturned Capital
Contributions of the Class B Limited
Partners during such calendar quarter (or
portion thereof).
"Indebtedness" of any Person shall mean, without duplication, (A) as
shown on such Person's balance sheet (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property, and (ii) all
obligations of such Person evidenced by a note, bond, debenture or similar
instrument (but only to the extent disbursed with respect to construction loans
or other lines of credit), (B) the face amount of all letters of credit issued
for the account of the Person and, without duplication, all unreimbursed amounts
drawn thereunder, (C) all capitalized leases, and (D) all net payment
obligations of such Person under any rate hedging agreements which were not
entered into specifically in connection with Indebtedness set forth in clauses
(A) or (B) hereof.
"Indemnified Party" shall have the meaning set forth in Section 3.11.
"Initial Closing" shall mean the initial admission of Limited Partners
into the Partnership.
"Initial Closing Date" shall mean the date when the Initial Closing
occurs.
"Interim Investments" shall mean (i) cash and obligations issued or
guaranteed by the United States of America (so long as such obligations are
scheduled to mature within nine months from the date of acquisition thereof);
(ii) obligations issued or guaranteed by any Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America
pursuant to authority granted by the Congress of the United States (so long as
such obligations are scheduled to mature within nine months from the date of
acquisition thereof); (iii) commercial paper maturing within nine months from
the date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from Standard & Poor's Corporation or from
Moody's Investors Service, Inc.; (iv) investments in commercial paper maturing
within nine months from the date of acquisition thereof and issued
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by the holding company of any commercial bank organized under the laws of the
United States of America or any State thereof that has (x) a combined capital
and surplus in excess of one billion dollars ($1,000,000,000) and a rating of at
least AA or the equivalent thereof by Standard & Poor's Corporation or at least
Aa or the equivalent thereof by Moody's Investors Service, Inc. and (y)
commercial paper rated at least A-1 or the equivalent thereof by Standard &
Poor's Corporation and at least P-1 or the equivalent thereof by Moody's
Investors Service, Inc.; (v) certificates of deposit, banker's acceptances and
time deposits maturing within nine months from the date of acquisition thereof
issued or guaranteed or placed with, and money market deposit accounts issued or
offered by, commercial banks which are members of the Federal Deposit Insurance
Corporation and which have a combined capital, surplus and undistributed profits
of at least two hundred fifty million dollars ($250,000,000); (vi) repurchase
agreements that are secured by obligations issued or guaranteed by the United
States of America or an agency or instrumentality thereof entered into with any
office of any commercial bank meeting the qualifications specified in clause (v)
above (so long as such repurchase agreements have a term of not more than seven
(7) days); (vii) other money market instruments; and (viii) mutual funds
substantially all of the assets of which are invested in any or all of the
investments described in clauses (i) through (vii) above.
"Internal Revenue Code" or "Code" shall mean the United States Internal
Revenue Code of 1986, as from time to time amended, and any successor thereto.
"Investment" shall mean one or more assets constituting Interim
Investments and/or Strategic Investments.
"Investment Amount" shall mean, with respect to each Partner and a
particular Investment, such Partner's allocable share (determined in accordance
with such Partner's Equity Interest Percentage) of the Capital Contributions
directly committed to such Investment, as determined by the General Partner
absent manifest error.
"Investment Committee" shall have the meaning set forth in Section 6.4.
"Investment Period" shall have the meaning set forth in Section 4.1(a).
"Involuntary Withdrawal" shall have the meaning set forth in Section
8.3.
"IRS" shall mean the Internal Revenue Service of the United States
Department of the Treasury.
"Key Man Event" shall have the meaning set forth in Section 4.1(g).
"Limited Partners" shall have the meaning set forth in Section 1.1.
"Liquidating Agent" shall have the meaning set forth in Section 11.1.
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"Managed Assets" shall have the meaning set forth in Section 5.10(e).
"Partners" shall have the meaning set forth in Section 1.1.
"Partnership" shall have the meaning set forth in Section 1.1.
"Partnership Minimum Gain" shall have the meaning set forth in Section
5.5(a).
"Person" shall mean a corporation, association, retirement system,
international organization, joint venture, partnership, limited liability
company, trust or individual.
"Predecessor In Interest," as to the Equity Interest of any Partner,
shall mean any Partner which was the prior holder of all or any portion of such
Equity Interest.
"Quarterly GP Priority Distribution Amount" shall have the meaning set
forth in Section 5.10(g).
"REIT" shall have the meaning set forth in Section 3.7.
"Regulatory Allocations" shall have the meaning set forth in Section
5.9(c).
"Removal" shall have the meaning set forth in Section 8.4.
"Return Account" shall mean a bookkeeping account established with
respect to each Limited Partner in order to determine whether and when
cumulative cash distributions to such Partner exceed the aggregate of its
Capital Contributions and a 10% per annum cumulative, compounded annual return
thereon (such rate of return shall hereinafter be referred to as the "RETURN
RATE").
The Return Account shall be determined on the last day of each
calendar month as follows:
(i) Start with the balance in the Return Account on
the last day of the prior calendar month;
(ii) ADD any Capital Contributions made by such
Limited Partner before the 15th of that month and SUBTRACT any
distributions made to the Limited Partner before the 15th of
that month; PROVIDED, HOWEVER, that no such distributions
shall reduce the balance in the Return Account to below zero;
(iii) ADD an amount equal to (A) the sum of the
amounts in clauses (i) and (ii) above multiplied by (B)
0.00797414043;
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(iv) ADD any Capital Contributions made by such
Limited Partner on or after the 15th of that month; and
(v) SUBTRACT any distributions made to the Limited
Partner on or after the 15th of that month; PROVIDED, HOWEVER,
that no such distributions shall reduce the balance in the
Return Account to below zero.
"Return Income Element" shall mean, with respect to a Limited Partner,
an amount equal to the cumulative amount added to such Partner's Return Account
pursuant to clause (iii) of the second paragraph of the definition of Return
Account.
"Return of Capital Distribution" shall mean, with respect to a Limited
Partner, the amount by which any net distribution to the Partner (I.E. a
distribution other than a distribution offset by an Additional Capital
Contribution), when aggregated with all prior net distributions to the Partner
other than Return of Capital Distributions, exceeds, on the date of the
distribution, the Partner's Return Income Element computed through that date.
"Senior Management" shall mean William A. Bonn, Jeremy B. Fletcher,
John Halsted, Douglas S. Mitchell, Erin R. O'Boyle, Randy J. Parker, Thomas
Ragno and E. Valjean Wheeler.
"Special Tax Distribution" shall have the meaning set forth in Section
5.10(d).
"Strategic Investments" shall mean any direct or indirect, current or
contingent interest, option or commitment to acquire or other contract right
relating to any type of real estate-related asset, including without implied
limitation, portfolios, real estate-related assets, individual assets, privately
or publicly held operating companies and real estate-related businesses,
commercial mortgage-backed securities, indebtedness secured by real property or
interests in entities owning real property, and interests in entities that own
or operate real property.
"Subsequent Change" shall have the meaning set forth in Section 3.5.
"Subsequent Closing" shall have the meaning set forth in Section
4.4(b).
"Subscription Agreement" shall have the meaning set forth in Section
4.3.
"Treasury Regulations" shall mean the regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"UBTI" shall have the meaning set forth in Section 3.6.
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"Unreturned Capital Contributions" shall mean, with respect to a
Limited Partner, the Capital Contribution of the Limited Partner less any
Additional Capital Contributions made by such Partner and any Return of Capital
Distributions to such Partner.
"Voluntary Withdrawal" shall have the meaning set forth in Section 8.2.
"Voting Interest" shall mean, with respect to any Partner(s) entitled
to vote or otherwise participate with respect to a matter, the ratio which the
Capital Commitment(s) of such Partner(s) voting in favor of the matter with
respect to which such vote is being taken bears to the aggregate Capital
Commitments of all Partners entitled to vote or otherwise participate with
respect to such matter, expressed as a percentage.
"Withdrawal" shall have the meaning set forth in Section 8.5.
2. FORMATION OF LIMITED PARTNERSHIP
2.1 ORGANIZATION. The Partnership has been formed by the filing of the
certificate of limited partnership (as it may be amended or restated from time
to time, the "Certificate") for the Partnership required under the Delaware
Revised Uniform Limited Partnership Act (as in effect from time to time, the
"Act"), with the Delaware Secretary of State pursuant to the Act. The
Certificate may be restated by the General Partner as provided in the Act or
amended by the General Partner to change the address of the office of the
Partnership in Delaware or the name and address of its resident agent in
Delaware or to make corrections required by the Act. The General Partner shall
deliver a copy of the Certificate and any amendment thereto to any Partner who
so requests.
2.2 PARTNERSHIP NAME. The name of the Partnership shall be "Beacon
Capital Strategic Partners, L.P." All business of the Partnership shall be
conducted under the Partnership name.
2.3 PURPOSES AND POWERS. The purpose of the Partnership is to acquire,
improve, develop, lease, maintain, own, operate, manage, mortgage, hold, sell,
exchange and otherwise deal in and with Strategic Investments, to acquire, hold
and dispose of Interim Investments, and to engage in any other activities
necessary or related or incidental thereto.
2.4 PRINCIPAL BUSINESS OFFICE, REGISTERED OFFICE AND REGISTERED AGENT.
The principal business office of the Partnership shall be located at One Federal
Street, 26th Floor, Boston, Massachusetts 02110. The principal business office
of the Partnership may be changed from time to time by the General Partner. The
General Partner shall promptly notify the Limited Partners of any change in such
principal business office. The registered office of the Partnership in the State
of Delaware shall be c/o The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801. The agent for service of process on the Partnership
pursuant to the Act shall be The Corporation Trust Company, 1209 Orange Street,
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Wilmington, Delaware 19801. The registered agent and registered office of the
Partnership may be changed by the General Partner from time to time. The General
Partner shall promptly notify the Limited Partners of any such change.
2.5 QUALIFICATION IN OTHER JURISDICTIONS. The General Partner shall
cause the Partnership to be qualified or registered under applicable laws in
such states as may be appropriate to avoid any material adverse effect on the
business of the Partnership and shall be authorized to execute, deliver and file
any certificates and documents necessary to effect such qualification or
registration, including without limitation the appointment of agents for service
of process in such jurisdictions.
2.6 POWERS. In furtherance of its purposes, but subject to all of the
provisions of this Agreement, the Partnership shall have and exercise all of the
powers and rights which can be conferred upon limited partnerships formed
pursuant to the Act.
3. AUTHORITY OF THE GENERAL PARTNER
3.1 GENERAL AUTHORITY. Except as expressly limited by the provisions of
this Agreement, the General Partner shall have complete and exclusive discretion
in the management and control of the affairs and business of the Partnership and
shall have all powers necessary, convenient or appropriate to carry out the
purposes, conduct the business and exercise the powers of the Partnership.
Except as so expressly limited, the General Partner shall possess and enjoy with
respect to the Partnership all of the rights and powers of a partner of a
partnership without limited partners to the extent permitted by Delaware law.
3.2 AUTHORITY FOR SPECIFIC ACTIONS. The General Partner is authorized
to take the actions listed below in this Section 3.2 on behalf of the
Partnership. This Section 3.2 is intended as an amplification of and not a
limitation of the authority granted to the General Partner under Section 3.1.
(a) To borrow money from sellers of property or from banks or other
lending institutions or the commercial paper market or otherwise to procure
extensions of credit for the Partnership, including at the discretion of the
General Partner, to issue instruments evidencing indebtedness or other debt
obligations (including, without limitation, mortgages) and, if security is
required therefor, to pledge, hypothecate, mortgage, assign, transfer and grant
a security interest in the Strategic Investments, Capital Commitments and other
assets of the Partnership, including, without limitation, the Limited Partners'
Subscription Agreements (PROVIDED, HOWEVER, that in no event shall any such
pledge obligate any Limited Partner to make any payments in excess of such
Limited Partner's uncontributed Capital Commitment); and in connection with any
of the foregoing to execute, seal, acknowledge and deliver promissory notes,
guarantees, mortgages, security and other agreements, assignments and any other
written documents, and to prepay in whole or in part, refinance, recast,
increase, modify or extend any such debt affecting any of the assets of the
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Partnership and in connection therewith to execute any extensions or renewals of
any such debt and/or any other loans;
(b) To borrow funds to make Strategic Investments or to obtain
working capital or to otherwise leverage the Partnership's assets through the
issuance of mortgage-backed securities or preferred equity interests (so long as
such mortgage-backed securities or preferred equity investments are issued by a
subsidiary or other entity wholly owned by the Partnership or an entity created
pursuant to Section 3.2(h)) or as provided in Section 4.1(e)(v);
(c) To hold assets of the Partnership in the name of one or more
trustees, nominees, other agents or directly or indirectly through one or more
entities owned in whole or in part directly or indirectly by the Partnership;
(d) To maintain such insurance as the General Partner may deem
appropriate to protect the assets and interests of the Partnership and
Indemnified Parties and to satisfy any contractual undertakings of the
Partnership;
(e) To establish reserves for any Partnership purposes and to fund
such reserves with any Partnership assets or borrowed funds;
(f) To enter into property management, servicing and special
servicing or other service provider arrangements with respect to any asset of
the Partnership, including, without limitation, agreements that provide for
incentive compensation;
(g) To enter into transactions with BCP Affiliates, including,
without limitation, for the purchase or sale of assets or for services, provided
that (i) terms must be on an arm's length basis no less favorable than those
that could be obtained from unaffiliated third parties; (ii) prior approval by
the Board of Advisors has been obtained (except that prior approval by the Board
of Advisors need not be obtained with respect to transactions involving the
properties described in SCHEDULE B attached hereto); (iii) the fees and other
terms and conditions of any such transaction must be embodied in a written
contract that precisely describes the transaction; (iv) in the case of a
contract for goods or services, the contract must be terminable at will by the
General Partner without penalty to the Partnership and must automatically
terminate without penalty to the Partnership upon removal of the General
Partner; (v) any indemnification provided for the BCP Affiliate in connection
with any such transaction may not be broader than the indemnification provided
for the General Partner under this Agreement; and (vi) such transaction must be
principally for the benefit of the Partnership in the ordinary course of
business; and
(h) To create one or more entities to hold any assets of the
Partnership or for any other Partnership purpose, and to hold or distribute to
the Partners any interest in such entities. The General Partner may have
management rights and financial interests in any such entities so long as such
arrangements preserve in all material respects the overall economic
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relationship and rights of the Partners. The purpose of this provision is to
allow the General Partner to invest capital contributed by the Partnership
through parallel partnerships or other arrangements when the General Partner
deems such arrangements to be appropriate to minimize taxes, comply with
regulatory requirements, structure transactions so as to avoid the application
of taxes or regulatory requirements or otherwise achieve a benefit for the
Partners consistent with the purposes of the Partnership (provided that the
overall economic relationship, including, without limitation, allocations,
distributions, deficit restoration obligations and rights of the Partners are
preserved).
3.3 INVESTMENT RESTRICTIONS.
(a) The following restrictions shall be applicable to the
General Partner unless waived, with respect to a particular Investment by the
Limited Partners representing a Voting Interest of the Limited Partners in
excess of 50%, excluding from such vote any Limited Partner that is a BCP
Affiliate so long as the General Partner is a BCP Affiliate:
(i) The General Partner shall not make an investment in
any Strategic Investment if the amount of Partnership equity capital
invested in such Strategic Investment would exceed 25% of the Aggregate
Capital Commitments for a period of more than 180 days after such
Strategic Investment has been made, unless the General Partner obtains
the prior approval of the Board of Advisors for such Investment;
provided that at no time may the amount of Partnership equity capital
invested in any Strategic Investment exceed 35% of the aggregate
Capital Commitments. With respect to a Strategic Investment in an
operating company, the General Partner shall not make such an
Investment if the amount invested in all such operating companies would
exceed 20% of the aggregate Capital Commitments divided by 35%. With
respect to a Strategic Investment in new development, the General
Partner shall not make such an Investment if the amount invested in all
such new development would exceed 20% of the aggregate Capital
Commitments divided by 35%.
(ii) The General Partner shall not make a Strategic
Investment in any real estate assets located outside of the United
States of America, or in companies organized, headquartered or having
substantially all of their assets outside of the United States of
America.
(iii) The Partnership shall not sell uncovered calls or
engage in any other similar speculative investment activity involving
derivatives that would subject the Partnership to unlimited exposure.
(iv) The Partnership shall not make any Strategic
Investments in an entity that invests primarily in oil or gas
development or in any collective investment entity whose constituent
documents provide for the payment of a carried interest to a
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Person other than the Partnership, unless the General Partner or the
Partnership has the power to direct the investment decisions of such
collective investment entity or prevent investments from being made by
such collective investment entity. For the purposes of this Section
3.3(a)(iv), (x) "collective investment entity" shall mean a
partnership, limited partnership, limited liability company,
corporation or other entity in which the Partnership is one of many
passive investors and in which the Partnership has less than a majority
interest or otherwise does not have control over investment decisions
of such entity and (y) "carried interest" shall mean incentive
compensation based on the investment returns of a collective investment
entity, other than stock options or bonus compensation paid to
employees of such an entity. It is not the intent of the General
Partner to make non-influence bearing Investments on behalf of the
Partnership in publicly traded securities and, in any event, the
General Partner will not do so if the aggregate amount invested in all
such Investments would exceed 5% of the aggregate Capital Commitments
divided by 35%.
(v) The Partnership shall not incur Indebtedness if,
immediately after giving effect to the incurrence of such Indebtedness,
the aggregate Indebtedness of the Partnership would exceed 65% of the
sum of (A) the aggregate amount of all uncontributed Capital
Commitments plus (B) the aggregate value of the Partnership's
Investments, determined on the basis of the most recent valuations
available.
(b) No Capital Commitments may be drawn, and no Partnership
capital may be invested in any Strategic Investment, prior to the first date on
which the Partnership will qualify as a "real estate operating company," as
defined in the regulations promulgated under the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any successor thereto
("ERISA"), at 29 C.F.R. 2510.3-101.
(c) The Partnership shall not incur any "partner nonrecourse
debt" within the meaning of Treasury Regulations Section 1.704-2(b)(4) if and to
the extent such debt could reasonably cause the Partnership to violate the
requirements of Code Section 514(c)(9)(E) and the Treasury Regulations
promulgated thereunder.
