SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 2)
Berkshire Realty Company, Inc.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
084710 10 2
(CUSIP Number)
Thomas J. Saylak
Blackstone Real Estate Acquisitions III L.L.C.
345 Park Avenue
New York, New York 10154
(212) 583-5000
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
April 13, 1999
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box /_/.
Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
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*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP No. 084710 10 2 Page 3 of 25
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Blackstone Real Estate Acquisitions III L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIAL 8 SHARED VOTING POWER
LY OWNED
BY 0
EACH
Reporting 9 SOLE DISPOSITIVE POWER
PERSON
with 0
10 SHARED DISPOSITIVE POWER
0
<PAGE>
<PAGE>
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 5 of 25
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Blackstone Real Estate Advisors III L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) /_/
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIAL 8 SHARED VOTING POWER
LY OWNED
BY 0
EACH
Reporting 9 SOLE DISPOSITIVE POWER
PERSON
with 0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
<PAGE>
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 7 of 25
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BRE Advisors III L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) /_/
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIAL 8 SHARED VOTING POWER
LY OWNED
BY 0
EACH
Reporting 9 SOLE DISPOSITIVE POWER
PERSON
with 0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
<PAGE>
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 9 of 25
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BRE/Berkshire GP L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) /_/
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIAL 8 SHARED VOTING POWER
LY OWNED
BY 0
EACH
Reporting 9 SOLE DISPOSITIVE POWER
PERSON
with 0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
<PAGE>
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 11 of 25
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BRE/Berkshire LP L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) /_/
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIAL 8 SHARED VOTING POWER
LY OWNED
BY 0
EACH
Reporting 9 SOLE DISPOSITIVE POWER
PERSON
with 0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
<PAGE>
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
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CUSIP No. 084710 10 2 Page 12 of 25
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Peter G. Peterson
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) /_/
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7 SOLE VOTING POWER
NUMBER OF 0
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
EACH
REPORTING 0
PERSON 10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
<PAGE>
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 14 of 25
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Stephen A. Schwarzman
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(B)/x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) /_/
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER REPORTING
WITH
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
<PAGE>
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
AMENDMENT NO. 2 TO
STATEMENT PURSUANT TO RULE 13d-1
OF THE
GENERAL RULES AND REGULATIONS
UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
This Amendment No. 2 to Schedule 13D is being filed jointly by
Blackstone Real Estate Acquisitions III L.L.C., Blackstone Real Estate
Advisors III L.P., BRE Advisors III L.L.C., BRE/Berkshire GP L.L.C.,
BRE/Berkshire LP L.L.C., Mr. Peter G. Peterson and Mr. Stephen A. Schwarzman.
This Amendment No. 2 amends the Schedule 13D, as amended, relating to shares
of common stock, par value $.01 per share, of Berkshire Realty Company, Inc.,
a Delaware corporation (the "Company"). Capitalized terms used herein but
not defined shall have the meaning attributed to them in the Schedule 13D.
Item 2. Identity and Background.
Item 2 of the Schedule 13D is hereby amended by replacing the first
paragraph therein with the following:
This Schedule 13D is being filed jointly by Blackstone Real Estate
Acquisitions III L.L.C., a Delaware limited liability company
("Acquisitions"), Blackstone Real Estate Advisors III L.P., a Delaware
limited partnership ("BREA III L.P."), BRE Advisors III L.L.C., a
Delaware limited liability company ("BRE Advisors III"), BRE/Berkshire
GP L.L.C., a Delaware limited liability company ("Blackstone GP"),
BRE/Berkshire LP L.L.C., a Delaware limited liability company
("Blackstone LP"), Mr. Peter G. Peterson and Mr. Stephen A. Schwarzman
(the foregoing, collectively, the "Reporting Persons"). The principal
office and place of business of each of the Reporting Persons is 345
Park Avenue, New York, New York 10154.
Item 2 of the Schedule 13D is hereby amended by adding the following
paragraphs at the end thereof:
As described in Items 3 and 4 below, on April 12, 1999, Berkshire
Realty Holdings, L.P., a Delaware limited partnership ("Berkshire
Holdings"), was formed in connection with the transactions that are the
subject of this Schedule 13D. The general partners of Berkshire Holdings
are Blackstone GP, WXI/BRH Gen-Par, L.L.C., an affiliate of Whitehall
("WHGP"), and Aptco Gen-Par, L.L.C., an affiliate of the Krupp Affiliates
("Krupp GP"). The limited partners of Berkshire Holdings are Blackstone
LP, Whitehall, certain other investment limited partnerships and
corporations affiliated with Goldman, Sachs & Co. and The Goldman,
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<PAGE>
Sachs Group, L.P. (the "GS Affiliated Investors"), and Aptco Holdings,
L.L.C., an affiliate of the Krupp Affiliates ("Krupp LP"). Although, as
previously disclosed, Acquisitions, Whitehall and BCLP had formed Aptco
for the purpose of making a merger proposal for the acquisition of the
Company and related transactions, such parties determined that, rather
than Aptco, Berkshire Holdings would enter into the merger agreements
described in Item 4 below.
As a result of the formation of Berkshire Holdings, the partners of
Berkshire Holdings may be deemed to have joined the "group" (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended) that may have been deemed to have been previously formed by the
Reporting Persons, Whitehall and the Krupp Affiliates. Neither the
present filing nor anything contained herein shall be construed as (i)
an admission that the Reporting Persons together with Whitehall, WHGP,
the GS Affiliated Investors, the Krupp Affiliates, Krupp GP and Krupp
LP constitute a "person" or "group" for any purpose or (ii) an
admission that the Reporting Persons are, for purposes of Section 13(d)
or 13(g) of the Exchange Act, the beneficial owners of any of the
securities owned by Whitehall, WHGP, the GS Affiliated Investors, Krupp GP,
Krupp LP or any of the Krupp Affiliates. Pursuant to Rule 13(d)-1(k)(2),
the Reporting Persons are filing individually.
Blackstone GP and Blackstone LP are Delaware limited liability
companies formed in connection with the transactions that are the
subject of this Schedule 13D. The members of Blackstone GP and
Blackstone LP consist of a number of limited partnerships, the general
partner of each of which is Blackstone Real Estate Associates III L.P., a
Delaware limited partnership ("Blackstone Associates"). The sole
general partner of Blackstone Associates is Blackstone Real Estate
Management Associates III L.P. ("Management Associates"). Mr, Peterson
and Mr. Schwarzman are the Founding Members of BREA III L.L.C., a
Delaware limited liability company ("BREA"), which is the sole general
partner of Management Associates.
During the past five years, none of the Reporting Persons has been
(i) convicted in any criminal proceeding (excluding traffic violations
or similar misdemeanors) or (ii) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Page 18 of 25 Pages
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<PAGE>
To the knowledge of the Reporting Persons, WHGP is a Delaware
limited liability company that is an affiliate of Whitehall formed in
connection with transactions that are the subject of this Schedule 13D
and whose business address is 85 Broad Street, New York, New York 10004.
To the knowledge of the Reporting Persons, each of Krupp GP and
Krupp LP is a Delaware limited liability company that is an affiliate of
the Krupp Affiliates formed for the purpose of becoming a partner in
Berkshire Holdings and whose business address is The Berkshire Group,
One Beacon Street, Suite 1500, Boston, Massachusetts 02108.
Item 3. Source and Amount of Funds or Other Consideration.
Item 3 of the Schedule 13D is hereby amended by adding the following
paragraph after the second paragraph therein:
Berkshire Holdings was formed on April 12, 1999 in connection with
the transactions that are the subject of this Schedule 13D. Pursuant to
the terms of the Agreement of Limited Partnership of Berkshire Holdings,
dated as of April 13, 1999 (the "Partnership Agreement"), (attached
hereto as Exhibit 8), the partners of Berkshire Holdings have agreed to
contribute up to an aggregate of $316,349,295 in equity capital (as such
amount may be reduced to take into account the number of OP Units that
are converted into interests in Berkshire Holdings rather than cash and
the amount of debt financing obtained with respect to the transactions
described herein) to Berkshire Holdings. The Partnership Agreement
provides that (i) Krupp GP and Krupp LP (acting together) will
contribute to Berkshire Holdings at least 5,416,000 shares of Common
Stock and/or OP Units currently owned by the Krupp Affiliates (having a
value of $66,349,295, or $12.25 per share of Common Stock or OP Unit)
and (ii) each of Blackstone GP and Blackstone LP (acting together) and
Whitehall and WHGP (acting together) will contribute up to $125,000,000
in cash (as such amount may be reduced to take into account the number
of OP Units that are converted into interests in Berkshire Holdings
rather than cash and the amount of debt financing obtained with respect
to the transactions described herein).
The partners of Berkshire Holdings expect to finance the
transactions proposed herein with their equity contributions and debt
financing. The Commitment Letter has expired in accordance with its
terms. However, the partners of Berkshire Holdings have had preliminary
discussions with a mortgage broker regarding financing of a substantial
portion of the properties of the Company by the Federal Home
Loan Mortgage Association ("Freddie Mac") and plan to continue to pursue
such Freddie Mac financing with a view toward implementing such
financing concurrently with the closing of the transactions described
herein.
Page 19 of 25 Pages
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<PAGE>
Krupp GP, acting alone, has the authority to implement Freddie Mac
financing which meets the parameters set forth in the Partnership
Agreement. In the event that Krupp GP is not able to obtain the Freddie
Mac financing within such parameters, Blackstone GP and WHGP, acting
together, have the authority to obtain alternative financing, subject to
the terms of the Partnership Agreement. Each of Acquisitions and
Whitehall has severally agreed, pursuant to a letter agreement, dated
April 13, 1999, among Berkshire Holdings, Acquisitions and Whitehall
(the "Financing Letter") (attached hereto as Exhibit 9), and, subject to
the terms of the Financing Letter, to provide to Berkshire Holdings 50%
of an aggregate amount of financing up to $755 million, but in no event
more than 75.5% of the Transaction Value (as defined in the Financing
Letter).
Item 3 of the Schedule 13D is further amended by adding the
following paragraph at the end thereof:
The information set forth in response to this Item 3 is
qualified in its entirety by reference to the Partnership Agreement, the
Financing Letter and the Letter Agreement (as herein defined), which are
incorporated herein by reference.
Item 4. Purpose of Transaction.
Item 4 of the Schedule 13D is hereby amended by adding the following
paragraphs at the end thereof:
On April 13, 1999, Berkshire Holdings and BRI Acquisition, LLC, a
Delaware limited liability company and a wholly owned subsidiary of
Berkshire Holdings ("Buyer"), entered into an Agreement and Plan of
Merger, dated as of April 13, 1999, with the Company (the "Merger
Agreement") (attached hereto as Exhibit 10) pursuant to which, on the
terms and subject to the conditions set forth therein, among other
things, Buyer will be merged with and into the Company (provided that,
at the option of Berkshire Holdings, upon the satisfaction of certain
conditions, the Company will be merged with and into Berkshire Holdings)
and the stockholders of the Company (other than the Company, Berkshire
Holdings or its subsidiaries, or stockholders who properly
exercise dissenters' rights under Delaware law) will receive in cash
$12.25 per share of Common Stock.
Concurrently with the execution and delivery of the Merger
Agreement, Berkshire Holdings and BRI Acquisition Sub, LP, a Delaware
limited partnership and a wholly owned subsidiary of Berkshire Holdings,
entered into an Agreement and Plan of Merger, dated as of April 13,
Page 20 of 25 Pages
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<PAGE>
1999, with BRI OP and Berkshire Apartments, Inc., a Delaware corporation
(the "OP Merger Agreement") (attached hereto as Exhibit 11), pursuant to
which, on the terms and subject to the conditions set forth therein, among
other things, BRI Acquisition Sub, LP will be merged with and into BRI
OP and the holders of outstanding OP Units (other than the Company,
Berkshire Holdings or Berkshire Apartments, Inc.) will, at their election,
be entitled to receive one of the following forms of consideration in
respect of each outstanding OP Unit: (i) one Class A Preferred Unit (as
defined in the Partnership Agreement) of Berkshire Holdings, (ii) one
Class B Unit (as defined in the Partnership Agreement) of Berkshire
Holdings or (iii) $12.25 in cash.
To secure certain obligations of Berkshire Holdings and Buyer under
the Merger Agreement, Berkshire Holdings has entered into an escrow
agreement, dated as of April 13, 1999, with the Company, BRI OP,
Berkshire Holdings and American Stock Transfer and Trust Company, as
escrow agent (the "Escrow Agent") (attached hereto as Exhibit 12),
pursuant to which Berkshire Holdings has deposited a letter of credit (the
"Letter of Credit") (attached hereto as Exhibit 13) in the amount of
$29,500,000 in favor of the Escrow Agent which may, subject to the terms
of the Merger Agreement, be drawn upon to pay certain amounts to the
Company if the Merger Agreement is terminated in certain circumstances.
On April 13, 1999, Blackstone GP, WHGP, Krupp GP and certain other
parties entered into a letter agreement (the "Letter Agreement")
(attached hereto as Exhibit 14) relating to, among other things, the
Financing Letter, the Letter of Credit and the Partnership Agreement.
The information set forth in response to this Item 4 is qualified
in its entirety by reference to the Merger Agreements, the Escrow
Agreement, the Letter of Credit and the Letter Agreement, which are
incorporated herein by reference.
Item 5. Interests in Securities of the Issuer.
Item 5 of the Schedule 13D is hereby supplemented as follows:
As of the date hereof, no shares of Common Stock were beneficially
owned by the Reporting Persons.
Based on information provided by Whitehall to the Reporting
Persons, as of the date hereof, no shares of Common Stock were
beneficially owned by WHGP.
Page 21 of 25 Pages
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<PAGE>
Based on information provided by the Krupp Affiliates to the
Reporting Persons, as of the date hereof, no shares of Common Stock were
beneficially owned by either Krupp GP or Krupp LP.
None of the Reporting Persons, and based on information provided by
WHGP and the Krupp Affiliates, WHGP, Krupp GP or Krupp LP, has been a
party to any transaction in the Common Stock during the sixty-day period
ending on the date hereof, except as described in this Schedule 13D.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Item 6 of the Schedule 13D is hereby amended by replacing the existing
paragraph with the following paragraphs:
On April 13, 1999, Douglas S. Krupp entered into a voting agreement
(the "Voting Agreement") with the Company and BRI OP, pursuant to which,
among other things, Douglas S. Krupp has agreed to and to cause persons
or entities affiliated with him to (i) vote the Common Stock they own in
favor of adoption of the Merger Agreement and approval of the
transactions contemplated thereby and (ii) vote the OP Units they
own in favor of adoption of the OP Merger Agreement and the approval of
the transactions contemplated thereby. A copy of the Voting Agreement
is attached hereto as Exhibit 15 and is incorporated herein by
reference.
Except as disclosed in this Schedule 13D, the Joint Filing
Agreement among the Reporting Parties (attached hereto as Exhibit 16)
and the powers of attorney previously filed as exhibits to the Schedule
13D, none of the Reporting Persons is a party to any contracts,
arrangements, understandings or relationships with respect to any
securities of the Company, including but not limited to the transfer or
voting of any of the securities, finder's fees, joint ventures, loan or
option agreements, puts or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies, or a pledge or
contingency the occurrence of which would give another person voting
power over the securities of the Company.
Item 7. Material to be Filed as Exhibits.
Item 7 of the Schedule 13D is hereby amended by adding the following
immediately at the end thereof:
Page 22 of 25 Pages
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<PAGE>
Exhibit No. Exhibit
8. Agreement of Limited Partnership of Berkshire Realty
Holdings, L.P., dated as of April 13, 1999.
9. Financing Letter, dated April 13, 1999, among Berkshire
Holdings, Acquisitions and Whitehall.
10. Agreement and Plan of Merger, dated as of April 13, 1999,
among Berkshire Holdings, Buyer and the Company.
11. Agreement and Plan of Merger, as of dated April 13, 1999,
among Berkshire Holdings, BRI Acquisition Sub, LP, Berkshire
Apartments, Inc. and BRI OP.
12. Escrow Agreement, dated as of April 13, 1999, among the
Company, BRI OP, Berkshire Holdings and the Escrow Agent.
13. Letter of Credit, dated April 13, 1999.
14. Letter Agreement, dated as of April 13, 1999, among
Blackstone GP, WHGP, Krupp GP and the other parties thereto.
15. Voting Agreement, dated as of April 13, 1999, among
Douglas S. Krupp the Company and BRI OP.
16. Joint Filing Agreement among the Reporting Persons.
Page 23 of 25 Pages
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<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
BLACKSTONE REAL ESTATE ACQUISITIONS
III L.L.C.
By:/s/ Thomas J. Saylak
Name: Thomas J. Saylak
Title: Vice President
BLACKSTONE REAL ESTATE ADVISORS III
L.P.
By: BRE ADVISORS III L.L.C.
By:/s/ Thomas J. Saylak
Name: Thomas J. Saylak
Title: Vice President
BRE ADVISORS III L.L.C.
By:/s/ Thomas J. Saylak
Name: Thomas J. Saylak
Title: Vice President
Page 24 of 25 Pages
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<PAGE>
BRE/BERKSHIRE GP L.L.C.
By:/s/ Thomas J. Saylak
Name: Thomas J. Saylak
Title: Vice President
BRE/BERKSHIRE LP L.L.C.
By:/s/ Thomas J. Saylak
Name: Thomas J. Saylak
Title: Vice President
/s/ Thomas J. Saylak
PETER G. PETERSON
By: Thomas J. Saylak,
Attorney-in-Fact
/s/ Thomas J. Saylak
STEPHEN A. SCHWARZMAN
By: Thomas J. Saylak,
Attorney-in-Fact
Dated: April 15, 1999
EXHIBIT 8
---------
AGREEMENT OF LIMITED PARTNERSHIP
OF
BERKSHIRE REALTY HOLDINGS, L.P.