(d) Except for the properties set forth on SCHEDULE B attached
hereto, the Partnership shall not make an investment in which a BCP Affiliate
currently has an interest. The consideration paid by the Partnership to any BCP
Affiliate for any investment made in a property identified in SCHEDULE B hereto
will not exceed the aggregate cost and expenses (including, without limitation,
interest carry and taxes paid with respect to such property) incurred in
connection with the acquisition and ownership of such property by such BCP
Affiliate.
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3.4 ERISA MATTERS.
(a) The Partnership shall use reasonable best efforts to
conduct its affairs so as to qualify as a "real estate operating company" as
defined in the regulations promulgated under ERISA, as amended from time to
time, at 29 C.F.R. 2510.3-101. For purposes of determining that the Partnership
so qualifies, the annual valuation period of the Partnership for purposes of
such regulation shall be the ninety (90) day period commencing on each
anniversary of the date on which the Partnership makes its first Investment
(other than a short-term investment pending long-term commitment).
Simultaneously with the date of the closing of such first Investment by the
Partnership and, thereafter, prior to the expiration of each annual valuation
period, the Partnership shall obtain an opinion from counsel to the Partnership
as to whether the Partnership will qualify as a real estate operating company
during the twelve (12) month period ending on the last day of the next annual
valuation period.
(b) Notwithstanding any provision contained herein to the
contrary, each Limited Partner the assets of which constitute "plan assets"
under ERISA (an "ERISA Partner") may elect to withdraw from the Partnership, and
upon demand by the General Partner shall withdraw from the Partnership, if
either the ERISA Partner or the General Partner shall obtain an opinion of
counsel, in form and substance reasonably satisfactory to the General Partner,
and signed by counsel reasonably satisfactory to the General Partner, to the
effect that it is more likely than not that all or any portion of the assets of
the Partnership constitute assets of the ERISA Partner for the purposes of ERISA
and are subject to the provisions of ERISA to substantially the same extent as
if owned directly by the ERISA Partner. Such withdrawal shall be made in
compliance with the provisions of Article 5, including Section 5.1 dealing with
revaluations of Partnership property and Section 5.10(f). Notwithstanding
anything to the contrary in this Section 3.4(b), prior to the effectiveness of
the withdrawal of an ERISA Partner, the General Partner, for the purpose of
satisfying any outstanding Partnership borrowing which is secured by a pledge or
other encumbrance upon the Capital Commitments and/or the Subscription
Agreements, shall make a Contribution Call pursuant to Section 4.1(a) of an
amount equal to the amount then outstanding under any such Partnership
borrowing. No withdrawal under this Section 3.4(b) shall become effective until
the withdrawing partner has contributed its share of the amount requested in
such Contribution Call.
3.5 FOUNDATION PARTNERS. Notwithstanding any provision of this Agreement
to the contrary, any Limited Partner that is a "private foundation" as described
in Section 509 of the Code (a "Foundation Partner"), may elect to withdraw from
the Partnership, and upon demand by the General Partner shall withdraw from the
Partnership, if either the Foundation Partner or the General Partner shall
obtain an opinion of counsel, in form and substance reasonably satisfactory to
the General Partner, and signed by counsel reasonably acceptable to the General
Partner, to the effect that such withdrawal is necessary in order for the
Foundation Partner to avoid (a) excise taxes imposed by Subchapter A of Chapter
42 of the Code (other than Section 4940 or Section 4942 or, except to the extent
such excise taxes are imposed as a direct result of
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a Subsequent Change, as defined below, Section 4944 thereof) or (b) a material
breach of the fiduciary duties of its trustees under any federal or state law
applicable to private foundations or any rule or regulation adopted thereunder
by any agency,commission or authority having jurisdiction, provided that such
breach is the direct result of a change in the laws applicable to private
foundations or in the investment purpose of the Partnership, which change
becomes effective after the date of the Closing in which the Foundation Partner
becomes a Partner in the Partnership (a "Subsequent Change"). In the event of
the issuance of the opinion of counsel referred to in the preceding sentence,
the withdrawal of and disposition of the Foundation Partner's interest in the
Partnership shall be governed by paragraph 3.4(b) as if the Foundation Partner
were an ERISA Partner.
3.6 UBTI MATTERS. The Partnership will seek to structure its
Investments to avoid material amounts of unrelated business taxable income
("UBTI"), as such term is used in Sections 511 through 514 of the Code for
Limited Partners that are "qualified organizations" as defined in Code Section
514(c)(9)(C).
3.7 REIT MATTERS. The Partnership shall operate in a manner that does
not jeopardize the status of BCP as a real estate investment trust ("REIT")
under the Code, or result in the imposition of any federal income or excise
taxes on BCP except and to the extent that the requirements of this Section 3.7
with respect to a particular Investment or other activity of the Partnership are
specifically waived by BCP. Without limiting the foregoing, the Partnership
shall cause: at least 95% of its gross income in each calendar year to consist
of items described in Code Section 856(c)(2); at least 75% of its gross income
in each calendar year to consist of items described in Code Section 856(c)(3);
and the composition of its assets to satisfy the requirements of Code Section
856(c)(4) at the close of each calendar quarter. The foregoing shall not,
however, have the effect of overriding any provision of Article 5 hereof. The
Partnership shall not acquire any property described in Code Section 1221(1)
unless the property is foreclosure property (as defined in Code Section 856(e))
or the Partnership does not expect to recognize gain upon the disposition of the
property. The determination of whether any rental income is excluded from Code
Section 856(c)(2) or (3) by reason of Code Section 856(d)(2)(B) shall be made
with reference to BCP. Any action of the General Partner to enforce or otherwise
cause the Partnership to comply with the provisions of this Section shall not be
deemed to be a breach of any fiduciary duty otherwise owed to the Partners and
shall not require the approval of any Limited Partner or the Board of Advisors.
3.8 EXPENSE REIMBURSEMENT. The Partnership shall reimburse the General
Partner for the following (to the extent not directly paid by the Partnership):
(a) all Formation Expenses incurred by the General
Partner or any BCP Affiliate on behalf of the Partnership, up to a
maximum reimbursement equal to $1,000,000;
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(b) the charges and expenses of maintaining the
Partnership's bank accounts or of any banks, custodians or depositories
appointed for the safekeeping of the Interim Investments or other
property of the Partnership, including the costs of bookkeeping and
accounting services; and
(c) all other expenses not specifically provided for
in this Section 3.8 which are incurred by the General Partner or any
BCP Affiliate in connection with operating the Partnership or
performing the duties of the General Partner under this Agreement
(which shall not include (i) office overhead of the General Partner,
(ii) compensation of the General Partner's employees or (iii) travel
expenses of the General Partner's employees that are not related to a
specific Investment or proposed Investment).
All Formation Expenses in excess of $1,000,000 and all fees of any
finder or placement agent shall be paid by the General Partner and shall not be
reimbursed by the Partnership.
3.9 COINVESTMENTS.
(a) If the General Partner determines that the Partnership
cannot, or should not, fund a Strategic Investment in its entirety, the
Partnership may, during the Investment Period, coinvest with other parties,
including Partners, Affiliates of Partners, independent third parties and BCP
Affiliates, subject to the limitation set forth below in this Section 3.9, and
enter into agreements committing the Partnership to enter into such
coinvestments with such parties. The General Partner will provide reasonable
notice to the Partners of any coinvestment opportunity involving the
Partnership, and any coinvestment opportunity offered to any BCP Affiliate, any
Partner, or any Affiliate of a Partner will initially be offered to all Partners
in proportion to their Equity Interest Percentages. Any coinvestment between the
Partnership and a BCP Affiliate will be on a PARI PASSU basis as to all terms
and conditions, including without limitation, all rights, preferences and
privileges.
(b) So long as the General Partner is a BCP Affiliate, no BCP
Affiliate may exit a Strategic Investment in which the Partnership also has an
investment prior to the Partnership except in the context of a merger,
consolidation or sale of all or substantially all of the assets of such BCP
Affiliate.
3.10 OTHER PERMITTED BUSINESS.
(a) Except as otherwise limited by this Agreement, the General
Partner and any BCP Affiliate may engage independently or with others in other
business ventures of every nature and description, including, without
limitation, the rendering of advice or services of any kind to other investors
and the making or management of other investments and serving as a general
partner of other public or private real estate partnerships. Nothing in this
Agreement shall be deemed to prohibit the General Partner or any BCP Affiliate
from dealing or otherwise
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engaging in business with Persons transacting business with the Partnership or
from providing services relating to the purchase, sale, financing, management,
development or operation of real property or other assets of the type included
within the definition of Strategic Investments and receiving compensation
therefor. Neither the Partnership nor any Partner shall have any right by virtue
of this Agreement or the partnership relationship created hereby in or to such
other ventures or activities or to the income or proceeds derived therefrom, and
the pursuit of such ventures shall not be deemed wrongful or improper.
(b) Following the Initial Closing, no BCP Affiliate (other
than on behalf of the Partnership) will engage in businesses, or render services
to others, that compete with the Partnership, until the earlier of:
(i) the first date on which an amount equal to 85% of
the Partnership's Capital Commitments has been invested or committed
for investment (in other than Interim Investments) by the Partnership;
or
(ii) the expiration of the Investment Period.
Notwithstanding the foregoing, BCP Affiliates will be permitted at any time to
manage and make investments related to any existing or future investments made
by any BCP Affiliate in connection with the ventures entered into and assets
acquired (or committed to be acquired) by any BCP Affiliate prior to the Initial
Closing Date, or in connection with any additional investments made by any BCP
Affiliate during any period of time that the exclusivity provisions described
above are not in effect.
(c) Subject to Section 4.1(g), Messrs. Leventhal and Fortin
will devote such time as is reasonably necessary to achieve the objectives of
the Partnership and will be actively involved in the activities of the
Investment Committee.
3.11 EXCULPATION. Neither the General Partner, the members of the Board
of Advisors, the members of the Investment Committee, nor any principal, heir,
executor, administrator, partner, member, stockholder, employee, employer,
officer, director, manager, successor or assign of any of them (each an
"Indemnified Party") shall have any liability to the Partnership or to any
Partner for any loss suffered by the Partner or the Partnership which arises out
of any action or inaction of an Indemnified Party, unless such action or
inaction (i) has an adverse effect upon the Partnership and (ii) (x) constitutes
fraud, gross negligence or misconduct of such Indemnified Party, (y) was
committed in bad faith or was the result of active and deliberate dishonesty on
the part of such Indemnified Party, or (z) constitutes a material breach of this
Agreement by the General Partner.
3.12 INDEMNIFICATION. Subject to the limitations contained in this Section
3.12, the Partnership shall indemnify each Indemnified Party against all losses,
liabilities, damages and expenses incurred by such Indemnified Party as a result
of its status as such. Such indemnity
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shall cover, without implied limitation, judgments, settlements, fines,
penalties and counsel fees reasonably incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative body, in which an Indemnified Party may be or
may have been involved as a party or otherwise, or with which it may have been
threatened, by reason of being or having been an Indemnified Party, or by reason
of any act or omission on behalf of the Partnership; PROVIDED, HOWEVER, that an
Indemnified Party shall not be entitled to indemnification pursuant to this
Section 3.12 with respect to any matter as to which such Indemnified Party shall
have been finally adjudicated in any such action, suit or other proceeding, or
otherwise by a court of competent jurisdiction, to have committed an act or
omission (i) having an adverse effect upon the Partnership and (ii) (x)
constituting fraud, gross negligence or misconduct, (y) which was committed in
bad faith or was the result of active and deliberate dishonesty on the part of
such Indemnified Party or (z) constituting a material breach of this Agreement
by the General Partner. The right of indemnification provided hereby shall not
be exclusive of, and shall not affect, any other rights to which any Indemnified
Party may be entitled and nothing contained in this Section 3.12 shall limit any
lawful rights to indemnification existing independently of this Section 3.12.
3.13 PAYMENT OF INDEMNIFICATION EXPENSES. Prior to any final
disposition of any claim or proceeding with respect to which any Indemnified
Party may be entitled to indemnification hereunder, the Partnership shall pay to
the Indemnified Party, in advance of such final disposition, an amount equal to
all expenses of said Indemnified Party reasonably incurred in the defense of
said claim or proceeding so long as the Partnership has received a written
undertaking of said Indemnified Party to repay the Partnership the amount so
advanced if it shall be finally determined that said Indemnified Party was not
entitled to indemnification hereunder. Any Person entitled to indemnification
hereunder shall first seek recovery under any insurance policies by which such
Person is indemnified or covered prior to such Person receiving any
indemnification payment from the Partnership. Any Person entitled to
indemnification hereunder shall also seek recovery under any other indemnity by
which such Person is indemnified or covered or from any company in which the
Partnership has or had an Investment, as the case may be. To the extent that the
Partnership pays expenses on behalf of the Indemnified Party, and provided that
such Indemnified Party has no continuing liability with respect to any claim or
proceeding with respect to which such Indemnified Party may be entitled to
indemnification hereunder, the Partnership shall be subrogated to the rights of
such Indemnified Party to indemnification from another source.
3.14 PARTNERSHIP CLASSIFICATION. The General Partner shall use all
reasonable efforts to assure that the Partnership will be treated for federal
income tax purposes as a partnership and not as an association or publicly
traded partnership taxable as a corporation. The Partnership shall not elect to
be treated other than as a partnership for federal income tax purposes.
3.15 RELIANCE BY THIRD PARTIES. Any contract, instrument or act of the
General Partner on behalf of the Partnership shall be conclusive evidence in
favor of any third party
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dealing with the Partnership that the General Partner has the authority, power,
and right to execute and deliver such contract or instrument and to take such
action on behalf of the Partnership. This Section 3.15 shall not be deemed to
limit the liabilities and obligations of the General Partner as set forth in
this Agreement.
4. CAPITAL COMMITMENTS AND CONTRIBUTIONS
4.1 PAYMENT OF CAPITAL CONTRIBUTIONS.
(a) Each Partner agrees to pay to the Partnership an aggregate
amount in cash equal to its Capital Commitment, as set forth in SCHEDULE A
hereto. The total aggregate Capital Commitments of all Partners shall not exceed
five hundred million dollars ($500,000,000). All or any portion of each
Partner's Capital Commitment shall be payable upon not less than ten (10)
business days prior written notice from the General Partner (a "Contribution
Call") in accordance with Section 4.1(c) below. Except as otherwise provided
below in this Section 4.1, no Contribution Calls shall be made after the
expiration of the period (the "Investment Period") commencing on the date of the
Initial Closing and ending on the sooner of (i) the withdrawal of the General
Partner from the Partnership, (ii) the occurrence of a Key Man Event, and (iii)
the date which is twenty-four (24) months from the Initial Closing Date.
Contribution Calls may be made at any time after the expiration of the
Investment Period for the purpose of (x) paying amounts owing or that come due
under any credit facility obtained by the Partnership, to the extent secured by
such Capital Commitment, (y) funding investments in Strategic Investments with
respect to which the Partnership has entered into a letter of intent, agreement
in principal or definitive agreement prior to the expiration of the Investment
Period or (z) enabling the Partnership to acquire a Defaulting Partner's
Defaulted Interest pursuant to Section 4.2(b) below, provided that any such
Contribution Calls must be made prior to the day that is the 181st calendar day
following the last day of the Investment Period. No Partner shall have any right
to make any Capital Contribution that has not been called by the General Partner
pursuant to this Section 4.1.
(b) During the Investment Period, the General Partner may also
make a Contribution Call solely to the Limited Partners with respect to any
amounts previously distributed to the Limited Partners, to the extent such
amounts represent Return of Capital Distributions, if such amounts were
distributed by the Partnership (i) upon the disposition of any Strategic
Investment, or (ii) in connection with a financing, as determined by the General
Partner. In connection with any such Contribution Call on prior Return of
Capital Distributions to the Limited Partners, the General Partner shall
contribute an amount equal to the product of (i) the amount of such Contribution
Call divided by the aggregate Equity Interest Percentage of the Limited Partners
and (ii) the General Partner's Equity Interest Percentage.
(c) A Contribution Call shall be in the form of a written
notice to all Partners, specifying the general purpose of such Contribution Call
and, if such contribution is intended to be invested in a Strategic Investment,
a general description of the Strategic
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Investment, including, if applicable, its identity and location, an aggregate
dollar amount and a date on which payment shall be due, which date shall be no
less than ten (10) business days after the date of receipt of notice of such
Contribution Call. Except as provided in Section 4.1(b), each Partner shall be
required to contribute such Partner's Equity Interest Percentage of the
Contribution Call. The General Partner may, subject to compliance with the
requirement of ten (10) business days' advance notice for any increase in any
Contribution Call, amend, delay or rescind Contribution Calls at any time prior
to the payment due date thereof. The amendment, delay or rescission of a
Contribution Call shall not affect or abridge the right of the General Partner
to make any subsequent Contribution Call.
(d) Notwithstanding anything to the contrary above, each
Limited Partner shall be required to make Additional Capital Contributions to
the Partnership (each an "Additional Capital Contribution") (which shall not
reduce the outstanding balance of such Partner's Capital Commitment), the
aggregate amount of which for any period shall, for all Partners so obligated,
equal the Partnership's obligation to make distributions to the General Partner
pursuant to Section 5.10(g) for such period. For purposes of the preceding
sentence, each Limited Partner's obligation to make Additional Capital
Contributions shall commence as of the Initial Closing, whether such Partner was
admitted and made its full Capital Commitment at the Initial Closing or at a
Subsequent Closing. Each Limited Partner's obligation on account of its
Additional Capital Contribution shall be determined in accordance with Section
4.1(e) below.
(e) (i) To the extent possible, each Limited Partner's
obligation to make Additional Capital Contributions shall be funded
from amounts otherwise distributable to such Partner pursuant to
Section 5.10(c). In the event that, with respect to any period, the
amount otherwise distributable to any Limited Partner pursuant to
Section 5.10(c) with respect to any period is less than such Partner's
obligation on account of its Additional Capital Contribution for such
period, the amount of such deficit shall be paid to the Partnership
within ten (10) business days of receipt by the Partner of notice from
the General Partner.
(ii) With respect to each calendar quarter prior to the
end of the Investment Period, each Limited Partner's Additional
Capital Contribution shall be calculated by multiplying the daily
weighted average amount of the aggregate Capital Commitment of such
Limited Partner by a percentage (the "Applicable Percentage Rate"),
which is determined as follows:
(1) If such Limited Partner is a Class A Limited
Partner, such Limited Partner's Applicable Percentage Rate
shall be one-fourth of 1.50% (0.375%).
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(2) If such Limited Partner is a Class B Limited
Partner, such Limited Partner's Applicable Percentage Rate
shall be one-fourth of 1.25% (0.3125%).