THE INTERESTS OF THE GENERAL PARTNERS AND THE LIMITED PARTNERS ISSUED UNDER
THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES ACT OF ANY STATE OR THE DISTRICT OF COLUMBIA. NO RESALE OF AN
INTEREST BY A LIMITED PARTNER IS PERMITTED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THIS AGREEMENT AND ANY APPLICABLE FEDERAL OR STATE SECURITIES
LAWS, AND ANY VIOLATION OF SUCH PROVISIONS COULD EXPOSE THE SELLING LIMITED
PARTNER AND THE PARTNERSHIP TO LIABILITY.
Dated as of April 13, 1999
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TABLE OF CONTENTS
ARTICLE 1.
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Terms Generally . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 2.
THE PARTNERSHIP AND ITS BUSINESS
2.1 Partnership Name . . . . . . . . . . . . . . . . . . . . 17
2.2 Term . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3 Filing of Certificate and Amendments . . . . . . . . . . 18
2.4 Business; Scope of Partners' Authority . . . . . . . . . 18
2.5 Principal Office; Registered Agent . . . . . . . . . . . 18
2.6 Names and Addresses of the Partners . . . . . . . . . . 19
2.7 Representations by the Partners . . . . . . . . . . . . 20
2.8 Control of the Berkshire Group . . . . . . . . . . . . . 22
2.9 Pre-Closing Costs and Expenses . . . . . . . . . . . . . 22
2.10 Compliance with Certain Agreements . . . . . . . . . . . 22
2.11 Miscellaneous . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 3.
MANAGEMENT OF PARTNERSHIP BUSINESS;
POWERS AND DUTIES OF THE ADMINISTERING GENERAL PARTNER
3.1 Management and Control . . . . . . . . . . . . . . . . . 23
3.2 Role of the Administering General Partner and
Limitations on its Authority . . . . . . . . . . . . 24
3.3 Majority Decisions . . . . . . . . . . . . . . . . . . . 29
3.4 Unanimous Decisions . . . . . . . . . . . . . . . . . . 33
3.5 Consents of General Partners. . . . . . . . . . . . . . 36
3.6 Meetings of General Partners; etc. . . . . . . . . . . 36
3.7 No Participation by or Authority of Limited
Partners; Limited Rights . . . . . . . . . . . . . . 37
3.8 Acts of the Partnership and the Partners;
Representatives . . . . . . . . . . . . . . . . . . 38
3.9 Waiver of Rights by the Limited Partners . . . . . . . . 39
3.10 Sales of Certain Properties by WHGP and Blackstone
GP . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 4.
RIGHTS AND DUTIES OF PARTNERS
4.1 Duties and Obligations of the Administering General
Partner . . . . . . . . . . . . . . . . . . . . . . 40
4.2 Other Activities of the Partners . . . . . . . . . . . . 40
4.3 Indemnification . . . . . . . . . . . . . . . . . . . . 41
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4.4 Compensation of Partners and their Affiliates;
Goldman, Sachs & Co. as Financial Advisor . . . . . 42
4.5 Dealing with Partners . . . . . . . . . . . . . . . . . 44
4.6 Use of Partnership Property . . . . . . . . . . . . . . 45
4.7 Designation of Tax Matters Partner . . . . . . . . . . . 45
4.8 Guarantees. . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 5.
BOOKS AND RECORDS; ANNUAL REPORTS
5.1 Books of Account . . . . . . . . . . . . . . . . . . . . 47
5.2 Availability of Books of Account . . . . . . . . . . . . 48
5.3 Annual Reports and Statements; Annual Budgets and
Business Plans . . . . . . . . . . . . . . . . . . . 48
5.4 Accounting and Other Expenses . . . . . . . . . . . . . 50
5.5 Bank Account . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 6.
CAPITAL CONTRIBUTIONS, LOANS
AND LIABILITIES
6.1 Initial Capital Contributions of the Partners . . . . . 51
6.2 Additional Contributions . . . . . . . . . . . . . . . . 53
6.3 Dilution for Failure to Fund Capital Calls . . . . . . . 55
6.4 Capital of the Partnership . . . . . . . . . . . . . . . 56
6.5 Liability of General Partners . . . . . . . . . . . . . 56
6.6 Limited Liability of Limited Partners . . . . . . . . . 57
ARTICLE 7.
CAPITAL ACCOUNTS, PROFITS
AND LOSSES AND ALLOCATIONS
7.1 Capital Accounts . . . . . . . . . . . . . . . . . . . . 57
7.2 Profits and Losses . . . . . . . . . . . . . . . . . . . 58
ARTICLE 8.
APPLICATIONS AND DISTRIBUTIONS
OF AVAILABLE CASH
8.1 Applications and Distributions . . . . . . . . . . . . . 64
8.2 Liquidation . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 9.
TRANSFER OF COMPANY INTERESTS
9.1 Limitations on Assignments of Interests by Partners . . 67
9.2 Sale of All of the Properties Before the Fifth
Anniversary of the Closing Date at the Option of
Berkshire . . . . . . . . . . . . . . . . . . . . . 71
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9.3 Sale of All of the Properties Before the Fifth
Anniversary of the Closing Date at the Option of
Two General Partners . . . . . . . . . . . . . . . . 77
9.4 Sale of the Properties After the Fifth Anniversary . . . 78
9.5 Assignment Binding on Partnership . . . . . . . . . . . 79
9.6 Bankruptcy of a Limited Partner . . . . . . . . . . . . 80
9.7 Substituted Partners . . . . . . . . . . . . . . . . . . 80
9.8 Acceptance of Prior Acts . . . . . . . . . . . . . . . . 80
9.9 Additional Limitations . . . . . . . . . . . . . . . . . 80
9.10 Purchase of the Berkshire Group's Interest upon the
Termination of Douglas Krupp's Employment Under
the DK Employment Agreement . . . . . . . . . . . . 81
9.11 Transfers by the Blackstone Group and the Whitehall
Group . . . . . . . . . . . . . . . . . . . . . . . 83
9.12 Purchase of the Class A Preferred Units and Class B
Units . . . . . . . . . . . . . . . . . . . . . . . 83
9.13 Subsequent Transactions . . . . . . . . . . . . . . . . 86
ARTICLE 10.
DISSOLUTION OF THE PARTNERSHIP;
WINDING UP AND DISTRIBUTION OF ASSETS
10.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . 89
10.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . 90
10.3 Distribution of Assets . . . . . . . . . . . . . . . . . 90
10.4 Special Allocation . . . . . . . . . . . . . . . . . . . 91
ARTICLE 11.
AMENDMENTS
11.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . 91
11.2 Additional Partners . . . . . . . . . . . . . . . . . . 92
ARTICLE 12.
MISCELLANEOUS
12.1 Further Assurances . . . . . . . . . . . . . . . . . . . 92
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . 92
12.3 Headings and Captions . . . . . . . . . . . . . . . . . 93
12.4 Variance of Pronouns . . . . . . . . . . . . . . . . . . 93
12.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . 93
12.6 Governing Law . . . . . . . . . . . . . . . . . . . . . 93
12.7 Consent to Jurisdiction . . . . . . . . . . . . . . . . 93
12.8 Arbitration . . . . . . . . . . . . . . . . . . . . . . 94
12.9 Partition . . . . . . . . . . . . . . . . . . . . . . . 94
12.10 Invalidity . . . . . . . . . . . . . . . . . . . . . . . 95
12.11 Successors and Assigns . . . . . . . . . . . . . . . . . 95
12.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . 95
12.13 Waivers . . . . . . . . . . . . . . . . . . . . . . . . 95
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12.14 No Brokers . . . . . . . . . . . . . . . . . . . . . . . 95
12.15 Maintenance as a Separate Entity . . . . . . . . . . . . 95
12.16 Confidentiality . . . . . . . . . . . . . . . . . . . . 96
12.17 No Third Party Beneficiaries . . . . . . . . . . . . . . 96
12.18 Power of Attorney . . . . . . . . . . . . . . . . . . . 96
12.19 Construction of Documents . . . . . . . . . . . . . . . 98
12.20 Time of Essence . . . . . . . . . . . . . . . . . . . . 98
12.21 Default by Partnership . . . . . . . . . . . . . . . . . 98
12.22 Subsidiary Joint Ventures . . . . . . . . . . . . . . . 98
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SCHEDULES
Schedule 1.1(a) Properties; Preliminary Loan Amounts
Schedule 2.6(b) Names and Addresses of Partners
Schedule 2.7(c) Shares of Common Stock of BRI Owned by the Berkshire
Principals that will not be Contributed to the
Partnership
Schedule 2.10 Contribution Agreements
Schedule 3.2(a)(19) List of Ten Assets to be Sold
Schedule 3.2(a)(20) Allocated Acquisition Cost of Each Asset
Schedule 3.8 Representatives of the General Partners
Schedule 4.2(b) Krupp Affiliated Entities
Schedule 4.4(c) Managed Properties
Schedule 5.3(b) Initial Annual Budget
Schedule 6.1 Initial Capital Contributions of the Partners,
Partners; Partnership Percentage Interests;
Partnership Units held by the Partners
Schedule 9.10 Performance Termination
Schedule 9.13(a)(1) 17 Properties
Schedule 9.13(a)(2) 22 Properties
Schedule 9.13(a)(3) 33 Properties
EXHIBITS
Exhibit 1 Form of DK Employment Agreement
Exhibit 2 Form of Guarantee of Partnership Indebtedness
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AGREEMENT OF LIMITED PARTNERSHIP
OF
BERKSHIRE REALTY HOLDINGS, L.P.
This AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement"), is made and
entered into as of April __, 1999, by and among Whitehall Street Real Estate
Limited Partnership XI, a Delaware limited partnership ("Whitehall"), WXI/BRH
Gen-Par LLC , a Delaware limited liability company ("WHGP"), Stone Street
Real Estate Fund 1998 L.P., a Delaware limited partnership ("Stone Street"),
Bridge Street Real Estate Fund 1998 L.P., a Delaware limited partnership
("Bridge Street") and Stone Street WXI/BRH Corp., a Delaware corporation
("Stone Corp"), BRE/Berkshire LP L.L.C., a Delaware limited liability company
("Blackstone LP"), BRE/Berkshire GP L.L.C., a Delaware limited liability
company (in its capacity as a general partner hereunder, "Blackstone GP"),
Aptco Holdings, L.L.C., a Delaware limited liability company ("Berkshire")
and Aptco Gen-Par, L.L.C., a Delaware limited liability company ("BGP").
RECITALS
WHEREAS, the Partners desire to form a limited partnership pursuant
to the terms and provisions of this Agreement, and in accordance with the
statutes and laws of the State of Delaware relating to limited partnerships,
including without limitation, the Act;
WHEREAS, Berkshire Realty Holdings, L.P., (the "Partnership") intends
to acquire by merger Berkshire Realty Company, Inc., a Delaware corporation
(Berkshire Realty Company, Inc., together with its subsidiaries, "BRI");
WHEREAS, BRI Acquisition Sub, LP, a Subsidiary of the Partnership,
intends to merge with and into BRI OP Limited Partnership, a Delaware limited
partnership ("BRI OP"); and
WHEREAS, the Partnership intends to supervise the operation of the
business conducted by BRI, including the ownership, acquisition, management,
renovation and development of multifamily properties (the multifamily
properties owned by BRI and any additional multifamily properties (or
properties proposed for development) acquired by the Partnership, BRI OP, or
any of their respective subsidiaries, being hereinafter referred to as the
"Properties" and any of the foregoing individually being hereinafter referred
to as a "Property").
NOW, THEREFORE, in order to carry out their intent as expressed above
and in consideration of the mutual agreements hereinafter contained, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
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ARTICLE 1.
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below, which meanings shall be applicable
equally to the singular and plural of the terms defined:
"Act" shall mean the Delaware Revised Uniform Limited Partnership
Act, as amended from time to time.
"Additional Capital Call" shall mean a capital call made on the
Partners pursuant to Section 6.2.
"Additional Contribution" shall mean any amounts contributed by a
Partner pursuant to Section 6.2.
"Administering General Partner" shall mean (i) BGP, upon the
execution and delivery hereof or (ii) if for any reason BGP ceases to be
Administering General Partner pursuant to the terms hereof (including Section
3.2(c)), another Person appointed by the General Partners of the Partnership
(except that BGP shall not have an approval right with respect to such
appointment).
"Administrative Services Agreement" shall have the meaning set forth
in Section 4.4(c).
"Affiliate" shall mean with respect to any Person (i) any other
Person that directly or indirectly through one or more intermediaries
controls or is controlled by or is under common control with such Person,
(ii) any other Person owning or controlling 10% or more of the outstanding
voting securities of, or other ownership interests in, such Person, (iii) any
officer, director, member or partner of such Person and (iv) if such Person
is an officer, director, member or partner, the company for which such Person
acts in any such capacity. For purposes of this definition, the term
"control," when used with respect to any Person, means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" shall mean this Agreement of Limited Partnership, as it
may hereafter be amended or modified from time to time.
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"Annual Budget" shall mean the applicable budget for the Partnership
prepared by the Administering General Partner for approval pursuant to
Section 5.3(b).
"Appraiser" shall have the meaning set forth in Section 9.10(d).
"Approved Budget" shall mean (i) for calendar year 1999, the budget
previously approved by the General Partners and attached hereto as Schedule
5.3(b) and (ii) for any calendar year thereafter, the Annual Budget for the
Budget Year in question, as approved by at least two of the General Partners
in accordance with the provisions hereof and as any of the same may be
amended from time to time in accordance with the provisions hereof.
"Approved Business Plan" shall mean for any Budget Year, the Business
Plan for the Budget Year in question, as approved by at least two of the
General Partners in accordance with the provisions hereof and as any of the
same may be amended from time to time in accordance with the provisions
hereof.
"Available Cash" shall mean, for any quarterly period or such other
period for which computation may be appropriate, the excess, if any, of (A)
the sum of (i) the amount of all cash receipts of the Partnership during such
period from whatever source and (ii) any cash reserves of the Partnership
existing at the start of such period, less (B) the sum of (i) all cash
amounts paid or payable (without duplication) in such period on account of
expenses and capital expenditures incurred in connection with the
Partnership's business and approved in accordance with the provisions hereof
(including, without limitation, general operating expenses, taxes,
amortization or interest on any debt of the Partnership and expenses incurred
in connection with the satisfaction of any refinancing of any of the
Properties), and (ii) such cash reserves which may be required for capital
expenditures (not to exceed the greater of (x) $400 per apartment unit then
owned by the Partnership (directly or indirectly) and (y) amounts included in
an Approved Budget for capital expenditures less any amounts actually
expended), working capital and future needs of the Partnership in an amount
reasonably determined by at least two of the General Partners or, if not yet
determined for such period, in an amount equal to 105% of the amounts
required for the working capital and future needs of the Partnership as set
forth in the Partnership's Approved Budget.
"Bankruptcy" shall mean, with respect to the affected party, (i) the
entry of an order for relief under the Bankruptcy Code, (ii) the admission by
such party of its inability to pay its debts as they mature, (iii) the making
by it of an assignment for the benefit of creditors, (iv) the filing by it of
a petition in bankruptcy or a petition for relief under the Bankruptcy Code
or any other applicable federal or state bankruptcy or insolvency statute or
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any similar law, (v) an application by such party for the appointment of a
receiver for the assets of such party, (vi) an involuntary petition against
it seeking liquidation, reorganization, arrangement or readjustment of its
debts under any other federal or state insolvency law, provided that the same
shall not have been vacated, set aside or stayed within the sixty-day period
following the filing of such petition or (vii) the imposition of a judicial
or statutory lien on all or a substantial part of its assets unless such lien
is discharged or vacated or the enforcement thereof stayed within sixty (60)
days after its effective date.
"Bankruptcy Code" shall mean Title 11 of the United States Code, as
amended.
"Berkshire" shall have the meaning set forth in the first paragraph
of this Agreement.
"Berkshire Group" shall mean, collectively, Berkshire and BGP
together with any assignees or transferees to the extent permitted hereunder,
but only so long as any such Person continues in its capacity as a partner in
the Partnership.
"Berkshire Principals" shall mean Douglas Krupp and George Krupp.
"BGP" shall have the meaning set forth in the first paragraph of this
Agreement.
"Blackstone GP" shall have the meaning set forth in the first
paragraph of this Agreement.
"Blackstone Group" shall mean, collectively, Blackstone GP and
Blackstone LP, together with any assignees or transferees to the extent
permitted hereunder, but only so long as any such Person continues in its
capacity as a partner in the Partnership.
"Blackstone LP" shall have the meaning set forth in the first
paragraph of this Agreement.
"Book Value" shall mean, with respect to any Partnership Asset, its
adjusted basis for federal income tax purposes, except that the initial Book
Value of any asset contributed by a Partner to the Partnership shall be an
amount equal to the agreed gross fair market value of such asset, and such
Book Value shall thereafter be adjusted in a manner consistent with Treasury
Regulations Section 1.704-1(b)(2)(iv)(g) for revaluations pursuant to Section
7.1(b) and for the Depreciation taken into account with respect to such
asset.
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"BRI Merger Agreement" shall mean the Agreement and Plan of Merger,
dated as of April __, 1999 (as such agreement may be amended from time to
time), by and among the Partnership, BRI Acquisition LLC and Berkshire Realty
Company, Inc.
"BRI OP Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of April __, 1999 (as such agreement may be amended from
time to time), by and among the Partnership, BRI Acquisition Sub, L.P.,
Berkshire Apartments, Inc. and BRI OP.
"Bridge Loan" shall have the meaning set forth in Section 2.9(c).
"Bridge Street" shall have the meaning set forth in the first
paragraph of this Agreement.
"Budget Year" shall mean the period beginning on the date hereof and
ending on December 31, 1999; and beginning January 1, 2000, "Budget Year"
shall mean a period beginning on January 1, 2000 and ending on December 31,
2000 and each calendar year thereafter.
"Business Day" shall mean any day other than a Saturday, Sunday or
any other day on which banks in New York are required or permitted to be
closed.
"Business Plan" shall mean the applicable business plan for the
Partnership prepared by the Administering General Partner for approval
pursuant to Section 5.3(b).
"Capital Account" shall mean, when used in respect of any Partner,
the Capital Account maintained for such Partner in accordance with Section
7.1, as said Capital Account may be increased or decreased from time to time
pursuant to the terms of this Agreement.
"Capital Contribution" shall mean, (i) with respect to any Investor
Group Partner, the aggregate amount of capital actually contributed (and, in
the case of Berkshire and BGP only, deemed to be contributed) to the
Partnership by such Partner in accordance with Article 6 (regardless of the
class of Partnership Units received in respect of such contribution) and (ii)
with respect to Class A Preferred Limited Partners and the Class B Limited
Partners, the amounts deemed contributed by such Partners pursuant to Section
6.1 hereof and reflected on Schedule 6.1 hereto.
"Cause" shall mean, with respect to any Person, the conviction, guilty
plea, plea bargain or plea of nolo contendere of such Person with respect to
a felony, or the commission of fraud, in each case, other than with respect
to the Partnership or its Subsidiaries, Properties, business or personnel.
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"Certificate" shall mean the Certificate of Limited Partnership of
the Partnership filed with the Secretary of State of Delaware on April ___,
1999, as the same may hereafter be amended and/or restated from time to time.
"Class A Preferred Limited Partner" shall mean each Limited Partner
who is deemed to have made a Capital Contribution pursuant to Section 6.1(c)
hereof and who holds Class A Preferred Units, and any transferee of the
foregoing to the extent permitted hereunder, but only so long as any such
Person continues in its capacity as a partner in the Partnership.
"Class A Preferred Percentage Interest" shall mean, with respect to
each Class A Preferred Limited Partner, its percentage interest in such
class, determined by dividing the Class A Preferred Units owned by such
Partner by the total number of Class A Preferred Units then outstanding as
specified in Schedule 6.1 attached hereto, as such schedule may be amended
and restated from time to time.
"Class A Preferred Unit" means a Partnership Unit that is
specifically designated, when issued, as being a Class A Preferred Unit under
the terms of this Agreement.
"Class B Limited Partner" shall mean each Limited Partner who is
deemed to have made a Capital Contribution pursuant to Section 6.1(d) hereof
and who holds Class B Units, and any transferee of the foregoing to the
extent permitted hereunder, but only so long as any such Person continues in
its capacity as a partner in the Partnership.
"Class B Percentage Interest" shall mean, with respect to each Class
B Limited Partner, its percentage interest in such class, determined by
dividing the Class B Units owned by such Partner by the total number of Class
B Units then outstanding, as specified in Schedule 6.1 attached hereto, as
such schedule may be amended and restated from time to time.
"Class B Unit" means a Partnership Unit that is specifically
designated by the General Partners, when issued, as being a Class B Unit
under the terms of this Agreement.
"Class C Partner" shall mean each Partner (including each GP) who has
made a Capital Contribution pursuant to Section 6.1(a) hereof and who holds
Class C Preferred Units, and any transferee of the foregoing to the extent
permitted hereunder, but only so long as any such Person continues in its
capacity as a partner in the Partnership. The initial Class C Partners shall
be WHGP, Whitehall, Blackstone GP, Blackstone LP, Stone Street, Bridge Street
and Stone Corp.
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"Class C Preferred Percentage Interest" shall mean, with respect to
each Class C Partner, its percentage interest in such class, determined by
dividing the Class C Preferred Units owned by such Partner by the total
number of Class C Preferred Units then outstanding, as specified in Schedule
6.1 attached hereto, as such schedule may be amended and restated from time
to time.
"Class C Preferred Unit" means a Partnership Unit that is
specifically designated by the General Partners, when issued, as being a
Class C Preferred Unit under the terms of this Agreement.
"Class D Partner" shall mean each Partner (including each GP) who has
made a Capital Contribution pursuant to Section 6.1(b) hereof and who holds
Class D Units, and any transferee of the foregoing to the extent permitted
hereunder, but only so long as any such Person continues in its capacity as a
partner in the Partnership. The initial Class D Partners shall be BGP and
Berkshire.
"Class D Percentage Interest" shall mean, with respect to each
Class D Limited Partner, its percentage interest in such class, determined
by dividing the Class D Units owned by such Partner by the total number of
Class D Units then outstanding, as specified in Schedule 6.1 attached hereto,
as such schedule may be amended and restated from time to time.
"Class D Unit" means a Partnership Unit that is specifically
designated by the General Partners, when issued, as being a Class D Unit
under the terms of this Agreement.
"Class E Limited Partner" shall mean those Partners holding Class E
Units who shall be admitted to the Partnership from time to time pursuant to
the IMP upon the recommendation of the Administering General Partner and the
concurrence of the other General Partners.
"Class E Percentage Interest" shall mean, with respect to each Class
E Limited Partner, its percentage interest in such class, determined by
dividing the Class E Units then owned by such Partner by the total number of
Class E Units then outstanding, as specified in Schedule 6.1 attached hereto,
as such schedule may be amended and restated from time to time.
"Class E Unit" means a Partnership Unit that is specifically
designated by the General Partners, when issued, as being a Class E Unit
under the terms of this Agreement.
"Closing Date" shall mean the date upon which the closing under the
BRI Merger Agreement occurs.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any corresponding provision(s) of succeeding law.
"Company Cause"shall mean, with respect to any Person, the
conviction, guilty plea, plea bargain or plea of nolo contendere of such
Person with respect to a felony, or the commission of fraud, wilful
misconduct, gross negligence or gross dereliction of duties, in each case,
with respect to the Partnership or its Subsidiaries, Properties, business or
personnel, provided that, in the case of gross negligence or gross
dereliction of duties capable of cure, written notice of such gross
negligence or gross dereliction has been provided to such Person and such
conduct is not cured within a thirty (30) day period.
"Confidential Information" shall have the meaning set forth in
Section 12.16.
"Contributing Partner" shall have the meaning set forth in Section
6.3(a).
"Covered Person" shall have the meaning set forth in Section 4.2.
"Depreciation" shall mean, with respect to any Fiscal Year, all
deductions attributable to depreciation or cost recovery with respect to
Partnership Assets, including any improvements made thereto and any tangible
personal property located therein, or amortization of the cost of any
intangible property or other assets acquired by the Partnership, which have a
useful life exceeding one year; provided, however, that with respect to any
Partnership Asset whose tax basis differs from its Book Value at the
beginning of such Fiscal Year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Book Value as the
depreciation, amortization or other cost recovery deduction for such period
with respect to such asset for federal income tax purposes bears to its
adjusted tax basis as of the beginning of such Fiscal Year; provided,
however, that if the federal income tax depreciation, amortization or other
cost recovery deduction for such Fiscal Year is zero, Depreciation shall be
determined using any method selected by the General Partners.
"DK Employment Agreement" shall have the meaning set forth in Section
4.4(d).
"DK IMP" shall mean the right of holders of the Class D Units to
receive distributions under Sections 8.1(b)(5)(ii), (6)(i) and (7)(i), and
related rights.
"Failed Contribution" shall have the meaning set forth in Section
6.3(a).
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"Fair Market Value" shall have the meaning set forth in Section
9.10(d).
"Financing Capital Call" shall have the meaning set forth in Section
6.2(b).
"Fiscal Year" shall mean the fiscal year of the Partnership, which
shall be the calendar year; but upon termination of the Partnership, "Fiscal
Year" shall mean the period from the end of the last preceding Fiscal Year to
the date of such termination.
"Freddie Mac" shall mean The Federal Home Loan Mortgage Corporation.
"Freddie Mac Parameters" shall mean a loan with the following terms:
(i) an original principal amount equal to the greater of (A) 75% of the
appraised value of the properties listed on Schedule 1.1(a) hereto and (B)
$650 million (such principal amount to be reduced by the preliminary loan
amounts in respect of any assets sold at or prior to the Closing Date (as set
forth on Schedule 1.1(a) hereto) and by the preliminary loan amounts in
respect of any assets that are not included in the collateral pool for such
financing) (as set forth on Schedule 1.1(a) hereto), (ii) such loan and all
amounts payable with respect thereto shall be non recourse in all respects to
all Partners (with express exculpation), unless they agree in writing
otherwise, (iii) a term equal to seven years, (iv) fixed interest rate of 8%
per annum or less, (v) yield maintenance penalty due upon prepayments only
during the first five years of the term, (vi) the properties subject to such
loan will not be cross-collateralized and individual loans securing such
Properties will not be cross-defaulted and (vii) the other terms are no less
favorable to the Partnership than the terms of the "Conditional Commitment",
dated November 16, 1998, provided by Freddie Mac to the Investor Group
Partners.