With respect to each calendar quarter after the end of the Investment Period,
each Limited Partner's Additional Capital Contribution shall be calculated by
multiplying (i) the daily weighted average amount of such Limited Partner's
Unreturned Capital Contributions for such period and (ii) such Limited Partner's
Applicable Percentage Rate. With respect to the first and last calendar quarters
with respect to which the Limited Partners are obliged to make Additional
Capital Contributions, the amounts of their Additional Capital Contributions
shall be pro rated in the manner specified in the last sentence of Section
5.10(g)(i). Notwithstanding the foregoing, the Limited Partners' obligations to
make Additional Capital Contributions shall be reduced by the amount of
reduction in the Quarterly GP Priority Distribution Amount under Section
5.10(g)(iii), allocated among the Limited Partners in proportion to their
relative obligations to make Additional Capital Contributions.
(iii) Notwithstanding the foregoing, no Limited Partner
shall make any Additional Capital Contribution prior to the final Subsequent
Closing. The amount of any Additional Capital Contribution that would have been
payable by a Limited Partner but for the provisions of this Section 4.1(e)(iii)
shall be added to, or increase the amount of, the first Additional Capital
Contribution obligation of such Limited Partner on or following the final
Subsequent Closing.
(iv) Neither the provisions of this Section 4.1(e), nor
the failure of any Limited Partner to make any Additional Capital Contributions,
shall impair or otherwise modify the Partnership's obligation to make
allocations or distributions to the General Partner pursuant to Section 5.9(a)
or Section 5.10(g).
(v) Notwithstanding any provision in Section 4.1(d) or
this Section 4.1(e) to the contrary, the General Partner at its sole discretion
may defer the Limited Partners' Additional Capital Contributions (or the
withholding thereof from Partnership distributions) for any quarter and use
funds from other sources (including without limitation Partnership borrowings)
to make the distributions required by Section 5.10(g). Any such deferred
Additional Capital Contributions may be paid out of amounts otherwise
distributable to the Limited Partners under Section 5.10(c) as and when
determined by the General Partner or shall be paid to the Partnership by each
Limited Partner within ten (10) business days of receipt by the Partner of
notice from the General Partner.
(f) Each Limited Partner and the General Partner shall grant
to the Partnership a security interest in its Equity Interest securing payment
of its Capital Commitment. Each Limited Partner agrees to execute such security
agreements and UCC
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financing statements as the General Partner may reasonably request to perfect
such security interest, and the General Partner shall execute and file an
agreement and statement in a form substantially similar to that required of the
Limited Partners. Without the unanimous written consent of all Limited Partners,
neither the Partnership nor the General Partner, nor any other party, may
assign, re-pledge or re-grant a security interest in any Limited Partner's
Equity Interest in the Partnership to any third party, and any assignment,
re-pledge or re-grant in violation of this Section 4.1(f) shall be null and void
and have no force or effect. Except as provided above, no Limited Partner shall
pledge or grant a security interest in its Equity Interest without the prior
approval of the General Partner, such approval to be granted or withheld at the
sole discretion of the General Partner.
(g) If at any time prior to the expiration of the Investment
Period, both Alan M. Leventhal and Lionel P. Fortin are no longer actively
involved in the affairs of the Partnership on the basis contemplated by Sections
3.10(b) and (c), a "Key Man Event" will occur. Upon the occurrence of such Key
Man Event, the General Partner shall promptly give notice to the Limited
Partners of the Key Man Event, and the Investment Period will terminate upon the
delivery of such notice.
(h) In connection with any Partnership borrowings, the General
Partner shall be authorized to pledge, mortgage, assign, transfer and grant
security interests in the right to initiate and collect the Capital Commitments
of the Partners hereunder. Each Limited Partner shall promptly execute and
deliver appropriate estoppel certificates and parent entity guarantees (to the
extent required by lenders to the Partnership) and deliver required opinions of
counsel regarding the due formation, valid existence and good standing of such
Limited Partner and the due authorization, valid execution and delivery of its
Subscription Agreement and this Agreement and any documents executed in
connection with any such borrowing and shall execute such other instruments and
take such other action as the General Partner or such lender may reasonably
require in order to effectuate any such borrowings by the Partnership. Each
Limited Partner shall also use best efforts to provide to the Partnership and to
the lender, if necessary, information and representations necessary to ensure
that the lending arrangement will not constitute a non-exempt "prohibited
transaction" under ERISA. Nothing in this Section 4.1(h) shall require any
Limited Partner to take any action that would cause such Partner to assume
personal liability to the Partnership in an amount which exceeds such Limited
Partner's uncontributed Capital Commitment. In the event that, as a result of
any such pledge, mortgage, assignment, transfer or grant of security interest a
Limited Partner makes a payment directly to a lender as required pursuant
thereto, such payment shall be deemed to be a Capital Contribution of such
Limited Partner to the Partnership.
4.2 DEFAULTING PARTNERS.
(a) If a Limited Partner fails to pay any installment of its
Capital Commitment when due or fails to make any Additional Capital Contribution
under Section 4.1(d) when due, a notice of default shall be given to such
Limited Partner by the General
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Partner by facsimile transmission, hand delivery or by certified or registered
mail, each of which is to be confirmed by telephone by the General Partner. If
the installment or Additional Capital Contribution is not received by the
Partnership within five (5) business days after the receipt of such notice of
default, such amount shall bear interest payable to the Partnership at a rate of
18% per annum or, if lower, the highest rate of interest permitted under
applicable law, from and after the original due date of such installment or
Additional Capital Contribution (the "Default Date") until the earliest of
either (i) the payment of such installment or Additional Capital Contribution,
including any interest accruing under this Section 4.2(a), (ii) the purchase of
such Defaulting Partner's Defaulted Interest (as defined below) under Section
4.2(b), or (iii) the conclusion of foreclosure proceedings under Section 4.2(d).
Any interest paid by a Defaulting Partner pursuant to this Section 4.2(a) shall
not be treated as a Capital Contribution but shall be treated as income of the
Partnership. Notwithstanding any other provision of this Agreement, a Defaulting
Partner's obligation to pay any due and unpaid installment of its Capital
Commitment or due and unpaid Additional Capital Contribution under this Section
4.2(a) shall comply with all requirements of Treasury Regulation Section
1.704-1(b)(2)(ii)(C), such that the Defaulting Partner shall have a deficit
restoration obligation within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(C).
(b) In addition to, and not in limitation of the foregoing,
upon ten (10) days' written notice to any Partner which becomes a Defaulting
Partner (and provided that such default has not been cured by the Defaulting
Partner within such 10-day period), the General Partner, in its sole discretion,
may:
(i) offer to all non-defaulting Limited Partners the
right to acquire (subject to the terms of Article 7 hereof) all or any
portion of the Defaulting Partner's Defaulted Interest;
(ii) in the event that the entire Equity Interest of
the Defaulting Partner in the Partnership (a "Defaulted Interest") is
not acquired by the Limited Partners pursuant to clause (i) above,
cause the Partnership to acquire all or a portion of the portion of
such Defaulting Partner's Defaulted Interest in the Partnership not so
acquired; PROVIDED, HOWEVER, that the aggregate amount of the
Defaulting Partner's Defaulted Interest purchased by the Limited
Partners pursuant to clause (i) and by the Partnership pursuant to this
clause (ii) must be equal to the entire Defaulted Interest of the
Defaulting Partner, unless the remainder of such Defaulted Interest is
acquired pursuant to clause (iii) below; and/or
(iii) in the event that the entire Defaulted Interest
of the Defaulting Partner is not acquired by the Limited Partners
pursuant to clause (i) above and/or by the Partnership pursuant to
clause (ii) above, designate one or more third parties, which parties
may be Limited Partners, to acquire (subject to the terms of Article 7
hereof) all, but not less than all, of the Defaulting Partner's
Defaulted Interest not so acquired.
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A copy of any notice provided to a Defaulting Partner pursuant
to this Section 4.2(b) shall be transmitted promptly to all other Partners. In
the event that a Defaulting Partner shall pay any overdue installment of its
Capital Commitment or overdue Additional Capital Contribution, plus interest in
accordance with paragraph (a), prior to the expiration of the above-referenced
10-day notice period, such Partner shall cease to be a Defaulting Partner and
the remedies provided in this paragraph (b) and in paragraph (d) shall not be
available with respect thereto.
(c) With respect to any acquisition made pursuant to
subsection (b) above, the aggregate consideration payable to the Defaulting
Partner shall be a cash payment in an amount equal to 70% of such Defaulting
Partner's Estimated Value Capital Account; and each acquiring party shall be
obligated, severally and not jointly, to pay its PRO RATA portion of such
consideration based on the percentage of the Defaulting Partner's Defaulted
Interest acquired by such party. In the event that the General Partner exercises
its right to cause the Partnership to acquire a Defaulting Partner's Defaulted
Interest pursuant to subsection (b)(ii) above, for purposes of determining each
Partner's liability for any resulting Contribution Calls made in connection
therewith, the Equity Interest Percentages of the Partners shall be calculated
assuming that the Partnership's proposed purchase of all or a portion of the
Defaulted Interest has been completed.
(d) In addition to, or in lieu of, and not in limitation of
any of the foregoing, upon termination of the 10-day period provided in
paragraph (b) above, the General Partner, in its sole discretion, may commence
proceedings to collect any due and unpaid installment of the Defaulting
Partner's Capital Commitment or Additional Capital Contribution, as applicable,
(plus interest in accordance with paragraph (a) above) and the expenses of
collection, including court costs and attorneys' fees and disbursements.
(e) Any actions taken by the General Partner or the
Partnership pursuant to paragraphs (a) through (d), inclusive, of this Section
4.2 shall be in addition to and not in limitation of any other rights or
remedies that the Partnership may have against the Defaulting Partner,
including, but not limited to, the right to hold the Defaulting Partner
responsible for any damages or liabilities (including attorneys' fees) to which
the Partnership may be subjected (in whole or in part) as a result of the
default by the Defaulting Partner.
(f) Each Limited Partner hereby agrees that, in the event that
such Limited Partner shall fail to pay when due any installment of its Capital
Commitment or Additional Capital Contribution, as applicable, required pursuant
to Section 4.1 and the General Partner elects to pursue any remedy set forth in
paragraph (b) above, such Limited Partner shall sell, assign, transfer and
convey to the Partnership, any designee of the General Partner or any and all
Limited Partners making the election contemplated by subparagraph (b), its
entire Equity Interest in the Partnership in consideration of the amount
determined in accordance with the provisions of paragraph (c) of this Section
4.2.
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(g) So long as a Defaulting Partner remains a Defaulting
Partner, such Partner shall not be entitled to exercise any voting rights
otherwise granted to such Partner under this Agreement.
4.3 REQUIREMENTS FOR ADMISSION AS LIMITED PARTNER. Each Person desiring
to become a Limited Partner upon the Initial Closing Date or the date of any
Subsequent Closing shall execute and deliver to the General Partner a
subscription agreement (a "Subscription Agreement") and such other documents as
shall be deemed reasonably appropriate by the General Partner. Under such
Subscription Agreement and other documents, such subscriber shall, subject to
acceptance of its subscription by the General Partner, execute and agree to be
bound by this Agreement.
4.4 ADMISSION OF LIMITED PARTNERS.
(a) Each Limited Partner admitted to the Partnership pursuant
to this Article 4 shall become a Limited Partner on the Initial Closing Date or
on the date of any Subsequent Closing, as applicable. To the extent any BCP
Affiliate acquires an interest in the Partnership as a Limited Partner, such
interest shall be treated as a Limited Partner interest in all respects, except
as otherwise specified in this Agreement.
(b) Additional Limited Partners may be admitted to the
Partnership after the Initial Closing Date as follows:
(i) After the Initial Closing Date, the General Partner
may admit additional Limited Partners, or accept additional Capital Commitments
from existing Limited Partners, at one or more additional closings (each a
"Subsequent Closing") to be held on or prior to that date that is 180 days after
the Initial Closing Date (or, if such date is not a business day, the next
business day). In connection with any Subsequent Closing, newly admitted Limited
Partners, and existing Limited Partners that increase their Capital Commitments,
will each be required to make payments equal to the Catch-up Payment plus
Catch-up Interest (calculated from each date on which the existing Limited
Partners made any prior Capital Contributions), which amounts will be paid to
the existing Limited Partners, PRO RATA, in proportion to each such Partner's
Equity Interest Percentage immediately prior to such Subsequent Closing. Any
Catch- up Payment and Catch-up Interest paid to the Predecessor(s) In Interest,
pursuant to this Section 4.4(b), shall be treated as a payment to such
Predecessor(s) In Interest with respect to a sale of a portion of their Equity
Interests in the Partnership. The portion of the Equity Interest in the
Partnership sold by each Predecessor In Interest shall be a portion equal to the
percentage obtained by dividing the amount of the Catch-up Payment made to such
Predecessor In Interest by the aggregate amount of the Capital Contributions
made by such Predecessor In Interest immediately prior to such Subsequent
Closing. The General Partner may, in its discretion, make an election pursuant
to Section 754 of the Code.
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(ii) In connection with each Subsequent Closing, the
General Partner shall modify SCHEDULE A and the books and records of the
Partnership to accurately reflect the Capital Contributions, Capital Commitments
subject to call and Capital Account and Return Account balances of all Partners,
determined as of the time of such Subsequent Closing. The Capital Commitment of
each existing Partner shall not be increased, or decreased, by any Catch- Up
Payment or Catch-Up Interest received. The Capital Contributions (and Return
Account balances) of each existing Partner shall be reduced by the amount of any
Catch-Up Payment received (I.E., such Capital Contributions are attributable to
the interest in the Partnership that was sold). In computing the Capital
Commitments subject to call set forth on SCHEDULE A, Catch-up Payments made by a
Partner shall be treated as Capital Contributions by such Partner.
(iii) In connection with each Subsequent Closing, the
Equity Interest Percentage of the General Partner shall be redetermined.
Further, to the extent of any cash contributed by the General Partner pursuant
to Section 4.1 hereof, the General Partner shall be entitled to a distribution
in an amount equal to the excess of (A) the aggregate Capital Contributions made
by the General Partner immediately prior to such Subsequent Closing over (B) the
aggregate Capital Contributions which would have been made by the General
Partner if the redetermined Equity Interest Percentage with respect to the
General Partner had been the Equity Interest Percentage attributable to such
interest as of the Closing Date (calculated to take into account the reduction
in the aggregate Capital Contributions to the Partnership resulting from any
distribution to the General Partner under this Section 4.4(b)(iii) and any
distribution to a Fixed-Percentage Partner under Section 4.4(b)(vii) below). The
amount of the Capital Contributions of the General Partner shall be reduced by
the amount of any distributions made under this Section 4.4(b)(iii).
(iv) To the extent the General Partner has been allocated
income, gain, loss or deduction for periods prior to the Subsequent Closing in
excess of an amount equal to the product of (A) the ratio of (i) the income,
gain, loss or deduction allocated to all other Partners divided by (ii) one
hundred percent less the Equity Interest Percentage of the General Partner as
redetermined at such Subsequent Closing, multiplied by (B) the Equity Interest
Percentage of the General Partner as redetermined at such Subsequent Closing,
such excess amount (or chargebacks thereof, including chargebacks of
chargebacks) shall be disregarded in applying the "charge-back" provisions of
Sections 5.2(a) and (d) and Section 5.3(a) hereof, but only to the extent
necessary to comply with the requirements of Code Section 514(c)(9)(E) and the
Treasury Regulations promulgated thereunder.
(v) For purposes of Article 5 hereof, any item of income,
gain, loss, or deduction previously allocated pursuant to Article 5 hereof, as
well as any amounts credited or debited to the Return Account, in each case with
respect to any portion of an Equity Interest sold for a Catch-Up Payment
pursuant to Section 4.4(b)(i) shall be deemed attributable to such transferred
interests. Subject to Section 5.8, in the event that as of any Subsequent
Closing the Limited Partners include both Class A Limited Partners and Class B
Limited Partners, the General Partner may equitably adjust the portion of the
Equity Interest treated as sold by each
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Predecessor In Interest to each newly admitted Limited Partner (or existing
Limited Partner increasing its Capital Commitment) if and to the extent
necessary for the Capital Accounts of the Limited Partners immediately following
the Subsequent Closing to more closely reflect the different rates at which net
income is specially allocated away from Class A Limited Partners and Class B
Limited Partners under Section 5.9(a) (E.G., 1.25% versus 1.50%).
(vi) Notwithstanding the other provisions of this Section
4.4(b), in order to prevent certain economic distortions that might otherwise
occur, any Limited Partner that is treated as the same taxpayer as the General
Partner for federal income tax purposes shall be treated in the same manner as
the General Partner under this Section 4.4(b), and references to the General
Partner in the other provisions of this Section 4.4(b) shall include any such
Limited Partner.
(vii) Notwithstanding the foregoing, any Limited Partner
(other than a Limited Partner treated in the same manner as the General Partner
under Section 4.4(b)(vi)) who has committed at the Initial Closing, or at a
prior Subsequent Closing, to maintain a Capital Commitment equal to a fixed
percentage of the Capital Commitments to the Partnership (whether or not subject
to a cap, a "Fixed-Percentage Partner") shall not be treated as acquiring an
additional interest in the Partnership for purposes of this Section 4.4(b) to
the extent that its Capital Commitment increases to maintain its agreed Equity
Interest Percentage. Accordingly, to that extent, a Fixed-Percentage Partner
shall not be required to make a Catch-Up Payment or pay Catch-Up Interest at any
Subsequent Closing after the Closing at which the Fixed-Percentage Partner
became a Fixed-Percentage Partner. A Fixed Percentage Partner shall be entitled
to receive any Catch-Up Payments or Catch-Up Interest if, and only to the extent
that, its Equity Interest Percentage is reduced at a Subsequent Closing. At any
Subsequent Closing at which a Fixed-Percentage Partner's Capital Commitment
increases to maintain its Equity Interest Percentage, the Fixed-Percentage
Partner shall, like the General Partner, be entitled to a distribution in an
amount equal to the excess of (A) the aggregate Capital Contributions made by
the Fixed-Percentage Partner immediately prior to such Subsequent Closing over
(B) the product of the Fixed-Percentage Partner's Equity Interest Percentage of
the aggregate Capital Contributions to the Partnership (calculated to take into
account the reduction in the aggregate Capital Contributions to the Partnership
resulting from any distribution to the General Partner under Section 4.4(b)(iii)
and any distribution to a Fixed-Percentage Partner under this Section
4.4(b)(vii); provided that the Fixed Percentage Partner shall not be entitled to
such distribution with respect to any portion of its Equity Interest for which
it is entitled to receive a Catch-Up Payment or Catch-Up Interest (for example,
if a Fixed Percentage Partner with a capped commitment were diluted as a result
of reaching its cap at a Subsequent Closing). The amount of the Capital
Contributions of the Fixed-Percentage Partner shall be reduced by the amount of
any distributions made under this Section 4.4(b)(vii).