"Funded Portion" shall have the meaning set forth in Section 6.3(a).
"General Partner" or "GP" shall mean each of WHGP, Blackstone GP,
BGP, and any Person who subsequently becomes a general partner of the
Partnership pursuant to the terms of the Agreement, for so long as such
Persons shall be general partners of the Partnership; "General Partners"or
"GPs", shall mean such Persons, collectively.
"Goldman, Sachs & Co." shall mean Goldman, Sachs & Co., a New York
limited partnership, and any Person succeeding to its business substantially
as an entirety.
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"GS Group" shall mean The Goldman Sachs Group, L.P. and any Person
succeeding to its business substantially as an entirety, together with any
assignees or transferees to the extent permitted hereunder.
"GSMC" shall have the meaning set forth in Section 2.9(c).
"Holder Purchase Date" shall have the meaning set forth in Section
9.12(a).
"IMP" shall mean the incentive management participation plan approved
by the General Partners as a Unanimous Decision, which IMP shall provide the
Class E Limited Partners with the distributions under Sections
8.1(b)(5)(iii), 8.1(b)(6)(ii) and 8.1(b)(7)(ii) (it being understood and
agreed that none of BGP, Berkshire, Douglas Krupp or any of their respective
Affiliates shall be allocated any IMP allocated to the Class E Limited
Partners).
"Initial Appraisals" shall have the meaning set forth in Section
9.10(d).
"Initial Business Plan" shall mean the Business Plan for 1999 to be
approved in accordance with Section 5.3 within 30 days after the date hereof.
"Initial Capital Contribution" shall mean any Capital Contributions
made or deemed made pursuant to Sections 6.1(a)-(d) and 6.1(h).
"Institutional Lender" shall mean an Affiliate of any Investor Group
Partner (other than Berkshire or BGP) and/or any one or more of the following
other entities, provided that for any such other entity to qualify as an
Institutional Lender hereunder, such other entity, together with its
Affiliates, must have total assets of at least $5,000,000,000 and
stockholders' equity or net worth of at least $250,000,000 (or, in either
case, the equivalent thereof in a foreign currency) as of the date the loan
is made: a savings bank, a savings and loan association, a commercial bank or
trust company, an insurance company subject to regulation by any governmental
authority or body, a publicly traded real estate investment trust, a union,
governmental or secular employees' welfare, benefit, pension or retirement
fund, a pension fund property unit trust (whether authorized or
unauthorized), an investment company or trust, a merchant or investment bank
or any other entity generally viewed as an institutional lender. In each of
the foregoing cases, such Affiliate or other entity shall constitute an
Institutional Lender whether (i) acting for itself or (ii) as trustee, in a
fiduciary, management or advisory capacity or, in the case of a bank, as
agent bank, for any number of lenders, so long as in the case of clause (ii)
the day-to-day management decisions relating to the loan are either exercised
by or recommended by such Institutional Lender and, during the life of the
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loan, such Institutional Lender shall only be removed from its clause (ii)
capacity if it is replaced by another Institutional Lender also so acting
under clause (ii).
"Interest" shall mean the entire interest of a Partner in the
Partnership at any particular time, including the right of such Partner to
any and all benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all
the terms and provisions of this Agreement. An Interest may be expressed as a
number of Partnership Units.
"Investment" shall mean, relative to any Person (i) any loan or
advance made by such Person to any other Person (excluding advances made to
officers and employees in the ordinary course of business); (ii) the purchase
by such Person of any debt obligation of any other Person; and (iii) any
ownership or similar interest held by such Person in any other Person.
"Investor Group Partners" shall mean Berkshire, BGP, Whitehall, WHGP,
Stone Street, Bridge Street, Stone Corp., Blackstone LP and Blackstone GP,
together with any assignees or transferees thereof to the extent permitted
hereunder.
"IRS" shall mean the Internal Revenue Service and any successor
agency or entity thereto.
"Krupp Affiliated Entities" shall have the meaning set forth in
Section 4.2(a).
"Limited Partners" shall mean all Class A Preferred Limited Partners,
all Class B Limited Partners, all Class C Partners that hold limited
partnership interests, in their capacities as such holders, all Class D
Partners that hold limited partnership interests, in their capacities as such
holders, all Class E Limited Partners, all other Limited Partners admitted to
the Partnership pursuant to the terms hereof, and any transferees of the
foregoing permitted hereunder, but only so long as any such Person continues
in its capacity as a Partner in the Partnership.
"Losses" shall have the meaning set forth in Section 7.2(a).
"Majority Decision" shall have the meaning set forth in Section 3.3.
"Majority Sales Notice" shall have the meaning set forth in Section
9.3(a).
"Majority Third Party Offer" shall have the meaning set forth in
Section 9.3(b).
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"Majority Triggering Parties" shall have the meaning set forth in
Section 9.3(b).
"Managed Properties" shall have the meaning set forth in Section
4.4(c).
"Mandatory Capital Call" shall have the meaning set forth in Section
6.2(a).
"Mandatory Capital Call Limit" shall have the meaning set forth in
Section 6.2(a).
"Maximum Share" shall have the meaning set forth in Section 9.1(a).
"Minimum Gain" shall mean an amount equal to the excess of the
principal amount of debt, for which no Partner is liable ("non-recourse
debt"), over the adjusted basis of the Partnership Assets which represents
the minimum taxable gain which would be recognized by the Partnership if the
nonrecourse debt were foreclosed upon and the Partnership Assets were
transferred to the creditor in satisfaction thereof, and which is referred to
as "minimum gain" in Treasury Regulations Section 1.704-2(b)(2). A Partner's
share of Minimum Gain shall be determined pursuant to Treasury Regulations
Section 1.704-2.
"Necessary Expenditure" shall have the meaning set forth in Section
6.2(a).
"Non-Contributing Partner" shall have the meaning set forth in
Section 6.3(a).
"Non-recourse Deductions" for a taxable year means deductions
attributable to non-recourse debt (as determined under Treasury Regulation
Sections 1.704-2(c) and 1.704-2(i)(2)) for such year.
"Non-Triggering Parties" shall have the meaning set forth in Section
9.2(a).
"Notice of Sale" shall have the meaning set forth in Section 9.1(a).
"Objection Notice" shall have the meaning set forth in Section
5.3(b).
"Offer Terms" shall have the meaning set forth in Section 9.1(a).
"Offered Interest" shall have the meaning set forth in Section
9.1(a).
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"Organizational Document" shall mean, with respect to any Person, (i)
in the case of a corporation, such Person's certificate of incorporation and
by-laws, and any shareholder agreement, voting trust or similar arrangement
applicable to any of such Person's authorized shares of capital stock, (ii)
in the case of a partnership, such Person's certificate of limited
partnership, partnership agreement, voting trusts or similar arrangements
applicable to any of its partnership interests, (iii) in the case of a
limited liability company, such Person's certificate of formation, limited
liability company agreement or other document affecting the rights of holders
of limited liability company interests, or (iv) in the case of any other
legal entity, such Person's organizational documents and all other documents
affecting the rights of holders of equity interests in such Person.
"Partner-Funded Debt" shall mean any non-recourse debt of the
Partnership that is loaned or guaranteed by any Partner and/or is treated as
Partner non-recourse debt with respect to a Partner under Treasury
Regulations Section 1.704-2(b)(4).
"Partners" shall mean all Class A Preferred Limited Partners, all
Class B Limited Partners, all Class C Partners, all Class D Partners, all
Class E Limited Partners and all other Partners admitted to the Partnership
pursuant to the terms hereof, and any transferees of the foregoing permitted
hereunder, but only so long as any of the foregoing Persons continues in its
capacity as a partner in the Partnership; "Partner" shall mean any of the
foregoing individually.
"Partnership" shall mean Berkshire Realty Holdings, L.P., a Delaware
limited partnership, as said Partnership may from time to time be hereafter
constituted.
"Partnership Assets" shall mean all right, title and interest of the
Partnership in and to all or any portion of the assets of the Partnership and
any property (real, personal, tangible or intangible) or estate acquired in
exchange therefor or in connection therewith.
"Partnership Percentage Interest" shall mean, as to a Partner, the
percentage obtained by dividing the Partnership Units (other than Class A
Preferred Units, Class B Units or Class E Units) owned by such Partner by
the total number of Partnership Units (other than Class A Preferred Units,
Class B Units or Class E Units) then outstanding as specified in Schedule 6.1
attached hereto, as such exhibit may be amended and restated from time to
time. For the avoidance of doubt, the Partnership Percentage Interest of any
Class A Preferred Limited Partner, Class B Limited Partner or any Class E
Limited Partner shall be deemed zero percent (0%).