The provisions of this Section 4.4(b) are illustrated in EXHIBIT B hereto.
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(c) After the date which is 180 days after the Initial Closing
Date (or, if such date is not a business day, the next business day), no new
Limited Partner shall be admitted to the Partnership except (A) pursuant to
Section 4.2 hereof, (B) as a substitute Limited Partner in accordance with
Article 7 hereof, or (C) on such terms and conditions as have received the prior
written consent of the Partners representing a Voting Interest of the Partners
in excess of 50% and the approval of the General Partner.
(d) The admission of a Person to the Partnership that would
cause the Partnership to be an investment company within the meaning of Section
3 of the Investment Company Act of 1940, as amended, shall be void AB INITIO and
shall not bind or be recognized by the Partnership.
(e) The admission of a new Limited Partner or Limited Partners
or the acceptance by the Partnership of an additional Capital Commitment with
respect to one or more existing Partners, shall not cause the dissolution or
termination of the Partnership.
4.5 INTEREST.
Except as provided in Section 4.4(b) with respect to Catch-up Interest,
no Partner shall be entitled to receive any interest on any Capital
Contributions to the Partnership.
4.6 ASSIGNEES.
Subject to Section 4.4(b), any reference in this Agreement to the
Capital Commitment or Capital Contribution of a Partner who is an assignee of
all or a portion of an Equity Interest shall include the Capital Commitment and
Capital Contribution of the assignor (or a PRO RATA portion thereof in the case
of an assignment of less than the entire Equity Interest of the assignor).
5. CAPITAL ACCOUNTS; PROFITS AND LOSSES; DISTRIBUTIONS
5.1 CAPITAL ACCOUNTS.
(a) A separate capital account (each a "Capital Account")
shall be maintained for each Partner in accordance with the rules of Treasury
Regulations Section 1.704-1(b)(2)(iv), and this Section 5.1 shall be interpreted
and applied in a manner consistent therewith. Whenever the Partnership would be
permitted to adjust the Capital Accounts of the Partners pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(F) to reflect revaluations of Partnership
property, the Partnership may so adjust the Capital Accounts of the Partners,
and the Partnership shall so adjust the Capital Accounts when so permitted to
the extent necessary to comply with the requirements of Section 514(c)(9)(E) of
the Code. In the event that the Capital Accounts of the Partners are adjusted
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(F) to reflect
revaluations of Partnership property, (i) the Capital Accounts of the Partners
shall be adjusted in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(G) for allocations of
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depreciation, depletion, amortization and gain or loss, as computed for book
purposes, with respect to such property, (ii) the Partners' distributive shares
of depreciation, depletion, amortization and gain or loss, as computed for tax
purposes, with respect to such property shall be determined so as to take
account of the variation between the adjusted tax basis and book value of such
property in the same manner as under Code Section 704(c), and (iii) the amount
of upward and/or downward adjustments to the book value of the Partnership
property shall be treated as income, gain, deduction and/or loss for purposes of
applying the allocation provisions of this Article 5. In the event that Code
Section 704(c) applies to Partnership property, the Capital Accounts of the
Partners shall be adjusted in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(G) for allocations of depreciation, depletion, amortization
and gain and loss, as computed for book purposes, with respect to such property.
(b) Notwithstanding any provision herein to the contrary, any
fees, expenses or other costs of the Partnership that are required to be paid by
the General Partner without reimbursement, pursuant to Section 3.8 or otherwise,
and that are required to be treated as capital contributions to the Partnership
for purposes of the Treasury Regulations promulgated under Section 704(b) of the
Code, shall be added to the balance of the General Partner's Capital Account.
5.2 ALLOCATION OF NET INCOME.
After making special allocations, if any, required by Sections 5.5,
5.6, 5.9 and 8.6, remaining net income for any Fiscal Year or portion thereof
shall be allocated among the Partners in the following order and priority:
(a) First, to the Partners, in reverse order of, and in
proportion to, the amounts of net loss allocated to the Partners under Section
5.3(c) until the excess of (i) the aggregate amount of net loss allocated to
such Partners pursuant to Section 5.3(c) for all Fiscal Years over (ii) the
aggregate amount of net income allocated pursuant to this Section 5.2(a) for all
Fiscal Years is equal to zero;
(b) Second, to the Partners, PRO RATA, in proportion to their
Equity Interest Percentages until the excess of (i) the aggregate amount of net
loss allocated pursuant to Section 5.3(b) for all Fiscal Years over (ii) the
aggregate amount of net income allocated pursuant to this Section 5.2(b) for all
Fiscal Years is equal to zero;
(c) Third, subject to 5.2(d) and 5.9(a) below, to each
Partner, PRO RATA, in proportion to their Equity Interest Percentages; and
(d) Fourth, subject to Section 5.9(a) below, as determined on
a Partner-by-Partner basis, once a Limited Partner has received cumulative
allocations of income pursuant to Section 5.2(c) equal to the sum of the amount
of (i) net loss allocated to the Limited Partner pursuant to 5.3(a) that was a
"chargeback" of prior allocations of net income under
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Section 5.2(c) and (ii) the Limited Partner's Return Income Element calculated
to date, net income that would otherwise be allocated to the Limited Partner
pursuant to Section 5.2(c) shall be allocated:
(A) 50% to the Limited Partner and 50% to the General
Partner until the cumulative net income allocated to the General
Partner with respect to the Limited Partner pursuant to this Section
5.2(d) for all Fiscal Years (net of related chargebacks under Section
5.3(a) to the General Partner) equals 20% of the sum of (i) the
cumulative net income allocated both to the Limited Partner and to the
General Partner with respect to the Limited Partner pursuant to this
Section 5.2(d) for all Fiscal Years (net of related chargebacks under
Section 5.3(a)) and (ii) the cumulative net income allocated to the
Limited Partner pursuant to Section 5.2(c) for all Fiscal Years (net of
related chargebacks under Section 5.3(a) to the Limited Partner), and
(B) thereafter, 80% to the Limited Partner and
20% to the General Partner.
5.3 ALLOCATION OF NET LOSS.
After making special allocations, if any, required by Sections
5.5, 5.6, 5.9 and 8.6, remaining net loss shall be allocated among the Partners
in the following order and priority:
(a) First, to the Partners in same ratio, and in the reverse
order of priority, in which net income was allocated pursuant to Sections 5.2(c)
and (d) and Section 5.9(a) for all prior Fiscal Years until the excess of (i)
the aggregate amount of net income allocated pursuant to Sections 5.2(c) and (d)
and 5.9(a) for all Fiscal Years with respect to each Partner over (ii) the
aggregate amount of net loss allocated pursuant to this Section 5.3(a) for all
Fiscal Years with respect to each Partner is equal to zero;
(b) Second, to the Partners, PRO RATA, in proportion to their
Equity Interest Percentages; and
(c) No allocation of net loss shall be made pursuant to
Sections 5.3(a) or (b) to the extent that it causes or increases a deficit
balance in any Partner's Adjusted Capital Account. To the extent any allocation
of net loss would cause the Adjusted Capital Account Balance of any of the
Limited Partners to have a deficit balance, such net loss shall be allocated to
the Limited Partners with positive balances in their Adjusted Capital Accounts
in proportion therewith and any remaining amount of such net loss shall be
allocated to the General Partner, but only to the extent such allocation of net
loss does not cause or increase a deficit balance in the General Partner's
Adjusted Capital Account.
5.4 TREATMENT OF CERTAIN AFFILIATED PARTNERS.
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For purposes of maintaining Capital Accounts, and only to the extent
required by the Treasury Regulations promulgated under Section 704(b) of the
Code, or as otherwise required to comply with the requirements of Section
514(c)(9)(E) of the Code, any Partner that is a disregarded entity for federal
income tax purposes and is treated as the same taxpayer (or part of the same
taxpayer) as any other Partner shall be treated as a single Partner. Except as
otherwise required to comply with the requirements of Section 514(c)(9)(E) of
the Code, such Partners shall be treated as distinct and separate Partners for
all other purposes of this Agreement.
5.5 MINIMUM GAIN CHARGEBACKS AND NON-RECOURSE DEDUCTIONS.
(a) Notwithstanding any other provisions of this Agreement, in
the event there is a net decrease in Partnership Minimum Gain during a Fiscal
Year, the Partners shall be allocated items of income and gain in accordance
with Treasury Regulations Section 1.704-2(f). For purposes of this Agreement,
the term "Partnership Minimum Gain" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2), and any Partner's share of Partnership
Minimum Gain shall be determined in accordance with Treasury Regulations Section
1.704- 2(g)(1). This Section 5.5(a) is intended to comply with the minimum gain
charge-back requirement of Treasury Regulations Section 1.704-2(f) and shall be
interpreted and applied in a manner consistent therewith.
(b) Notwithstanding any other provision of this Agreement,
non-recourse deductions shall be allocated to the Partners, PRO RATA, in
proportion to their Equity Interest Percentages. "Non-recourse deductions" shall
have the meaning set forth in Treasury Regulations Section 1.704-2(b)(1).
(c) Notwithstanding any other provisions of this Agreement, to
the extent required by Treasury Regulations Section 1.704-2(i), any items of
income, gain, loss or deduction of the Partnership that are attributable to a
nonrecourse debt of the Partnership that constitutes "partner nonrecourse debt"
as defined in Treasury Regulations Section 1.704-2(b)(4) (including chargebacks
of partner nonrecourse debt minimum gain) shall be allocated in accordance with
the provisions of Treasury Regulations Section 1.704-2(i). This Section 5.5(c)
is intended to satisfy the requirements of Treasury Regulations Section
1.704-2(i) (including the partner nonrecourse debt minimum gain chargeback
requirements) and shall be interpreted and applied in a manner consistent
therewith.
5.6 QUALIFIED INCOME OFFSET.
Any Partner who unexpectedly receives an adjustment, allocation or
distribution described in Treasury Regulations Section 1.704-1(b)(2)(ii)(D)(4),
(5) or (6) that causes or increases a deficit balance in its Adjusted Capital
Account shall be allocated items of income and gain in an amount and a manner
sufficient to eliminate, to the extent required by the Treasury Regulations
Section 1.704-1(b)(2)(ii)(D), such deficit balance as quickly as possible.
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5.7 CODE SECTION 704(b) ALLOCATIONS. The allocation provisions
contained in this Article 5 are intended to comply with Code Section 704(b) and
the Treasury Regulations promulgated thereunder, and shall be interpreted and
applied in a manner consistent therewith.
5.8 CODE SECTION 514(c)(9)(E) ALLOCATIONS.
It is the intention of the Partners that this Agreement provide for
allocations to comply with the requirements of Code Section 514(c)(9)(E) and
Treasury Regulations promulgated thereunder, and the Partners agree that all
interpretations of this Agreement shall be made accordingly. In the event that
the General Partner is Removed or Withdraws, special allocations of income and
gain under Section 8.6, and any other allocations the amount of which is
affected by allocations under Section 8.6, shall be made in a manner that
complies with Code Section 514(c)(9)(E) and achieves, as closely as possible,
the intended reduction in the former General Partner's Carried Interest.
5.9 SPECIAL ALLOCATIONS; OTHER ALLOCATION PROVISIONS.
(a) With respect to each Limited Partner, net income otherwise
allocable to or with respect to a Limited Partner pursuant to Section 5.2(c) or
(d) for a Fiscal Year (or portion thereof) shall be allocated first to the
General Partner until the cumulative allocations of net income to the General
Partner with respect to such Limited Partner pursuant to this Section 5.9(a) for
all Fiscal Years (net of related chargebacks under Section 5.3(a) to the General
Partner) equals the aggregate amount of Additional Capital Contributions
required to be made by such Limited Partner for such period and all prior
periods, determined without regard to Section 4.1(e)(iii), whether or not
actually paid by the Limited Partner and whether or not funded out of
distributions otherwise payable to the Limited Partner or by Additional Capital
Contributions by the Limited Partner, and the remaining balance of such net
income shall be allocated either to the Limited Partner under Section 5.2(c) or
between the Limited Partner and the General Partner under Section 5.2(d),
whichever applies.
(b) If any amounts are required to be added to the General
Partner's Capital Account pursuant to Section 5.1(b), items of loss and
deduction shall be allocated to the General Partner to the extent permitted by
Treasury Regulations Sections 1.514(c)-2(f) and (g) (or as otherwise permitted
by Section 514(c)(9)(E) of the Code and the Treasury Regulations thereunder),
and net income otherwise allocable to the General Partner pursuant to Section
5.2(d) or Section 5.9(a) shall instead be allocated to the Limited Partners, in
the aggregate amount of such additions to the General Partner's Capital Account
so that, to the maximum extent possible, the Capital Account of each Partner
equals the Capital Account it would have if (i) such amounts were not added to
the General Partner's Capital Account and (ii) this Section 5.9(b) were not
included in this Agreement. Any allocations pursuant to this Section 5.9(b)
shall comply with the requirements of Code Section 514(c)(9)(E) and the Treasury
Regulations thereunder.
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(c) The allocations set forth in Sections 5.3(c), 5.5 and 5.6
(the "Regulatory Allocations") are intended to comply with the requirements of
Treasury Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding any other
provisions of this Article 5 (other than the Regulatory Allocations), the
Regulatory Allocations shall be taken into account as provided for in the
following two sentences. Income, gain, loss and deduction shall be reallocated
to the extent that such reallocation causes the net aggregate amount of
allocations of income, gain, deduction and loss to each Partner to be equal to
or more closely approximate the net aggregate amount of such items that would
have been allocated to each such Partner if the Regulatory Allocations had not
occurred (taking into account any anticipated allocations under Section 5.2(a));
PROVIDED, HOWEVER, that such reallocations shall be made only if and to the
extent they are consistent with the requirements of Code Section 514(c)(9)(E)
and Treasury Regulations Section 1.514(c)-2. This Section 5.9(c) shall be
interpreted and applied in such a manner and to such extent as is reasonably
necessary to eliminate, as quickly as possible but consistent with the
requirements of Code Section 514(c)(9)(E) and the Treasury Regulations
promulgated thereunder, permanent economic distortions that would otherwise
occur as a consequence of the Regulatory Allocations in the absence of this
Section 5.9(c).
(d) Notwithstanding the provisions of Sections 5.2, 5.3 and
5.9(c), but subject to and only to the extent permitted by the requirements of
Section 5.7 and the requirements of Code Section 514(c)(9)(E) and the Treasury
Regulations thereunder, items of income, gain, loss and deduction for any Fiscal
Year or portion thereof in which the Partnership makes a distribution pursuant
to Section 5.10(f), and to the extent permissible the immediately preceding
year, shall be allocated so that to the extent possible each Partner receiving
distributions under Section 5.10(f) receives the same distributions that it
would receive if distributions governed by Section 5.10(f) were instead made
under Sections 5.10(c) and 5.10(g) (as modified, if applicable, by Sections 8.6
and 8.7) provided, that with respect to the General Partner, allocations of
income under this Section 5.9(d) to provide the General Partner with
distributions under Section 5.10(f) equal to the distributions that would
otherwise be payable to the General Partner under Section 5.10(g) shall be made
solely with net income (if any) remaining after (i) the allocations required
under Sections 5.5 and 5.6 and (ii) reducing the net income otherwise available
by any remaining excess of the amount described in clause (i) of Section 5.2(b)
over the amount described in clause (ii) of Section 5.2(b).
(e) Any elections or other decisions relating to the
allocations of Partnership items of income, gain, loss, deduction or credit
shall be made by the General Partner in any manner that reasonably reflects the
purpose and intent of this Agreement.
5.10 DISTRIBUTIONS.
(a) NET CASH FLOW FROM OPERATIONS. Net cash flow from
operations or other cash available for distribution (other than Disposition
Proceeds) in excess of working capital requirements (including reserves), as
reasonably determined by the General Partner, shall be distributed to the
Partners quarterly in accordance with the provisions of Section 5.10(c) below;
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provided that no distributions (other than distributions pursuant to Section
5.10(g)) shall be made pursuant to this Section 5.10 prior to the final
Subsequent Closing.
(b) PROCEEDS FROM CAPITAL TRANSACTIONS.
(i) All Disposition Proceeds with respect to an
Investment in excess of reasonable reserves for the Partnership's
future capital requirements for the operation, maintenance,
preservation, and/or enhancement of the Partnership's then-existing
Strategic Investments shall be distributed to the Partners quarterly
(or more frequently in the sole discretion of the General Partner) in
accordance with the provisions of Section 5.10(c) below.
(ii) Notwithstanding the provisions of Section
5.10(b)(i) above, during the Investment Period, in the sole discretion
of the General Partner, all Disposition Proceeds with respect to an
Investment which are not in excess of the aggregate of all Partners'
Investment Amounts with respect to such Investment may either be
retained by the Partnership or distributed to the Partners in
accordance with the provisions of Section 5.10(c) below.
(c) DISTRIBUTIONS. Subject to the provisions of Section
5.10(d), Section 5.10(f) and Section 5.10(g), all distributions shall be made in
the following manner:
(i) First, to the Partners, PRO RATA, in proportion
to their Equity Interest Percentages; and
(ii) Second, notwithstanding the provisions of
Section 5.10(c)(i) above, at any time that a Limited Partner's Return
Account is equal to zero, distributions that would otherwise be made to
such Limited Partner pursuant to Section 5.10(c)(i) shall instead
thereafter be made in the following manner:
(A) 50% to the Limited Partner and 50% to
the General Partner UNTIL the General Partner, pursuant to
this clause (ii) with respect to the Limited Partner, has
received 20% of the sum of (1) all distributions made by the
Partnership to the Limited Partner in excess of the Limited
Partner's Capital Contributions plus (2) all distributions
made to the General Partner pursuant to this Section
5.10(c)(ii) with respect to the Limited Partner; and
(B) THEREAFTER, 80% to the Limited Partner
and 20% to the General Partner.
The provisions of this Section 5.10(c) and Section 5.10(g) are illustrated in
EXHIBIT C hereto.
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(d) SPECIAL TAX DISTRIBUTION. Notwithstanding anything to the
contrary above, if a Partner's Total Tax Liability with respect to net income
allocated to the Partner pursuant to Section 5.2 (which shall not include
Section 8.6) for any Fiscal Year exceeds the distributions to the Partner
pursuant to Section 5.10(c) during such Fiscal Year, then the Partnership shall
distribute an amount equal to the shortfall to the Partner (a "Special Tax
Distribution"); provided that cash is available for the distribution without the
sale of capital assets or refinancing for the purpose of such distribution. To
the extent that cash is not available to make a Special Tax Distribution to each
Partner, any available cash will be distributed among the Partners in proportion
to the amounts distributable under this Section 5.10(d). Any Special Tax
Distribution to a Partner shall reduce the Partner's right to future
distributions pursuant to Section 5.10(c) by an equal amount.
For purposes of the computation required by this Section 5.10(d), the net income
allocated to a Partner pursuant to Section 5.2 shall be deemed to be reduced by
any prior net loss allocated to the Partner pursuant to Section 5.3 that: (i)
was made in a Fiscal Year after the last Fiscal Year for which a distribution
was made to the Partner under this Section 5.10(d); and (ii) was a "chargeback"
of prior net income allocated to the Partner pursuant to Section 5.2. Capital
losses included in any such prior net losses shall be included in the
computation only to the extent of subsequent capital gains. The "Total Tax
Liability" shall be determined by assuming an effective tax rate equal to the
maximum federal (net of any deduction for Massachusetts tax) and Massachusetts
income tax rate applicable to individuals without consideration of the effect of
any deductions, offsets or credits available to the Partner (or its direct or
indirect partners or members) from other sources, and shall be appropriately
adjusted to take into account the different tax rates that may be in effect for
different taxable years.
(e) DISTRIBUTIONS IN KIND. Except as permitted by this Section
5.10(e) and Section 3.2(h), the General Partner shall not make in-kind
distributions.
(i) (A) Prior to the termination and liquidation of
the Partnership, except as provided in Section 5.10(e)(ii) and (iii),
the General Partner may elect to make any distribution to a Partner
hereunder, either wholly or partially, in securities for which a public
market (National Exchange or NASDAQ National Market) exists and which
may be traded by the Limited Partners without restrictions; and (B)
upon the termination and liquidation of the Partnership, the
Liquidating Agent may, if it so determines, distribute restricted
securities and other assets of the Partnership in-kind to the Partners
in accordance with Section 5.10(f).
(ii) Notwithstanding the provisions of Section
5.10(e)(i)(A), no in-kind distribution shall be made to an ERISA
Partner or BHC Partner unless: (A) notice is given to such ERISA
Partner or BHC Partner at least ten (10) business days prior to the
in-kind distribution date; and (B) the ERISA Partner or BHC Partner
does not deliver to the General Partner, at least five (5) business
days prior to such distribution date, an opinion of counsel, in form
and substance reasonably satisfactory to the General Partner
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and signed by counsel reasonably satisfactory to the General Partner
(which may include an opinion of a nationally recognized counsel or
in-house counsel regularly employed by a Limited Partner with expertise
in the subject matter of such opinion), stating that (x) in the case of
an ERISA Partner, receiving or holding such property by the ERISA
Partner would be materially likely to result in a violation of ERISA or
(y) in the case of a BHC Partner, under then current Federal Reserve
Board policy and practice, the BHC Partner would not receive approval
to hold assets contemplated by such in-kind distribution or the BHC
Partner would be likely to result in a violation of applicable law or
regulation by receiving and holding assets contemplated by such
distribution. In the event that such ERISA Partner or BHC Partner
provides the General Partner with such an opinion of counsel in a
timely manner, such ERISA Partner or BHC Partner (such Limited Partner
to be referred to as the "Electing Limited Partner") shall be entitled
to receive instead such other securities, property or cash of the
Partnership as the General Partner may determine in accordance with
paragraph (iii) below.
(iii) In the case of (ii) above, the Partnership may
(1) retain the securities or other assets on behalf of the ERISA
Partner or BHC Partner, or (2) transfer the securities or other assets
that would have been distributed to the ERISA Partner or BHC Partner to
a subsidiary of the Partnership and distribute the interests in such
subsidiary to the ERISA Partner or BHC Partner and the General Partner.
In either case, the General Partner will act as temporary manager of
the securities or other assets (the "Managed Assets") for the exclusive
benefit of the Electing Limited Partner without collecting a fee for
such management services. In the case of (1) or (2) above, the
following provisions shall apply:
(A) The Partnership or subsidiary of the
Partnership shall hold the Managed Assets as nominee for the
benefit of, and on behalf of, the Electing Limited Partner.
Subject to the following sentence, the General Partner shall
use commercially reasonable efforts to effect the disposition
of the Managed Assets. The General Partner shall have sole
discretion with respect to the sale, exchange or disposition
of the Managed Assets and shall have no fiduciary or other
duty to the Partnership or the other Limited Partners in the
exercise of such discretion. The Electing Limited Partner
shall be liable for all taxes and other charges levied upon
the Managed Assets and on any income or distributions thereon,
and shall be liable for any and all costs incurred by the
Partnership for the benefit of the Electing Limited Partner
pursuant to this Section. The Electing Limited Partner shall
have the benefit, and bear the risk, of all distributions of
income, dividends, cash or other property on or relating to
the Managed Assets or any change in the character of the
Managed Assets. The provision of Sections 3.11 and 3.12 shall
be available with respect to the Managed Assets; provided,
that any indemnification obligation arising under Section 3.12
with respect to the Managed Assets shall be borne solely by
the Electing Limited Partner to the extent of the fair market
value of all Managed Assets held by the General Partner and
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determined at the time that securities corresponding to such
Managed Assets were originally distributed in-kind to the
other Partners.
(B) Upon any disposition of the Managed
Assets for cash, the Partnership shall transfer to the
Electing Limited Partner the proceeds of such disposition,
less the amount of any expenses related to such disposition.
(C) For all purposes under this Agreement,
including for purposes of determining the Electing Limited
Partner's Capital Account, the Electing Limited Partner shall
be treated as if it received the Managed Assets at the time
that assets corresponding to such Managed Assets were
originally distributed in-kind to the other Partners.
(D) To the extent that distributions under
Section 5.10(e)(i) or (ii) would violate any law or regulation
and such violation can not be cured after commercially
reasonable efforts are taken by the Electing Limited Partner,
upon the determination of a manner in which such distributions
would be permissible to the ERISA Partner or BHC Partner, the
General Partner shall have sole discretion to determine in
which manner such distributions may be made.
(f) DISTRIBUTIONS IN LIQUIDATION OF A PARTNER'S INTEREST IN
THE PARTNERSHIP. In the event the Partnership (or a Partner's interest therein)
is "liquidated" within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(G), then any distributions shall be made pursuant to this
Section 5.10(f) to the Partners (or such Partner, as appropriate), in accordance
with their positive Capital Account balances in compliance with Treasury
Regulations Section 1.704- 1(b)(2)(ii)(B)(2) and subject to the restriction on
in-kind distributions to ERISA Partners described in Section 5.10(e)(ii).
(g) SPECIAL PRIORITY DISTRIBUTION TO GENERAL PARTNER.
(i) With respect to each calendar quarter (or portion
thereof in the case of the first or last quarter), the Partnership
shall distribute to the General Partner an amount (the "Quarterly GP
Priority Distribution Amount") equal to the sum of (i) the product of
the GP Class A Priority Distribution Base for such quarter multiplied
by one fourth of 1.5% (0.375%) and (ii) the product of the GP Class B
Priority Distribution Base for such quarter multiplied by one fourth of
1.25% (0.3125%). Except as otherwise required by Section 5.10(f), the
distributions required by this Section 5.10(g) for any period shall be
in addition to the other distributions to which the General Partner is
entitled under this Section 5.10 and shall be made prior to any other
distributions pursuant to this Section 5.10 for such period. With
respect to the first and last calendar quarter for which the General
Partner is entitled to receive the Quarterly GP Priority Distribution
Amount, or in the case of periods described in Section 5.10(g)(ii), the
amount thereof shall be prorated based on the number of days during
such quarter for
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which such payment obligation is in effect; PROVIDED, HOWEVER, that the
Quarterly GP Priority Distribution Amount for the final quarter shall
not be prorated to the extent it reflects unpaid Quarterly GP Priority
Distribution Amounts from prior quarters.
(ii) In the event that distributions are made under
Section 5.10(f), the distributions required under Section 5.10(g)(i)
and the Additional Capital Contributions required under Section 4.1 for
the period ending on the date of the distribution under Section 5.10(f)
shall be made (and the Capital Accounts shall be adjusted
appropriately) immediately prior to making such distributions under
Section 5.10(f).
(iii) Any and all transaction fees, break-up fees,
directors fees, advisory fees, consulting fees, monitoring fees or
other ancillary fees received by the General Partner or any BCP
Affiliate in connection with an Investment proposed to be acquired or
acquired by the Partnership will be credited against, and subtracted
from, the Quarterly GP Priority Distribution Amount. If the amount of
such fees exceeds the Quarterly GP Priority Distribution Amount for any
period, the excess shall carry forward and reduce the Quarterly GP
Priority Distribution Amount in subsequent periods.
(h) DIRECTION OF DISTRIBUTION PROCEEDS. All distributions made
to a Partner pursuant to this Agreement shall, at the election of such Partner,
be made via wire transfer pursuant to instructions provided by such Partner to
the General Partner from time to time in writing, such instructions to be as
initially set forth on Schedule A attached hereto.
5.11 DEFICIT RESTORATION BY GENERAL PARTNER.
In the event the General Partner's interest in the Partnership is
"liquidated" within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(G) (including, without limitation, upon the liquidation of the
Partnership) and the General Partner's Capital Account has a deficit balance
after giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs, the
General Partner shall contribute to the capital of the Partnership the amount
necessary to restore such deficit balance to zero in compliance with Treasury
Regulations Section 1.704-1(b)(2)(ii)(B)(3). For so long as the General Partner
is a BCP Affiliate, Beacon Capital Partners, L.P. shall guarantee the deficit
restoration obligation of the General Partner as and to the extent provided in
the form of guaranty attached hereto as EXHIBIT A.
5.12 NO DEFICIT RESTORATION BY LIMITED PARTNERS. Except as otherwise
provided in Section 4.2(a), no Limited Partner shall have any obligation to
restore a deficit balance in its Capital Account upon liquidation of its
interest in the Partnership or otherwise.
5.13 RIGHT OF SET-OFF. No part of any distribution shall be paid
pursuant this Article 5 to any Partner from which there is due and owing to the
Partnership, at the time of such distribution, any amount required to be paid to
the Partnership pursuant to Article 4. Any such
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withheld distribution shall be deemed to have been distributed to such Partner,
shall be set off against such Partner's obligation to the Partnership and shall
reduce such Partner's obligation to the Partnership accordingly.
5.14 WITHHOLDING.
(a) If the Partnership is required by law or regulation to
withhold and pay to any taxing or other governmental authority any amount
otherwise distributable to a Partner, the Partnership shall be entitled to
withhold such amount and the amount so withheld shall for all purposes of this
Agreement be treated as if distributed to such Partner.
(b) In the event that the proceeds to the Partnership from an
investment are reduced on account of taxes withheld at source, and such taxes
are imposed on one or more, but not all of the Partners in the Partnership, the
amount of the reduction shall be borne by the relevant Partners and treated as
if it were paid by the Partnership as a withholding obligation with respect to
such Partners pursuant to paragraph (a) above.
5.15 EXCESS NON-RECOURSE LIABILITIES. For purposes of allocating excess
nonrecourse liabilities under Treasury Regulation Section 1.752-3(a)(3), the
"Partners' interests in Partnership profits" shall be the General Partner's 100%
interest in items allocated pursuant to Section 5.9(a) and 100% of such
nonrecourse liabilities shall be allocated to the General Partner.
6. BOARD OF ADVISORS AND INVESTMENT COMMITTEE
6.1 BOARD OF ADVISORS. The Partnership shall have a board of advisors
(the "Board of Advisors") composed of a minimum of three (3) members appointed
pursuant to this Section 6.1. The Board of Advisors shall be composed of members
designated by the General Partner, in its sole discretion, provided that (i)
such members are representatives of the Limited Partners, other than officers,
directors, employees, partners or directors of the General Partner or a BCP
Affiliate and (ii) the majority of such members have a high degree of skill and
experience in investment activities of institutional investors; PROVIDED,
HOWEVER, the General Partner shall be entitled, in its sole discretion, to
designate one non-voting member of the Board of Advisors who may not necessarily
satisfy (i) and (ii) in this Section 6.1. In the event of the resignation or
death of a member of the Board of Advisors, which results in there being fewer
than three (3) members on the Board of Advisors, the General Partner shall
promptly designate a successor to such member.
6.2 BOARD OF ADVISORS MEETINGS AND EXPENSE REIMBURSEMENT. The General
Partner shall convene meetings of the Board of Advisors to discuss issues
involving conflicts of interest. Written notice of the time and place of each
advisory meeting shall be given to the members of the Board of Advisors in
writing at least two weeks prior to the date of the meeting. Notice of meetings
may be waived by a majority of all of the members of the Board of Advisors.
Board of Advisors members shall be entitled to reimbursement from the
Partnership for their reasonable travel expenses and other reasonable
out-of-pocket expenses incurred in connection with their
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attendance at meetings of the Board of Advisors but shall not be entitled to any
fees, remuneration or other reimbursements from the Partnership or any of the
Partners.
6.3 QUORUM AND VOTING OF MEMBERS OF BOARD OF ADVISORS. Except as
otherwise specifically provided in this Agreement, the Board of Advisors shall
have no control over management of the Partnership or its activities, shall not
take part in the management of the Partnership, and shall not have any authority
to bind the Partnership or the General Partner or to act for or on behalf of the
Partnership. The Board of Advisors shall review the method of valuation used in
connection with any in-kind distribution. The Board of Advisors shall approve
(i) transactions between the Partnership and BCP Affiliates and (ii) conflicts
of interest (other than transactions between the Partnership and BCP
Affiliates), including, without limitation, settlements in connection with which
any BCP Affiliate receives indemnification pursuant to Section 3.12 hereof.
Except as otherwise expressly provided in Sections 3.2(g) and in this Section
6.3, the General Partner shall in no event be required to obtain the consent or
approval of the Board of Advisors prior to making any decision or taking any
action whatsoever. Each member of the Board of Advisors, other than any
non-voting member, shall be entitled to one vote. A majority in number of the
members of the Board of Advisors shall constitute a quorum for a meeting.
Members of the Board of Advisors may attend meetings in person, by proxy
approved by the General Partner, or by telephone conference call pursuant to
which all meeting attendees can speak with all other meeting attendees. Any
approval or consent required to be given by the Board of Advisors shall be
deemed to have been given upon the written consent of a majority of the total
number of the members of the Board of Advisors or upon the approval of a
majority of a quorum of the members of the Board of Advisors at a duly held
meeting of the Board of Advisors.
6.4 INVESTMENT COMMITTEE. The Partnership shall have an investment
committee (the "Investment Committee"), which, subject to Section 4.1(g) hereof,
shall consist of Alan M. Leventhal and Lionel P. Fortin and will also include
additional members of Senior Management. Each member of the Investment Committee
shall serve until he or she resigns or is removed by the General Partner. The
members of the Investment Committee may adopt such procedures as they may deem
appropriate to make decisions regarding investment of the Partnership's capital,
financings, ongoing management of the Partnership's portfolio of Strategic
Investments, dispositions of the Partnership's assets and other Partnership
business.
6.5 PARTNERSHIP MEETINGS. The Partnership shall hold an annual meeting
(in the continental U.S.) of the Partners during each full Fiscal Year of the
Partnership's existence at which the General Partner will review and discuss the
Partnership's activities. The General Partner shall use reasonable efforts to
hold each such annual meeting within six months of the end of the prior Fiscal
Year and in no event shall hold such meeting later than nine months after the
end of the prior Fiscal Year. The Partnership shall hold special meetings of the
Partners upon the call of the General Partner, or any two Limited Partners if
such Limited Partners give written notice to the General Partner that they wish
to call a special meeting of the Partners for the purpose of exercising any
right of the Limited Partners provided for in this Agreement. The
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General Partner shall notify each Limited Partner of the time and place of each
such annual or special meeting at least thirty (30) days prior to the date
thereof.
7. TRANSFERS OF LIMITED PARTNERSHIP INTERESTS
7.1 ASSIGNABILITY OF INTERESTS. Subject to the limitations set forth in
this Section 7.1, except as specifically provided by this Agreement, the
economic interest in the Partnership of a Limited Partner may not be directly or
indirectly assigned without the consent of the General Partner, which consent
may not be unreasonably withheld. No Limited Partner shall be entitled to assign
its interest in the Partnership without providing to the General Partner such
evidence as it may reasonably require, including an opinion of a nationally
recognized counsel or in-house counsel regularly employed by a Limited Partner,
such counsel having expertise in the subject matter of such opinion, if so
required, that the assignment or transfer will not:
(a) violate the registration provisions of the Securities Act
of 1933, as amended, or the securities laws of any applicable jurisdiction;
(b) cause the Partnership not to be entitled to the exemption
from the definition of an "investment company" pursuant to either Section
3(c)(1) or Section 3(c)(7) of the Investment Company Act of 1940, as amended,
and the rules and regulations of the Securities and Exchange Commission
thereunder (the "1940 Act");
(c) result in the termination of the Partnership under the
Internal Revenue Code;
(d) cause the Partnership to fail to satisfy the requirements
of Section 514(c)(9)(E) of the Code or any successor provisions thereto;
(e) cause the Partnership to fail to satisfy the requirements
of any otherwise applicable safe harbor from treatment as a publicly traded
partnership under Treasury Regulations Section 1.7704-1;
(f) result in the assets of the Partnership or the actions of
the General Partner being subject to Part 4 of Subtitle B of Title I of ERISA;
(g) cause the Partnership or any Partner to be in violation of
any law, contract or other obligation legally binding upon any of them or
otherwise suffer any material adverse consequence;
(h) cause BCP to receive or accrue any amounts described in
Code Section 856(d)(2)(B).
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In addition, no assignment, other than pursuant to Section 4.2, shall be
permitted if at the time of such assignment, the assigning Limited Partner is in
default in its obligations under this Agreement. No assignment shall be binding
upon the Partnership until the General Partner receives an executed copy of such
assignment, which shall be in form and substance reasonably satisfactory to the
General Partner, and until such assignment is approved by the General Partner
pursuant to this Section 7.1. Notwithstanding the assignment of all or any
portion of a Partner's interest in the Partnership, (i) the assignor shall
continue to be liable with respect to its Capital Commitment relating to the
interest assigned, and (ii) the assignment of an economic interest in the
Partnership shall not entitle the assignee to be admitted as a substitute
Limited Partner other than pursuant to Section 7.2.