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"Partnership Redemption Date" shall have the meaning set forth in
Section 9.12(b).
"Partnership Unit" means a fractional, undivided share of the
Interests of all Partners issued pursuant to Section 6 hereof, and includes
Class A Preferred Units, Class B Units, Class C Preferred Units, Class D
Units, Class E Units and any other classes or series of Partnership Units
established after the date hereof. The number of Partnership Units
outstanding and the Class A Percentage Interests, Class B Percentage
Interests, Class C Percentage Interests, Class D Percentage Interests,
Class E Percentage Interests and the Partnership Percentage Interests in the
Partnership represented by such Partnership Units are set forth in
Schedule 6.1 hereto, as such Exhibit may be amended and restated from time to
time.
"Performance Termination" shall mean a termination of the DK
Employment Agreement after the third anniversary of the Closing Date as a
result of a determination by WHGP and Blackstone GP that the net operating
income of the Properties is not at least $124 million for the full year
ending on the third anniversary of the Closing Date (the "Test Year") (it
being understood that such net operating income shall be calculated based
upon the unaudited financial statements of the Partnership, provided that any
of the General Partners may require that the Performance Termination be based
on the net operating income shown on audited financial statements). For
purposes of calculating the foregoing test, (x) net operating income so
derived shall be reduced by (i) the amount of any net operating income
attributable to properties acquired by the Partnership after the Closing Date
and (ii) the amount of net operating income attributable to properties sold
by the Partnership prior to or after the Closing Date to the extent included
in the net operating income of the Test Year, and (y) the $124 million
threshold shall be reduced by the amount of net operating income attributable
to the Properties sold by the Partnership prior to or after the Closing Date,
as such attributable amounts are shown on Schedule 9.10 attached hereto.
"Permitted Pledge" shall mean, with respect to any member of the
Berkshire Group, a pledge of, or security interest in, an equity interest in
a legal entity to secure a loan made to the pledgor, provided that, (i) such
pledged equity interest may not be transferred to the pledgee by foreclosure,
assignment in lieu thereof or other enforcement of such pledge and (ii) the
pledgor may pledge only its economic interest in such legal entity and no
other rights under such legal entity's Organizational Documents.
"Person" shall mean any individual, partnership, corporation, limited
liability company, trust or other legal entity.
"Pledgee" shall have the meaning set forth in Section 9.1(b).
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"Pledgor" shall have the meaning set forth in Section 9.1(b).
"Profits" shall have the meaning set forth in Section 7.2(a).
"Properties" shall have the meaning set forth in the Recitals.
"Property" shall have the meaning set forth in the Recitals.
"Property Loan" shall mean any bridge, permanent or construction
financing assumed or obtained by the Partnership in accordance with the
provisions hereof, which may be secured by a mortgage, or similar security in
the nature of a mortgage on all or any of the Properties.
"Purchaser" shall have the meaning set forth in 9.1(a).
"Rate of Return" shall mean, with respect to any Partnership Units
held by any Partner, a return of all Capital Contributions made by such
Partner with respect to such Partnership Units plus a cumulative, annually
compounded, return on such Capital Contributions (and accrued but unpaid
return at the specified rate outstanding from time to time) at a rate per
annum equal to the applicable percentage specified herein. A Partner shall
be deemed to have received a specified Rate of Return with respect to such
Partner's Partnership Units when the total Capital Contributions made from
time to time by such Partner in respect of such Partnership Units are
returned to such Partner together with an annual return thereon equal to such
specified percentage calculated commencing on the date such Capital
Contributions are made and compounded annually to the extent not paid on a
current basis, taking into account the timing and amounts of all previous
Capital Contributions by such Partner in respect of such Partnership Units
and all previous distributions by the Partnership to such Partner. For
purposes of computing such Rate of Return, the periods used to measure
capital inflows and outflows shall be monthly and any Capital Contribution
made, or deemed made, by such Partner, any forfeiture of any Capital
Contribution and any distribution of funds received by such Partner at any
time during a month shall be deemed to be made, forfeited or received on the
first day of such month. Any calculations shall be based on a 12-month year
based on thirty (30) day months.
"Restricted Period" shall have the meaning set forth in Section
4.2(a).
"Sales Notice" shall have the meaning set forth in Section 9.2(a).
"Sales Response Notice" shall have the meaning set forth in Section
9.2(c).
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"Second Tier Differential" shall mean an amount equal to the excess
of (i) the amount distributed by the Partnership necessary to give the
holders of Class C Preferred Units a 20% Rate of Return on the aggregate
Capital Contributions made in respect of such Class C Preferred Units over
(ii) the amount distributed by the Partnership necessary to give the holders
of Class C Preferred Units a 17.5% Rate of Return on the aggregate Capital
Contributions made in respect of such Class C Preferred Units.
"Stone Corp" shall have the meaning set forth in the first paragraph
of this Agreement.
"Stone Street" shall have the meaning set forth in the first
paragraph of this Agreement.
"Subsidiaries" shall mean all of the entities in which the
Partnership owns (whether as of the date hereof or at any time hereafter),
directly or indirectly 51% or more of the ownership interests and
"Subsidiary" shall mean any one of them.
"Substituted Partner" shall mean any Person admitted to the
Partnership as a Partner pursuant to the provisions of Section 9.7.
"Targeted Capital Account Balance" shall mean, with respect to any
Partner, the balance necessary to produce a Capital Account for each Partner
such that if an amount of cash equal to such positive Capital Account were
distributed in accordance with such positive Capital Account balances, such
distribution would be in the amounts, sequence and priority set forth in
Section 10.3.
"Tax Matters Partner" shall mean the General Partner designated
pursuant to Section 4.7.
"Third Appraisal" shall have the meaning set forth in Section
9.10(d).
"Third Party Offer" shall have the meaning set forth in Section
9.2(f).
"Third Party Offer Price" shall have the meaning set forth in Section
9.2(f).
"Third Party Response Notice" shall have the meaning set forth in
Section 9.2(g).
"Transfer" shall have the meaning set forth in Section 9.1(a).
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"Transferring Partner" shall have the meaning set forth in Section
9.1(a).
"Treasury Regulations" shall mean the regulations promulgated under
the Code, as such regulations are in effect on the date hereof.
"Triggering Party" shall have the meaning set forth in Section
9.2(a).
"Unanimous Decision" shall have the meaning set forth in Section 3.4.
"WHGP" shall have the meaning set forth in the first paragraph of
this Agreement.
"Whitehall" shall have the meaning set forth in the first paragraph
of this Agreement.
"Whitehall Group" shall mean, collectively, Whitehall, WHGP, Stone
Street, Bridge Street and Stone Corp., together with any assignees or
transferees to the extent permitted hereunder, but only so long as any such
Person continues in its capacity as a partner in the Partnership.
1.2 Terms Generally. For all purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires:
(a) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision; and
(b) the words "including" and "include" and other words of
similar import shall be deemed to be followed by the phrase "without
limitation."
ARTICLE 2.
THE PARTNERSHIP AND ITS BUSINESS
2.1 Partnership Name. The business of the Partnership shall be
conducted under the name of Berkshire Realty Holdings, L.P. in the State of
Delaware and under such name or such assumed names as the Administering
General Partner deems necessary or appropriate to comply with the
requirements of any other jurisdiction in which the Partnership may be
required to qualify.
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2.2 Term. The term of the Partnership shall continue in full
force and effect until terminated following dissolution on December 31, 2049
or such earlier date of dissolution as hereinafter provided.
2.3 Filing of Certificate and Amendments. The Certificate of
Limited Partnership of the Partnership was filed with the Secretary of State
of the State of Delaware on April ___, 1999. The Partners hereby agree to
execute and file any required amendments to the Certificate and shall do all
other acts requisite for the constitution of the Partnership as a limited
partnership pursuant to the laws of the State of Delaware or any other
applicable law and for enabling the Partnership to conduct business in the
jurisdictions in which the Partnership's properties are located.
2.4 Business; Scope of Partners' Authority.
(a) The Partnership is organized primarily for the purpose of
BRI merging with the Partnership (or a Subsidiary thereof) and, subsequent to
such merger, acquiring, owning, financing, refinancing, managing,
maintaining, operating, improving, developing, marketing and selling
multifamily properties. The Partnership is empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and
business described herein and for the protection and benefit of the
Partnership, including, without limitation, full power and authority to enter
into, perform and carry out contracts of any kind, borrow money, guarantee
and issue evidences of indebtedness whether or not secured by any mortgage,
deed of trust, pledge or other lien, acquire, own, manage, improve and
develop any real property (or any interest therein), and sell, transfer and
dispose of any such real property.
(b) Except as otherwise expressly and specifically provided in
this Agreement, no Partner shall have any authority to bind or act for, or
assume any obligations or responsibility on behalf of, any other Partner.