7.2 SUBSTITUTE LIMITED PARTNERS. A person that acquires an economic
interest in the Partnership by assignment from a Limited Partner in accordance
with the provisions of Section 7.1 may only be admitted to the Partnership as a
substitute Limited Partner with the consent of the General Partner, which may be
withheld in its sole and absolute discretion. The admission of an assignee as a
substitute Limited Partner shall in all events be conditioned upon the
assignee's written assumption, in form and substance satisfactory to the General
Partner, of all obligations of the assigning Limited Partner and execution of an
instrument satisfactory to the General Partner whereby such assignee becomes a
party to this Agreement as a Limited Partner. Upon the admission of an assignee
as a substitute Limited Partner, the assignor shall cease to be liable with
respect to its Capital Commitment relating to the interest in the Partnership
assigned.
7.3 OBLIGATIONS OF ASSIGNEE. Any assignee of the interest of a Limited
Partner in the Partnership, irrespective of whether such assignee has accepted
and adopted in writing the terms and provisions of this Agreement or been
admitted as a substituted Limited Partner, shall be deemed by the acceptance of
such assignment to have agreed to be subject to the terms and provisions of this
Agreement in the same manner as its assignor, and to have assumed the assignor's
Capital Commitment obligation pursuant to Section 4.1 with respect to the
interest in the Partnership assigned.
7.4 ALLOCATION OF DISTRIBUTIONS BETWEEN ASSIGNOR AND ASSIGNEE. Upon the
assignment of an interest in the Partnership pursuant to this Article 7,
distributions pursuant to Article 5 shall be made to the Person owning the
interest in the Partnership at the date of distribution, unless the assignor and
assignee otherwise agree and direct the General Partner in a written statement
signed by both.
8. TRANSFER OF PARTNERSHIP INTEREST BY GENERAL PARTNER; WITHDRAWAL
8.1 ASSIGNABILITY OF INTEREST. Without the consent of the Limited
Partners representing a Voting Interest of the Limited Partners of at least
66-2/3%, excluding from the vote any Limited Partner that is a BCP Affiliate so
long as the General Partner is a BCP Affiliate, the General Partner may not
transfer its interest in the Partnership. Any assignment of the General
Partner's interest which requires consent pursuant to this Section 8.1 shall
only become
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effective upon (i) the execution by the General Partner of a written assignment,
the execution by the successor of this Agreement, and the written assumption by
the successor of the obligations of the General Partner hereunder, (ii) the
receipt by the Partnership of an opinion of counsel that such assignment and
assumption will not, violate the registration provisions of the Securities Act
of 1933, as amended, or the securities laws of any applicable jurisdiction, or
cause the Partnership not to be entitled to the exemption from the definition of
an "investment company" pursuant to either Section 3(c)(1) or Section 3(c)(7) of
the 1940 Act, and (iii) delivery of notice of such assignment to the Limited
Partners. In the event of an assignment of the interest of the General Partner,
the successor shall become the General Partner hereunder, and the predecessor
and successor General Partner shall cause the execution of any necessary papers
including, without limitation, an amendment to the Certificate to record the
substitution of the successor as General Partner.
8.2 VOLUNTARY WITHDRAWAL. The General Partner shall not effect a
voluntary withdrawal (a "Voluntary Withdrawal") as a General Partner from the
Partnership until such time as the Partnership shall have received an opinion of
counsel to the effect that such withdrawal will not constitute a termination of
the Partnership or otherwise materially adversely affect the status of the
Partnership for federal income tax purposes, and if the General Partner
proposing to withdraw is then the sole General Partner, a new General Partner
shall have been selected who, (i) shall have stated a willingness to be
admitted, (ii) shall satisfy the then applicable provisions of the Code and any
applicable procedures, regulations, rules and rulings (including published
private rulings) thereunder, and (iii) shall have received the specific written
consent of Limited Partners representing a Voting Interest of the Limited
Partners of at least 66-2/3%, excluding from such vote, any Limited Partner that
is a BCP Affiliate so long as the General Partner is a BCP Affiliate.
8.3 INVOLUNTARY WITHDRAWAL. The General Partner shall be deemed to have
involuntarily withdrawn ("Involuntarily Withdrawal") as a General Partner from
the Partnership upon the occurrence of any of the following events: (i) in the
case of a corporate General Partner, the revocation of its charter, other than
by voluntary act of its stockholders, (ii) in the case of a General Partner
which is a partnership, the death, dissolution (other than by voluntary act of
its partners) or bankruptcy of all the general partners of such partnership,
(iii) the making of an assignment for the benefit of creditors, the filing of a
voluntary petition in bankruptcy, or an adjudication of bankruptcy, or (iv) any
other event which constitutes an event of withdrawal under the Act.
8.4 REMOVAL OF GENERAL PARTNER. The General Partner may be removed (a
"Removal"), in the event of both (i) its or any BCP Affiliate's (A) fraud,
misconduct, gross negligence, breach of its fiduciary duty, acting in bad faith,
(B) knowing material breach of this Agreement or any other material breach of
this Agreement which remained uncured for over thirty (30) days after written
notice thereof by two or more Limited Partners or the Board of Advisors, (C)
engagement in criminal misconduct directly and specifically related to the
business of the Partnership, or which, in the reasonable judgment of the Board
of Advisors, impairs or is
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likely to impair the General Partner's effectiveness in carrying out its
obligations under this Agreement, (D) engagement in any other unlawful act
pursuant to which the Partnership has lost assets or has obtained assets to
which the Partnership is not entitled, in any case having a materially adverse
effect on the Partnership and (ii) the written consent of at least three (3)
Limited Partners whose aggregate Capital Commitments represent a minimum of a
majority of the aggregate Capital Commitments of all the Limited Partners,
excluding from the vote any Limited Partner that is a BCP Affiliate so long as
the General Partner is a BCP Affiliate. The General Partner will provide prompt
written notice to the Limited Partners of the occurrence of any of the foregoing
events described in Section 8.4 of which it has knowledge. At least ninety (90)
days prior to the date of any such written consent of the Limited Partners, the
Limited Partners seeking to remove the General Partner shall give the General
Partner written notice of their intention to seek such Removal. Such notice
shall specify the alleged misconduct or gross negligence constituting the basis
for such Removal. Within said 90-day period, the General Partner shall have the
right to call a meeting of the Partners in accordance with Section 6.5. At such
meeting, the General Partner shall have the opportunity to rebut any allegations
against it. In addition to the foregoing, the General Partner may challenge the
basis for its Removal by any other means. Notwithstanding any other provision of
this Agreement, in the event that the General Partner elects to initiate legal
proceedings to challenge the basis for its Removal, the party who is successful
on the merits of the disputed matter shall be entitled to reimbursement from the
other parties of all reasonable attorneys' fees and expenses incurred by it in
connection with such dispute.
8.5 PAYMENT OF EXPENSES TO GENERAL PARTNER UPON WITHDRAWAL. Without in
any way limiting the provisions of Section 8.6 below, upon the assignment of all
of the General Partner's interest, a Voluntary Withdrawal or an Involuntary
Withdrawal (collectively, a "Withdrawal") or Removal of the General Partner, the
withdrawn or removed General Partner or its estate or legal representatives
shall be entitled to receive from the Partnership any reimbursements of expenses
due and owing to it by the Partnership. The right of the General Partner, its
estate or legal representatives to payment of said amounts shall be subject to
any claim for damages which the Partnership or any Partner may have against such
General Partner, its estate or legal representatives if such Withdrawal is in
contravention of this Agreement.
8.6 REDUCTION IN GENERAL PARTNER'S INTEREST UPON REMOVAL OR WITHDRAWAL.
In the event that the General Partner shall be removed in accordance with
Section 8.4 hereof or Withdraws as a general partner of the Partnership in
accordance with Section 8.2 or 8.3 hereof, the General Partner's Carried
Interest (as defined below) in the Partnership shall be reduced to 15% (I.E. 75%
of its former Carried Interest) with respect to the Investments then held by the
Partnership and shall cease with respect to any Investments acquired by the
Partnership after the date the General Partner Withdraws or is Removed ("New
Investments") as further provided below. The General Partner's entitlement to
the Quarterly GP Priority Distribution Amount shall cease as further provided
below.
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For this purpose, the General Partner's "Carried Interest" shall be its
entitlement under Section 5.10(c)(ii) to 20% of distributions after Limited
Partners have received designated returns. To implement the reduction in the
General Partner's Carried Interest, this Agreement shall be deemed to be
amended, automatically and without requiring any further action, so that the
former General Partner becomes entitled to receive the distributions that it
would otherwise receive as General Partner (at the time that such distributions
would be received) if (i) the Partnership made no New Investments and received
no Capital Contributions after the date on which the General Partner is Removed
or Withdraws and (ii) the figure "20%" in Sections 5.10(c)(ii)(A) and (B) were
replaced with "15%." In the Fiscal Year in which distributions are first made to
the former General Partner under the provisions of this Section 8.6 and in
subsequent Fiscal Years, the Partnership shall specially allocate items of
income and gain to the former General Partner until the cumulative amount of
income and gain so allocated is equal to the cumulative amount so distributed;
PROVIDED that the amount of income and gain so allocated shall not duplicate any
amount of net income or other items already allocated to the General Partner on
or prior to the date on which it is Removed or Withdraws.
The General Partner shall be entitled to receive its Quarterly GP Priority
Distribution Amount computed through the date on which it is removed or
Withdraws, but shall then cease to be so entitled without any further amendment
to this Agreement. The provisions for offset to such amounts set forth in
Section 5.10(g)(iii) shall cease to apply to fees paid to the former General
Partner or any BCP Affiliate following such date. Similarly, the special
allocation set forth in Section 5.9(a) shall cease to apply to the former
General Partner; PROVIDED that if the net income allocated to the former General
Partner with respect to any Limited Partner under Section 5.9(a) for all Fiscal
Years (net of related chargebacks under Section 5.3(a)) is less than the
distributions to the former General Partner computed with respect to that
Limited Partner under Section 5.10(g), then the allocations of net income to the
former General Partner with respect to that Limited Partner under Section 5.9(a)
shall continue until the shortfall is eliminated.
8.7 FURTHER CONSEQUENCES OF REMOVAL OR WITHDRAWAL.
(a) If the Partnership does not terminate as provided in
Section 8.8 hereof, then in the event of the Removal or Withdrawal of the
General Partner as a general partner of the Partnership, the former General
Partner shall, to the extent of any remaining interest in the Partnership,
become a Limited Partner of the Partnership as of the effective date of its
Withdrawal or Removal. Thereafter, except as otherwise provided in this Article
8, the former General Partner shall be treated as a Limited Partner for all
purposes of this Agreement. Upon becoming a Limited Partner, the former General
Partner's Capital Account and Capital Commitment shall initially be the same as
they were on the effective date of its Withdrawal or Removal.
(b) After Withdrawal or Removal of a General Partner, the
withdrawn or removed General Partner or its estate or legal representatives
shall remain liable for all obligations and liabilities incurred by it while a
General Partner and for which it was liable as a
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General Partner, but shall be free of any obligation or liability incurred on
account of or arising from the activities of the Partnership from and after the
time such Withdrawal or Removal shall have become effective.
(c) If a court of competent jurisdiction determines that the
Partnership has suffered any loss, damage or liability in consequence of the
conduct that formed the basis for the General Partner's Removal under Section
8.4(i), the amount of any distributions to the former General Partner or other
person pursuant to Sections 5.10(c), (d) or (g) or Section 8.6 shall be reduced
by the value of such loss, damage or liability (as determined by the court) to
the extent not otherwise paid by the former General Partner.
(d) Upon the Removal of a General Partner that is a BCP
Affiliate, the former General Partner and any BCP Affiliate that is a Limited
Partner shall have no voting rights with respect to any Partnership matters as
of the effective date of the Removal.
8.8 CONTINUATION OF PARTNERSHIP BUSINESS. If, following the Withdrawal
or Removal of a General Partner, there is no remaining General Partner, any
Limited Partner may notify the other Limited Partners of such circumstances. Any
Limited Partner may then propose for admission a substitute General Partner. A
substitute General Partner proposed pursuant to this Section 8.8 shall, with the
specific written consent of Limited Partners representing a Voting Interest of
the Limited Partners of at least 66-2/3%, excluding from the vote any Limited
Partner that is a BCP Affiliate, become a substitute General Partner as of the
date of Withdrawal or Removal of the former General Partner, upon his or its
execution of this Agreement and shall thereupon continue the Partnership
business. If no substitute General Partner has received such consent of the
Limited Partners and executed this Agreement within ninety (90) days from the
date of the General Partner's Withdrawal or Removal, then the Partnership shall
thereupon terminate and dissolve in accordance with Article 10 hereof.
9. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
9.1 LIMITED LIABILITY. A Limited Partner which receives the return of
any part of its Capital Contribution shall be liable to the Partnership for the
amount of its Capital Contribution so returned to the extent, and only to the
extent, provided by the Act except as may otherwise be provided in Section
4.1(b). Except as provided in Section 4.1 or the Act, the Limited Partners shall
not otherwise be liable to the Partnership for the repayment, satisfaction, or
discharge of the Partnership's debts, liabilities, and obligations. Except as
provided in Sections 4.1 or 4.2 with respect to the payment of Additional
Capital Contributions or the payment of interest upon failure to pay when due
any installment of a Capital Commitment, no Limited Partner shall have any
obligation to contribute money in excess of such Limited Partner's Capital
Commitment. No Limited Partner shall be personally liable to any third party for
any liability or other obligation of the Partnership.
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9.2 AUTHORITY OF LIMITED PARTNERS. The Limited Partners shall not
participate in or have any control over the management of the Partnership or its
business and affairs and shall not have any power or authority to act for or
bind the Partnership.
9.3 CONFIDENTIALITY. For the purposes of this Section 9.3,
"Confidential Information" means information delivered pursuant to Section 12
that is proprietary in nature and that was clearly marked or labeled or
otherwise adequately identified in writing when received as being confidential
information of the Partnership or relating to a Strategic Investment, provided
that such term does not include information that (a) was publicly known or
otherwise known to a Partner prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by a Partner or
any person acting on a Partner's behalf, (c) otherwise becomes known to a
Partner other than through disclosure by the Partnership or (d) constitutes
financial statements delivered to a Partner under Section 12 that are otherwise
publicly available. Partners will maintain the confidentiality of such
Confidential Information in accordance with internal procedures adopted by a
Partner in good faith to protect confidential information of third parties
delivered to such Partner, provided that a Partner may deliver or disclose
Confidential Information to (i) its trustees, directors, officers, employees,
agents, attorneys and Affiliates, (ii) its financial advisors and other
professional advisors, (iii) any other Partner, (iv) any party to which a
Partner sells or offers to sell its Partner interest or any part thereof, (v)
any federal or state regulatory authority having jurisdiction over a Partner,
(vi) the National Association of Insurance Commissioners (including the
Securities Valuation Office) or any similar organization, or any nationally
recognized rating agency that requires access to information about a Partner's
investment portfolio, or (vii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to a Partner, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
a Partner is a party or (z) to the extent a Partner may reasonably determine
such delivery and disclosure to be necessary or appropriate in the enforcement
or for the protection of such Partner's rights and remedies under this
Agreement.
9.4 BHC PROVISIONS.
(a) If a BHC Partner and its Affiliates that are BHC Partners
in the aggregate hold for their own account an amount that is determined
initially at the time of admission of that BHC Partner or any of such
Affiliates, the admission of additional Limited Partners, or any other
adjustment of the Partners interests hereunder, to be in excess of 4.99% (or
such greater percentage as may be permitted under the BHCA) of the interests of
the Limited Partners, excluding for purposes of calculating this percentage
portions of any other interests that are non-voting interests (collectively the
"Non-Voting Interests"), such amount in excess of 4.99% (or such greater
percentage as may be permitted under the BHCA) shall be a Non-Voting Interest
(whether or not subsequently transferred in whole or in part to any other
Person) and shall not be included in determining whether the requisite
percentage in interest of the Limited Partners have consented to, approved,
adopted, or taken any action hereunder, provided that such Non-Voting
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Interest shall be permitted to vote on any proposal to continue the business of
the Partnership, but not on the approval of a successor General Partner. Each
BHC Partner hereby irrevocably waives its corresponding right under applicable
law to vote its Non-Voting Interest in respect of a successor General Partner,
which waiver shall be binding upon each such BHC Partner or any entity which
succeeds to its interest. Upon the admission of additional Limited Partners, a
withdrawal of a Limited Partner from the Partnership or any other adjustment of
the Limited Partners' proportionate interests, a recalculation of the interests
held by all BHC Partners shall be made, and only that portion of the total
interest in the Partnership held by each BHC Partner that is determined as of
the date of such admission, withdrawal or other adjustment, as applicable, to be
in excess of 4.99% (or such greater percentage as may be permitted under the
BHCA) of the interests of the Limited Partners, excluding Non-Voting Interests
as of such date, shall be a NonVoting Interest. Non-Voting Interests shall not
be counted as interests of Limited Partners for purposes of determining under
this Agreement whether any vote required hereunder has been approved by the
requisite Percentage in Interest of the Limited Partners. Except as provided in
this Section 9.4, an interest which is held as a Non-Voting Interest shall be
identical in all regards to all other interests held by Limited Partners.
(b) Notwithstanding the foregoing, any BHC Partner may elect
not to be governed by this Section 9.4 by providing the General Partner with
written notice and an opinion of counsel (which counsel shall be reasonably
acceptable to both the BHC Partner and the General Partner and which counsel
shall include any in-house counsel of the BHC Partner having experience in such
matters) to the effect that, as a result of a change in law or regulation
applicable to such BHC Partner or for such other reason as may be specified in
such opinion, such BHC Partner is not prohibited from acquiring or controlling
any or all of its Non-Voting Interests, in which case only the amount of the
interests held by such electing BHC Partner as may be specified in such opinion
to be subject to this paragraph shall continue to be Non-Voting Interests. Any
such election by a BHC Partner may be rescinded at any time by providing the
General Partner with written notice and an opinion of counsel (which counsel
shall be reasonably acceptable to both the BHC Partner and the General Partner
and which counsel shall include any in-house counsel of the BHC Partner having
experience in such matters) to the effect such BHC Partner is prohibited by law
or regulation applicable to such BHC Partner from acquiring or controlling a
specified percentage of the interests of the Limited Partners.
(c) Notwithstanding any provision of this Agreement to the
contrary, any BHC Partner may elect to withdraw from the Partnership, or upon
demand by the General Partner shall withdraw from the Partnership, if either the
BHC Partner or the General Partner shall obtain an opinion of counsel (which
counsel shall be reasonably acceptable to both the BHC Partner and the General
Partner and which counsel shall include any in-house counsel of such BHC Partner
having experience in such matters) to the effect that the BHC Partner, the
Partnership, or the General Partner (including its Affiliates) is unable to
secure Federal Reserve Board approval to retain its interest in the Partnership
and would be in violation of any provision of the BHCA, including any
regulation, written interpretation or directive of any governmental authority
having regulatory authority over such BHC Partner or any other law, rule,
regulation or administrative
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practice to which such BHC Partner is subject as a result of the BHC Partner
continuing as a Limited Partner. In the event of the issuance of the opinion of
counsel referred to in the preceding sentence, a copy of such opinion shall be
given to all the Partners, together with the written notice of the election of
the BHC Partner to withdraw or the written demand of the General Partner for
withdrawal, whichever the case may be. Thereupon, the BHC Partner shall take all
reasonable steps to secure approval to retain its partnership interest or
deliver a written opinion of counsel that such approval cannot be secured or can
only be secured on terms or conditions that are unreasonably burdensome. Unless
within ninety (90) days after receipt of such written notice and opinion the BHC
Partner or the General Partner is able to eliminate the necessity for such
withdrawal to the reasonable satisfaction of the BHC Partner and the General
Partner, whether by correction of the condition giving rise to the necessity of
the BHC Partner's withdrawal, or the amendment of this Agreement, or otherwise,
such BHC Partner shall withdraw its entire interest in the Partnership, such
withdrawal to be effective upon the last day of the fiscal quarter during which
such ninety (90) day period expired.
(i) The withdrawing BHC Partner shall be entitled to
receive within ninety (90) days after the date of such withdrawal an
amount equal to the amount of such Partner's Estimated Value Capital
Account, computed as of the effective date of such withdrawal.
(ii) Any distribution or payment to a withdrawing BHC
Partner pursuant to this paragraph may, in the sole discretion of the
General Partner, be made in cash, cash equivalents and/or in a pro rata
distribution of securities (subject to the provisions regarding in-kind
distributions set forth in Section 5.10(e)), or any combination
thereof, or the distribution may be made in the form of a promissory
note, which would be repaid on a pro rata basis with distributions to
the remaining Partners; PROVIDED, HOWEVER, if the withdrawing BHC
Partner would receive an amount of any security that would cause such
BHC Partner to own or control in excess of the amount of such security
that it may lawfully own or control or may own or control without tax
penalty, then, upon receipt of notice to such effect from a BHC
Partner, the General Partner shall vary the method of distribution, in
an equitable manner, so as to avoid such excessive ownership or
control. In determining the form of payment to be made to the
withdrawing BHC Partner, the General Partner will use reasonable
efforts to, but is not required to, make payments in cash to the extent
reasonably available and subject to the ongoing cash requirements of
the Partnership as determined by the General Partner, in its sole
discretion.
10. DURATION AND TERMINATION OF THE PARTNERSHIP
10.1 DURATION. Except as provided in Section 8.8 the Partnership shall
continue until the seventh anniversary of the later of (i) the Initial Closing
Date or (ii) the date of the final Subsequent Closing, unless prior to such
anniversary, the General Partner, in its sole discretion, elects to declare an
extension of the Partnership's duration for one additional year. If so
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extended, the Partnership shall continue until the eighth anniversary of the
later of (i) the Initial Closing Date or (ii) the date of the final Subsequent
Closing.
10.2 BANKRUPTCY OF LIMITED PARTNER. The bankruptcy, insolvency,
dissolution, or liquidation of, or the making of an assignment for the benefit
of creditors by, or any other act or circumstance with respect to, a Limited
Partner shall not cause the dissolution or termination of the Partnership.
10.3 TERMINATION. The Partnership shall terminate and dissolve ninety
(90) days from the date of the earlier of (i) the date of the Withdrawal or
Removal of a General Partner, unless the remaining General Partner or Partners
or a substitute General Partner elect to continue the Partnership in accordance
with Section 8.8, in which event the Partnership shall not terminate or
dissolve, but shall continue as though no such Withdrawal or Removal had
occurred; (ii) the expiration of the Partnership as provided in Section 10.1;
(iii) upon the vote of the General Partner and Limited Partners representing
66-2/3% of the aggregate Capital Commitments of the Partnership; (iv) upon the
vote of Limited Partners representing a Voting Interest of all Limited Partners
of at least 75%, excluding from the vote any Limited Partner that is a BCP
Affiliate so long as the General Partner is a BCP Affiliate; or (v) upon a
change in control of the General Partner, unless Limited Partners representing a
majority of the aggregate Capital Commitments of all Limited Partners, excluding
from the vote any Limited Partner that is a BCP Affiliate so long as the General
Partner is a BCP Affiliate, vote to continue the Partnership.
For the purposes of this Section 10.3, a "change in control of the
General Partner" shall mean an event or occurrence that results in Beacon
Capital Partners, L.P. or an Affiliate of Beacon Capital Partners, L.P. no
longer having a controlling interest in the General Partner.
11. LIQUIDATION OF THE PARTNERSHIP
11.1 GENERAL. Upon the termination and/or dissolution of the
Partnership, the Partnership shall be liquidated in accordance with this Article
and the Act. The termination, dissolution and liquidation shall be conducted and
supervised by the General Partner or, if there is no remaining General Partner
and no substitute General Partner has been appointed following the Withdrawal or
Removal of a General Partner, by a Person who shall be designated for such
purpose by Limited Partners which have made a majority of the aggregate Capital
Contributions made by all of the Limited Partners, excluding from the vote any
Limited Partner that is a BCP Affiliate (the General Partner or such trustee or
other Person, as applicable, being referred to in this Article 11 as the
"Liquidating Agent"). The Liquidating Agent shall have all of the rights,
powers, and authority with respect to the assets and liabilities of the
Partnership in connection with the liquidation, dissolution and termination of
the Partnership that the General Partner has with respect to the assets and
liabilities of the Partnership during the term of the Partnership, and the
Liquidating Agent is hereby expressly authorized and empowered to execute any
and all documents necessary or desirable to effectuate the liquidation of the
Partnership and the transfer of any assets or liabilities of the Partnership.
The Liquidating Agent shall have the right from
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time to time, by revocable powers of attorney, to delegate to one or more
Persons any or all of such rights and powers and such authority and power to
execute documents and, in connection therewith, to fix the reasonable
compensation of each such Person, which compensation shall be charged as an
expense of liquidation.
The Liquidating Agent shall liquidate the Partnership as promptly as
shall be practicable after termination, consistent with the preservation of
capital. Without limiting the rights, powers, and authority of the Liquidating
Agent as provided in this Section 11.1, any Partnership asset that the
Liquidating Agent may sell shall be sold at such price and on such terms as the
Liquidating Agent may, in its sole discretion, deem appropriate. Subject to
Section 5.10(e)(ii), the Liquidating Agent may, if it so determines, distribute
restricted securities and other assets of the Partnership in-kind to the
Partners.
11.2 PRIORITY ON LIQUIDATION; DISTRIBUTIONS. The proceeds of
liquidation shall be applied in the following order of priority:
(a) To pay the costs and expenses of the dissolution and
liquidation;
(b) To pay matured debts and liabilities of the Partnership to
all creditors of the Partnership (including, without limitation, any liability
to any Partner);
(c) To establish any reserves which the Liquidating Agent may
deem necessary or advisable for any contingent or unmatured liability of the
Partnership to all Persons who are not Partners;
(d) To establish any reserves which the Liquidating Agent may
deem necessary or advisable for any contingent or unmatured liability of the
Partnership to Partners; and
(e) The balance, if any, to the Partners in accordance with
Section 5.10(f).
11.3 ORDERLY LIQUIDATION. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Partnership and the discharge of
liabilities so as to minimize the losses normally attendant upon a liquidation.
The Liquidating Agent shall, however, if possible consistent with the preceding
sentence, dispose of Partnership assets and effect distributions to the Partners
within 180 days after the date of termination of the Partnership.
11.4 SOURCE OF DISTRIBUTIONS. Subject to Section 5.11, the General
Partner shall not be liable out of its own assets for the return of the Capital
Contributions of the Limited Partners, it being expressly understood that any
such return shall be made solely from the Partnership's assets.
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11.5 STATEMENTS ON TERMINATION. Each Partner shall be furnished with a
statement prepared by the Partnership's accountant, which shall set forth the
assets and liabilities of the Partnership as at the date of complete
liquidation, and each Partner's share thereof. Upon consummation of the
liquidation of the Partnership set forth in Article 11 hereof, the Limited
Partners shall cease to be such, and the Liquidating Agent shall execute,
acknowledge, and cause to be filed a certificate of cancellation of the
Partnership.
12. BOOKS; ACCOUNTING; TAX ELECTIONS; REPORTS
12.1 BOOKS AND ACCOUNTS. Complete and accurate books and accounts shall
be kept and maintained for the Partnership at its principal place of business.
Such books and accounts shall be kept in accordance with generally accepted
accounting principles consistently applied, the provisions of Section 5.1 and on
such other basis, if any, as the General Partner determines is necessary to
properly reflect the operations of the Partnership. Each Partner or its duly
authorized representative, at its own expense, shall at all reasonable times
have access to, and may inspect and make copies of, such books and accounts and
any other records and such other information of the Partnership upon reasonable
prior written notice to the General Partner.
All funds received by the Partnership other than those invested in
Interim or Strategic Investments shall be deposited in the name of the
Partnership in such bank account or accounts, and all securities owned by the
Partnership may be deposited with such custodian, as the General Partner may
designate from time to time and withdrawals therefrom shall be made upon such
signature or signatures on behalf of the Partnership as the General Partner may
designate from time to time.
12.2 RECORDS AVAILABLE. The General Partner shall maintain at the
Partnership's principal office the following documents: (i) a current list of
the full name and last known business address of each Partner, (ii) a copy of
the Certificate of Limited Partnership and all amendments thereto, (iii) copies
of the Partnership's federal, state and local income tax returns and of any
financial statements of the Partnership for the three most recent Fiscal Years,
and (iv) copies of this Agreement and all amendments thereto, together with
executed copies of any powers of attorney pursuant to which this Agreement, the
Certificate of Limited Partnership, or any such amendment has been executed.
Such documents and all other Partnership documents are subject to inspection and
copying at the reasonable request and at the expense of any Partner during
ordinary business hours upon reasonable prior notice to the General Partner.
Except to the extent requested by a Limited Partner, the General Partner shall
have no obligation to deliver or mail a copy of the Partnership's Certificate of
Limited Partnership or any amendment thereto to the Limited Partners.
12.3 ANNUAL FINANCIAL STATEMENTS AND VALUATION. The Partnership shall
engage an independent certified public accountant of recognized national
standing to act as the accountant for the Partnership. Within ninety (90) days
after the end of each Fiscal Year, the General Partner, at Partnership expense,
shall prepare and mail to each Limited Partner and to each
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former Partner who withdrew during such Fiscal Year (or to such former Partner's
legal representative, as applicable) (i) a report stating in sufficient detail
such transactions effected by the Partnership during such Fiscal year as shall
enable such Partner, former Partner, or legal representative to prepare its
respective state and Federal income tax returns, (ii) a summary description of
each acquisition or disposition by the Partnership during the previous Fiscal
Year, including any transactions with any BCP Affiliate, (iii) a statement of
all distributions made to such Partner during the previous Fiscal quarter and
the previous Fiscal Year and such Partner's Capital Account balance and the
Return Account balance as of the end of the immediately preceding Fiscal Year,
and (iv) a valuation of the assets of the Partnership. The General Partner shall
also furnish to the Limited Partners a balance sheet and schedule of Investments
of the Partnership as of the end of the Fiscal Year and statements of
operations, Partners' Equity and cash flow for such Fiscal Year prepared in
accordance with generally accepted accounting principles together with the
auditors' report thereon indicating that the audit was performed in accordance
with generally accepted auditing standards. Consistent with the requirements of
generally accepted accounting principles, the Partnership's assets will be
presented on a fair value basis. The Partnership will provide to each Limited
Partner a description of the methodology used to value all Partnership assets in
connection with the preparation of the annual valuation of such assets.
12.4 QUARTERLY FINANCIAL STATEMENTS. Within forty-five (45) days after
the end of each quarter of each Fiscal Year, the General Partner shall mail to
each Limited Partner unaudited balance sheets, an unaudited cash flow statement
and an unaudited income statement of the Partnership as at such quarter-end. The
General Partner shall also provide the Partners with a semi-annual detailed
report of the Partnership's business and activities, including a statement of
Capital Accounts and remaining Capital Commitments and a summary of investments
and dispositions made during the prior six (6) months.
12.5 RELIANCE ON ACCOUNTANTS. All decisions as to accounting matters,
except as specifically provided to the contrary herein, shall be made by the
General Partner, to the extent consistent with the terms of this Agreement, in
accordance with generally accepted accounting principles and procedures applied
in a consistent manner. The General Partner may rely upon the advice of the
Partnership's accountants as to whether such decisions are in accordance with
generally accepted accounting principles.
12.6 TAX MATTERS PARTNER; FILING OF RETURNS.
(a) The General Partner shall be the "tax matters partner" of
the Partnership and shall, at the Partnership's expense, cause to be prepared
and timely filed after the end of each Fiscal Year of the Partnership all
Federal and state income tax returns required of the Partnership for such Fiscal
Year. The Partnership shall make such elections pursuant to the provisions of
the Internal Revenue Code as the General Partner, in its sole discretion, deems
appropriate.
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(b) The Partnership shall deliver to each Limited Partner a
Form K-1 by August 1st of each year (or the 1st day of the 8th month following
the close of the Fiscal Year if the Fiscal Year is not the calendar year).
12.7 FISCAL YEAR. The fiscal year (the "Fiscal Year") of the
Partnership shall be the period ending on December 31 of each year, or such
other period as the General Partner may designate as the Fiscal Year of the
Partnership, consistent with the requirements of the Code.
13. POWER OF ATTORNEY
13.1 GENERAL. Each Limited Partner irrevocably constitutes and appoints
each officer and director of the General Partner and each Liquidating Agent the
true and lawful attorney-in-fact of such Limited Partner to execute,
acknowledge, swear to and file (i) any certificate or other instrument which may
be required to be filed by the Partnership under the laws of any jurisdiction in
which the Partnership does business, or which the General Partner shall deem
advisable to file, so long as no such certificate or instrument shall have the
effect of amending this Agreement; (ii) any agreement, document, certificate or
other instrument which any Limited Partner is required to execute in connection
with the termination of such Limited Partner's interest in the Partnership and
the withdrawal of such Limited Partner pursuant to Section 4.2 hereof and which
such Limited Partner has failed to execute and deliver within ten days after
written request therefor by the General Partner; and (iii) any instrument which
the General Partner deems necessary or appropriate to facilitate the
implementation of the terms of this Agreement, including the pledging of Capital
Commitment obligations as contemplated by Sections 3.2 and 4.1(h), so long as
such instruments do not alter the rights or obligations of the Limited Partners
under the terms of this Agreement.
13.2 SURVIVAL OF POWER OF ATTORNEY. It is expressly acknowledged by
each Limited Partner that the foregoing power of attorney is coupled with an
interest and shall survive death, legal incapacity, bankruptcy, insolvency,
assignment for the benefit of creditors and assignment by a Limited Partner of
its Limited Partner's interest in the Partnership; PROVIDED, HOWEVER, that if a
Limited Partner shall assign all of its interest in the Partnership and the
assignee shall, in accordance with the provisions of this Agreement, become a
substitute Limited Partner, such power of attorney shall survive such assignment
only for the purpose of enabling the General Partner to execute, acknowledge,
swear to and file any and all instruments necessary to effect such substitution.
13.3 WRITTEN CONFIRMATION OF POWER OF ATTORNEY. Each Limited Partner
hereby agrees to execute, upon fifteen (15) days' prior written notice, a
confirmatory or special power of attorney, containing the substantive provisions
of this Section substantially in the form attached hereto as Exhibit D.
54
<PAGE>
14. MISCELLANEOUS
14.1 FURTHER ASSURANCES. The Partners agree to execute such instruments
and documents as may be required by the Act or by law or which the General
Partner reasonably deems necessary or appropriate to carry out the intent of
this Agreement so long as they do not alter the rights and obligations of the
Limited Partners under this Agreement.
14.2 SUCCESSORS AND ASSIGNS. The agreements contained herein shall be
binding upon and inure to the benefit of the permitted successors and assigns of
the respective parties hereto.
14.3 APPLICABLE LAW. This Agreement shall be governed by, and construed
in accordance with, the Act and judicial interpretations thereof to the extent
applicable and otherwise in accordance with the laws of the State of Delaware.
14.4 SEVERABILITY. If any one or more of the provisions contained in
this Agreement, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and all other applications thereof shall
not in any way be affected or impaired thereby, unless the absence of the
invalid, illegal or unenforceable provision would materially affect the
respective interests of the Partners, in which case the Partners shall use their
best efforts to make such changes or adjustments in this Agreement as would
restore the respective economic interests of the Partners as originally
contemplated hereby.
14.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original of this Agreement
binding on the parties hereto.
14.6 ENTIRE AGREEMENT. This Agreement (together with the Subscription
Agreements of each of the Limited Partners and any side letters with any Limited
Partners) represents the entire agreement among the parties hereto with respect
to the subject matter hereof.
14.7 BENEFIT OF OUTSIDE AGREEMENTS. The Partnership and the General
Partner have disclosed and will in the future disclose to the Limited Partners
any and all side letters or similar agreements with any existing or future
investor (who is or becomes a Limited Partner) in the Partnership. Neither the
Partnership nor the General Partner shall enter into any side letter or similar
agreement with any existing investor (who is a Limited Partner) in the
Partnership that has the effect of establishing rights or otherwise benefitting
such investor in a manner more favorable in any material respect to such
investor than the rights and benefits established in favor of any Limited
Partner by this Agreement unless, in any such case, each Limited Partner has
been offered the opportunity to receive such rights and benefits of such side
letter.
14.8 AMENDMENT. Except as provided below in this Section 14.8, the
provisions of this Agreement may be amended or waived at any time and from time
to time with the consent of the General Partner and of Limited Partners
representing a Voting Interest of the Limited Partners in
55
<PAGE>
excess of 50%, excluding from the vote any Limited Partner that is a BCP
Affiliate so long as the General Partner is a BCP Affiliate. The General Partner
may amend SCHEDULE A hereto at any time and from time to time without the
consent of any other Partner to reflect the admission or withdrawal of any
Partner, or the change in any Partner's Capital Commitment, as contemplated by
this Agreement. No amendment shall become effective without the consent of a
Limited Partner if such amendment would cause an increase in the Capital
Commitment or adversely affect the limited liability of that Limited Partner. No
amendment shall become effective without the unanimous consent of the Partners
adversely affected if such amendment would affect the allocations, distributions
or deficit restoration obligations provided for by this Agreement. No amendment
shall be made to Section 3.4 without the consent of the General Partner and of
Limited Partners which are ERISA Partners and which made a majority of the
aggregate Capital Contributions made by all ERISA Partners. No amendment shall
be made to Section 3.5 without the consent of the General Partner and of
Foundation Partners which have made a majority of the aggregate Capital
Contributions made by all of the Foundation Partners. No amendment shall be made
to Section 3.6 or that would cause the provisions of this Agreement to fail to
satisfy the requirements of Section 514(c)(9)(E) of the Code without the consent
of the General Partner and of Limited Partners which have made a majority of the
aggregate Capital Contributions made by all of the Limited Partners which are
"qualified organizations" as defined in Code Section 514(c)(9)(C). No amendment
shall be made to Section 3.7 without the consent of each Partner that is a BCP
Affiliate. No amendment shall be made to Section 5.10(e) or 9.4, with respect to
any BHC Partner, without the consent of each BHC partner.
14.9 CONSTRUCTION. The captions used herein are intended for
convenience of reference only, and shall not modify or affect in any manner the
meaning or interpretation of any of the provisions of this Agreement. As used
herein, the singular shall include the plural, the masculine gender shall
include the feminine and neuter, and the neuter gender shall include the
masculine and feminine, unless the context otherwise requires. The words
"hereof", "herein", and "hereunder", and words of similar import, when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
14.10 FORCE MAJEURE. Whenever any act or thing is required of the
Partnership or the General Partner hereunder to be done within any specified
period of time, the Partnership or the General Partner, as the case may be,
shall be entitled to such additional period of time to do such act or thing as
shall equal any period of delay resulting from causes beyond the reasonable
control of the Partnership or the General Partner, as the case may be,
including, without limitation, bank holidays, actions of governmental agencies,
and financial crises of a nature materially affecting the purchase and sale of
securities; provided, that this provision shall not have the effect of relieving
the Partnership or the General Partner from the obligation to perform any such
act or thing.
14.11 NOTICES. All notices, demands, solicitations of consent or
approval, and other communications hereunder shall be in writing and shall be
sufficiently given if personally delivered, transmitted by facsimile, or sent
postage prepaid by overnight courier or registered or
56
<PAGE>
certified mail, return receipt requested, addressed as follows: if intended for
the Partnership or the General Partner, to the Partnership's principal office
determined pursuant to Section 2.4 hereof, and if intended for any Limited
Partner to the address of such Limited Partner set forth on SCHEDULE A hereto,
or to such other address as such Partner may designate by written notice.
Notices shall be deemed to have been given when personally delivered or
transmitted by facsimile or, if mailed or sent by overnight courier, the date on
which received. The provisions of this Section shall not prohibit the giving of
written notice in any other manner; any such written notice shall be deemed
given only when actually received.
14.12 NO RIGHT OF PARTITION FOR REDEMPTION. No Partner and no
successor-in-interest to any Partner shall have the right while this Agreement
remains in effect to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property of the Partnership partitioned or, except on such terms and conditions
as the General Partner may, in its sole discretion, approve, to require the
redemption of its interest in the Partnership.
14.13 THIRD-PARTY BENEFICIARIES. Except with respect to Section 3.7
hereof, the provisions of this Agreement are not intended to be for the benefit
of any creditor or other person to whom any debts or obligations are owed by, or
who may have any claim against, the Partnership or any of its Partners, except
for Partners in their capacities as such. Notwithstanding any contrary provision
of this Agreement, no such creditor or person shall obtain any rights under this
Agreement or shall, by reason of this Agreement, be permitted to make any claim
against the Partnership or any Partner.
14.14 GENERAL PARTNER AS LIMITED PARTNER. A General Partner may also be
a Limited Partner, and in such event its rights, powers, restrictions and
liabilities as a General Partner shall remain unaffected, and in addition it
shall, in respect of its Capital Contributions as a Limited Partner, have all of
the rights and powers and be subject to all of the restrictions and liabilities
of a Limited Partner.
[Remainder of Page Intentionally Left Blank]
57
<PAGE>
IN WITNESS WHEREOF, this Limited Partnership Agreement has been
executed by the parties as of this 1st day of October, 1999.
GENERAL PARTNER
BCP STRATEGIC PARTNERS, LLC
By: BEACON CAPITAL PARTNERS, L.P.,
---------------------------------------
a Delaware limited partnership, as its
sole member
By: BEACON CAPITAL PARTNERS, INC.,
---------------------------------------
a Maryland corporation, as its general
partner
By: _______________________________________
Name: William A. Bonn, Esq.
Title: Senior Vice President and
General Counsel
LIMITED PARTNERS
----------------
See Signature Pages Attached Hereto
58
<PAGE>
BEACON CAPITAL STRATEGIC PARTNERS, L.P.
SCHEDULE A
LIST OF PARTNERS AND CAPITAL COMMITMENTS
[SEE DOCUMENT NUMBER 799771 AND 800095.]
59
<PAGE>
BEACON CAPITAL STRATEGIC PARTNERS, L.P.
SCHEDULE B - LIST OF PROPERTIES TO BE ACQUIRED BY THE PARTNERSHIP
IN WHICH BCP AFFILIATES HAVE AN INTEREST
1. 215 Fremont Street, San Francisco, California.
2. Beaumeade Office Park, Loudoun County, Virginia.
B-1
<PAGE>
BEACON CAPITAL STRATEGIC PARTNERS, L.P.
EXHIBIT A - FORM OF GUARANTY OF GENERAL PARTNER'S DEFICIT RESTORATION OBLIGATION
[SEE DOCUMENT NUMBER 794578.]
Exh. A-1
<PAGE>
BEACON CAPITAL STRATEGIC PARTNERS, L.P.
EXHIBIT B - ILLUSTRATION OF SECTION 4.4(b)
To illustrate the provisions of Section 4.4(b), assume that the Capital
Commitments of the Partners at the Initial Closing were: General Partner - $40
million, Fixed-Percentage Limited Partner A - $16 million (10% of the total
Capital Commitments), Limited Partner B - $64 million and Limited Partner C -
$40 million. For purposes of these provisions and this example, the General
Partner's Capital Commitment includes the Capital Commitment of any Limited
Partner that is treated in the same manner as the General Partner under Section
4.4(b)(vi). Prior to a Subsequent Closing, the Partnership made a capital call
of $21 million and used the proceeds to make an investment of $19 million and
retain $2 million as an operating reserve: the General Partner, A, B and C made
Capital Contributions of $5.25 million, $2.1 million, $8.4 million and $5.25
million respectively. Pursuant to Section 4.1(e)(iii), no Partners have made any
Additional Capital Contributions.
A new Limited Partner D commits to invest $36 million at the Subsequent
Closing, which occurs 6 months after the Initial Closing. A's Capital Commitment
increases to $20 million. Total Capital Commitments are now $200 million, and A
continues to have an Equity Interest Percentage of 10%. In this event, the
General Partner's Equity Interest Percentage will be reduced to 20% under
Section 4.4(b)(iii), and under Sections 4.4(b)(iii) and 4.4(b)(vii)the General
Partner and A will be entitled to distributions of $1.35 million and $150,000,
respectively, so that their net Capital Contributions of $3.9 million and $1.95
million will be equal to 20% and 10%, respectively, of the aggregate Capital
Contributions of $19.5 million ($21 million less the $1.5 million distribution).
The Catch-up Payments made by D are computed by reference to the $19.5
million of Partnership capital, and are paid $2.16 million to B and $1.35
million to C (because A maintains its Equity Interest Percentage, A does not
participate). At the Subsequent Closing the General Partner also determines that
the Catch-up Interest with respect to the $3.51 million of prior Capital
Contributions is $175,500. Accordingly, D shall also make Catch-up Interest
payments of $108,000 and $67,500 to B and C, respectively. Therefore, at the
Subsequent Closing, D will pay $3,685,500 in cash to B and C, in an 8:5 ratio.
Immediately following the Subsequent Closing, D's Capital Commitment is
$36 million, of which $32.49 million remains subject to call. D's Capital
Contributions are $3.51 million. A's Capital Commitment is increased to $20
million, of which $18.05 remains subject to call ($20 million - $2.1 million +
$150,000). A's Capital Contributions are $1.95 million ($2.1 million -
$150,000). The General Partner, B and C continue to have Capital Commitments of
$40 million, $64 million and $40 million, respectively, of which $36.1 million
($40 million - $5.25 million + $1.35 million), $57.76 million ($64 million -
$8.4 million + $2.16 million) and $36.1 million ($40 million - $5.25 million +
$1.35 million), respectively, remain subject to call. The General Partner's, B's
and C's Capital Contributions are $3.9 million ($5.25 million - $1.35
Exh. B-1
<PAGE>
million), $6.24 million ($8.4 million - $2.16 million) and $3.9 million ($5.25
million - $1.35 million), respectively.
Immediately after the Subsequent Closing, the Capital Accounts of the
Partners and the assets of the Partnership would be as follows (assuming no
income or loss had been earned by the Partnership):
<TABLE>
<CAPTION>
Assets Capital
------ -------
<S> <C> <C> <C> <C>
Cash $500,000 Limited Partner A $ 1,950,000 10%
Investment $19,000,000 Limited Partner B 6,240,000 32%
Limited Partner C 3,900,000 20%
Limited Partner D 3,510,000 18%
General Partner 3,900,000 20%
----------- ------
Total $19,500,000 Total $19,500,000 100.00%
----------- ----------- ------
----------- ----------- ------
</TABLE>
If the Partnership had earned $500,000 of income prior to the
Subsequent Closing (and none of the income had been allocated to the General
Partner under Section 5.2(d) or 5.9), the assets and Capital Account balances of
the Partnership immediately following the Subsequent Closing would be as
follows:
<TABLE>
<CAPTION>
Assets Capital
------ -------
<S> <C> <C> <C> <C>
Cash $ 1,000,000 Limited Partner A $ 2,000,000 10.00%
Investment 19,000,000 Limited Partner B 6,388,571 31.94%
----------- Limited Partner C 3,992,857 19.96%
Limited Partner D 3,593,571 17.97%
General Partner 4,025,000 20.13%
----------- ------
Total $20,000,000 Total $20,000,000* 100.00%
----------- ----------- ------
----------- ----------- ------
*CORRECTED FOR ROUNDING.
</TABLE>
Exh. B-2
<PAGE>
BEACON CAPITAL STRATEGIC PARTNERS, L.P.
EXHIBIT C - ILLUSTRATION OF SECTIONS 5.10(c) AND 5.10(g)
To illustrate the provisions of Section 5.10(c) and Section 5.10(g),
assume that the Capital Commitments at the Initial Closing were: General Partner
- - $40 million, Limited Partner A - $80 million and Limited Partner B - $40
million. Limited Partner C was admitted at a Subsequent Closing with a Capital
Commitment of $40 million. Assume further that, for purposes of simplification,
(i) the Partners have made the Capital Contributions shown in the table below,
(ii) the Subsequent Closing was on the first anniversary of the Initial Closing,
(iii) none of the Limited Partners has made Additional Capital Contributions,
(iv) the Partnership has made no distributions other than a distribution of
$2,200,000 to the General Partner pursuant to Section 5.10(g) for the first
year, (v) the Partnership has $38,750,000 of cash available for distribution and
(vi) the distributions described below are made on the second anniversary of the
Initial Closing. Accordingly, on the second anniversary of the Initial Closing,
immediately prior to the distributions described below, the Partners' Equity
Interest Percentages, Capital Contributions and Return Account balances are as
follows:
<TABLE>
<CAPTION>
Equity Interest % Contribution Return Account
----------------- ------------ --------------
<S> <C> <C> <C>
Limited Partner A 40% $10,000,000 $12,100,000
Limited Partner B 20% 5,000,000 6,050,000
Limited Partner C 20% 5,000,000 6,050,000
General Partner 20% 5,000,000 N/A
------ -------------- ----------------
Total 100% $25,000,000 $24,200,000
</TABLE>
If the Partnership now distributed $38,750,000, distributions would be
made first under Section 5.10(g) to the General Partner in the amount of
$2,200,000.(1) Distributions would then be made to the Partners as a group in
proportion to their Equity Interest Percentages under Section 5.10(c)(i). For
purposes of determining the amount to be distributed under Section 5.10(c)(i),
each Limited Partner's Capital Contributions and Return Account is increased by
the Additional Contribution to be withheld from its distributions ($2,000,000
for Limited Partner A, $1,200,000 for each of Limited Partner B and C). The
amount remaining for distribution after payment of the General Partner's special
distribution ($38,750,000 - $2,200,000 = $36,550,000) is increased by the amount
of such Additional Capital Contributions ($36,550,000 + $4,400,000 =
$40,950,000).
- --------
(1) The actual amount of the distribution would be smaller because the basis on
which the distribution was computed would be changed in the second year. The
amount shown is used for purposes of simplifying the example.
Exh. C-1
<PAGE>
Under Section 5.10(c)(i), $14,100,000 is distributed to Limited Partner
A, and $7,250,000 is distributed to each of Limited Partners B and C, so that
the Return Account balance of each Limited Partner is reduced to zero. Further
distributions to each of the Limited Partners are made under Section
5.10(c)(ii).
The next $1,400,000 of distributions attributable to Limited Partner
A's Equity Interest Percentage is divided 50/50 between Limited Partner A and
the General Partner under Section 5.10(c)(ii)(A), causing the distribution of
$700,000 to the General Partner to equal 20% of the sum of (1) the $2,800,000 of
distributions to Limited Partner A in excess of its Capital Contributions
($14,100,000 + $700,000 - $12,000,000) plus (2) the $700,000 distributed to the
General Partner with respect to Limited Partner A (($2,800,000 + $700,000) x 20%
= $700,000). The next $700,000 of distributions attributable to Limited Partner
B's Equity Interest Percentage is divided 50/50 between Limited Partner B and
the General Partner, and the next $700,000 attributable to Limited Partner C's
Equity Interest Percentage is divided 50/50 between Limited Partner C and the
General Partner, using the same computations.
There remains $880,000 of gross distributions attributable to Limited
Partner A's Equity Interest Percentage, calculated as Limited Partner A's Equity
Interest Percentage of the gross distribution amount ($40,950,000 x 40% =
$16,380,000) less distributions under Section 5.10(c)(i) and Section
5.10(c)(ii)(A) to Limited Partner A and to the General Partner with respect to
Limited Partner A ($16,380,000 - $14,100,000 - $1,400,000 = $880,000). This
$880,000 is divided 80/20 (704,000/176,000) between Limited Partner A and the
General Partner under clause (ii)(B). Similarly, the remaining $590,000
attributable to the Equity Interest Percentage of each of Limited Partner B and
C is divided 80/20 (92,000/48,000) between each of Limited Partners B and C and
the General Partner.
The General Partner also receives ordinary distributions of $8,190,000
under Section 5.10(c)(i), in proportion to its Equity Interest Percentage of the
$40,950,000 gross distribution.
In summary, the gross distributions under Section 5.10(c) prior to
withholding under Section 4.1(e) are as follows:
<TABLE>
<CAPTION>
Return Account to $0 50/50 Catch-Up 80/20 Sharing Total
-------------------- -------------- ------------- -----
<S> <C> <C> <C> <C>
Limited Partner A $14,100,000 $ 700,000 $ 704,000 $15,504,000
Limited Partner B 7,250,000 350,000 192,000 7,792,000
Limited Partner C 7,250,000 350,000 192,000 7,792,000
General Partner 8,190,000 1,400,000 272,000 9,862,000
--------------- -------------- ----------- -------------
Gross Distributions $36,790,000 $2,800,000 $1,360,000 $40,950,000
</TABLE>
Exh. C-2
<PAGE>
The gross distributions under Section 5.10(c) are reduced by the
Additional Capital Contributions withheld under Section 4.1(e) to arrive at the
net distribution to each Partner under Section 5.10(c):
<TABLE>
<CAPTION>
Gross 5.10(c) Distribution 4.1(e) Net 5.10(c) Distribution
-------------------------- ------ ------------------------
<S> <C> <C> <C>
Limited Partner A $15,504,000 (2,000,000) $13,504,000
Limited Partner B 7,792,000 (1,200,000) 6,592,000
Limited Partner C 7,792,000 (1,200,000) 6,592,000
General Partner 9,862,000 N/A 9,862,000
--------------- ----------- --------------
Total $40,950,000 (4,400,000) $36,550,000
</TABLE>
The net $36,550,000 of distributions under Section 5.10(c) plus the General
Partner's $2,200,000 special distribution under Section 5.10(g) equals the total
cash available for distribution of $38,750,000.
Exh. C-3
<PAGE>
BEACON CAPITAL STRATEGIC PARTNERS, L.P.
EXHIBIT D - FORM OF POWER OF ATTORNEY
[SEE DOCUMENT NUMBER 794523.]
Exh. D-1
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of Beacon Capital
Partners, Inc. (the "Company") for the registration of 20,394,843 shares of
its common stock; to the incorporation by reference therein from the
Company's Annual Report (Form 10-K) for the year ended December 31, 1998 of
(i) our report dated January 21, 1999, with respect to the consolidated
financial statements and schedule of Beacon Capital Partners, Inc. and (ii)
our report dated January 8, 1999, with respect to the consolidated financial
statements and schedule of Beacon/PW Kendall LLC; and to the incorporation
therein from the Company's Current Report on Form 8-K dated November 17, 1999
of (iii) our report dated March 26, 1999, with respect to the combined
historical summary of gross income and direct operating expenses for Fort
Point Place, (iv) our report dated May 22, 1998, with respect to the combined
historical summary of gross income and direct operating expenses for The
Athenaeum Portfolio, (v) our report dated July 1, 1998, with respect to the
combined historical summary of gross income and direct operating expenses for
The Breunig Portfolio, and (vi) our report dated May 22, 1998, with respect
to the historical summary of gross income and direct operating expenses for
Technology Square and the Draper Building, all filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
November 16, 1999