Neither the Partnership nor any Partner shall, by virtue of executing this
Agreement, be responsible or liable for any indebtedness or obligation of any
other Partner incurred or arising on, before or after the execution of this
Agreement, except, as to the Partnership, as to those joint responsibilities,
liabilities, indebtedness, or obligations expressly assumed by the
Partnership as of the date of this Agreement or incurred thereafter pursuant
to and as limited by the terms of this Agreement.
2.5 Principal Office; Registered Agent. The principal office of
the Partnership shall be c/o The Berkshire Group, One Beacon Street, Suite
1500, Boston, Massachusetts 02108. The Partnership may change its place of
business to such location or locations as may at any time or from time to
time be determined by the Administering General Partner and consented to by
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WHGP and Blackstone GP. The mailing address of the Partnership shall be c/o
The Berkshire Group, One Beacon Street, Suite 1500, Boston, Massachusetts
02108, or such other address as may be selected from time to time by the
Administering General Partner. The address of the registered office of the
Partnership in the State of Delaware is c/o Bridge Service Corp., 30 Old
Rudnick Lane, Dover, Delaware 19901. The name and address of the registered
agent of the Partnership for service of process in the State of Delaware is
Bridge Service Corp, 30 Old Rudnick Lane, Dover, Delaware 19901.
2.6 Names and Addresses of the Partners. The names and
addresses of the Partners on the date of this Agreement are as follows:
Whitehall Street Real Estate Limited Partnership XI
85 Broad Street
New York, New York 10004
Attn: Steven M. Feldman
WXI/BRH Gen-Par LLC
85 Broad Street
New York, New York 10004
Attn: Steven M. Feldman
Bridge Street Real Estate Fund 1998 L.P.
Stone Street Real Estate Fund 1998 L.P.
Stone Street WXI/BRH Corp.
85 Broad Street
New York, N.Y. 10004
Attn: Kevin D. Naughton
BRE/Berkshire GP L.L.C.
345 Park Avenue, 32nd Floor
New York, N.Y. 10154
Attn: Mr. Thomas Saylak
BRE/Berkshire LP L.L.C.
345 Park Avenue, 32nd Floor
New York, N.Y. 10154
Attn: Mr. Thomas Saylak
Aptco Holdings, L.L.C.
One Beacon Street, Suite 1500
Boston, Massachusetts 02108
Attn: Mr. Douglas Krupp
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Aptco Gen-Par, L.L.C.
One Beacon Street, Suite 1500
Boston, Massachusetts 02108
Attn: Mr. Douglas Krupp
The names and addresses of the other Limited Partners and of such
Partners as may be admitted as Partners to the Partnership after the date
hereof shall be as set forth on Schedule 2.6(b) hereof, as such Schedule may
be amended from time to time.
2.7 Representations by the Partners.
(a) Each Partner who is not an individual represents,
warrants, agrees and acknowledges that, as of the date hereof:
(1) it is a corporation, a limited liability
company or partnership, as applicable, duly organized or
formed and validly existing and in good standing under the
laws of the state of its organization or formation; it has
all requisite corporate, limited liability company or
partnership power and authority to enter into this
Agreement, to acquire and hold its Interest and to perform
its obligations hereunder; and the execution, delivery and
performance of this Agreement has been duly authorized by
all necessary corporate, limited liability company or
partnership action; and
(2) its execution and delivery of this Agreement
and the performance of its obligations hereunder will not
conflict with or violate any of the provisions of its
Organizational Documents.
(b) Each Partner, whether or not an individual, represents,
warrants, agrees and acknowledges that as of the date hereof:
(1) its execution and delivery of this Agreement
and the performance of its obligations hereunder will not
conflict with, result in a breach of or constitute a default
(or any event that, with notice or lapse of time, or both,
would constitute a default) or result in the acceleration of
any obligation under any of the terms, conditions or
provisions of any other agreement or instrument to which it
is party or by which it is bound or to which any of its
property or assets are subject, violate any statute or any
order, rule or regulation of any court or governmental or
regulatory agency, body or official, that would materially
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and adversely affect the performance of its duties
hereunder; such Partner has obtained any consent, approval,
authorization or order of any court or governmental agency
or body required for the execution, delivery and performance
by such Partner of its obligations hereunder;
(2) there is no action, suit or proceeding pending
against such Partner or, to its knowledge, threatened in any
court or by or before any other governmental agency or
instrumentality which would prohibit its entering into or
performing its obligations under this Agreement; and
(3) this Agreement is a binding agreement on the
part of such Partner enforceable in accordance with its
terms against such Partner.
Further, each Limited Partner represents that it is acquiring its Interest
for its own account for investment purposes only and not with a view to the
distribution or resale thereof, in whole or in part, in violation of
applicable securities laws and agrees that it will not Transfer all or any
part of its Interest, or solicit offers to buy from or otherwise approach or
negotiate in respect thereof with any Person or Persons whomsoever, all or
any portion of its Interest in any manner that would violate or cause the
Partnership or any General Partner to violate applicable federal or state
securities laws.
(c) Berkshire and BGP represent, warrant and covenant that (i)
they will, on the Closing Date, contribute to the Partnership all shares of
common stock of BRI and all partnership interests in BRI OP owned by
Berkshire, BGP, the Berkshire Principals (other than the shares listed on
Schedule 2.7(c)) or any Affiliate of any of the foregoing as of the date
hereof and as of the Closing Date (it being understood that they shall only
be required to contribute 72.5% of the BRI OP interests held by Turtle Creek
Associates (such percentage representing their entire ownership percentage of
Turtle Creek Associates)), (ii) as of the date of this Agreement, Berkshire,
BGP, the Berkshire Principals and each Affiliate of any of the foregoing,
collectively own 512,203 shares of common stock of BRI (excluding the shares
listed on Schedule 2.7(c)) and 4,904,066 Units of partnership interests in
BRI OP and (iii) none of Berkshire, BGP, the Berkshire Principals, or any
Affiliates of any of the foregoing, shall Transfer any such shares or Units
except to the Partnership as the initial Capital Contributions of Berkshire
and BGP. Each of BGP and Berkshire further represents and warrants that,
except as set forth above and on Schedule 2.7(c), BGP, Berkshire, the
Berkshire Principals and their respective Affiliates have no equity interest
in BRI or BRI OP (other than the shares listed on Schedule 2.7(c)).
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2.8 Control of the Berkshire Group. Berkshire and BGP represent
and warrant that the Berkshire Principals control (which control is
exercisable without the consent or approval of any other Person) the business
and affairs of Berkshire and BGP.
2.9 Pre-Closing Costs and Expenses.
(a) Any reasonable out of pocket due diligence, legal and
underwriting costs or expenses incurred by an Investor Group Partner or its
Affiliate (other than GSMC) relating to the acquisition of BRI or the
execution of this Agreement will be reimbursed by the Partnership to such
Partner on or promptly after the Closing Date.
(b) The Partnership shall not be required to reimburse any
Partner for fees payable to any broker or investment banker in connection
with the proposed acquisition of BRI, except for the fee payable to Greenhill
& Co. in accordance with its existing agreement with The Berkshire Group,
which fee shall not be in excess of $4,955,000. Notwithstanding the
foregoing, the Partnership may pay fees to brokers or investment bankers in
connection with additional equity and/or debt financing as provided in
Section 3.4 or Section 4.4(a).
(c) The Partnership shall pay (i) all fees and expenses in an
amount not to exceed $750,000 related to the bridge financing committed by
Goldman Sachs Mortgage Company ("GSMC") in connection with the contemplated
merger of the Partnership (or a Subsidiary thereof) and BRI and (ii) all fees
and expenses related to the bridge financing committed or provided by
Whitehall and Blackstone in connection with the contemplated merger of the
Partnership (or a Subsidiary thereof) and BRI (the "Bridge Loan") payable
under the commitment letter or definitive agreements relating to such Bridge
Loan.
(d) In the event that, under the terms of the BRI Merger
Agreement, a termination or break-up fee and/or reimbursement of expenses
becomes payable to the Partnership, such fee shall be allocated among the
Investor Group Partners as follows: (i) first, to reimburse the Investor
Group Partners for their actual out of pocket transaction costs and expenses
incurred to the date of the payment of such fee and (ii) second, to the
Investor Group Partners pro rata based upon their respective anticipated
initial Partnership Percentage Interests.
2.10 Compliance with Certain Agreements. The Partnership
acknowledges that from and after the Closing Date, it will be bound by and
will comply (and will cause BRI OP to comply) with the terms of the
agreements listed on Schedule 2.10 hereto, as if the Partnership were a party
to such agreements and that the Class A Preferred Limited Partners and Class
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B Limited Partners shall be able to enforce such agreements as third party
beneficiaries of such agreements. Nothing in this Agreement shall constitute
an amendment to, or diminish or alter any rights or obligations contained in,
any of the agreements listed on Schedule 2.10.
2.11 Miscellaneous. The Partnership anticipates that the equity
and debt financing expected to be raised in contemplation of the transactions
contemplated by the BRI Merger Agreement will be sufficient to pay the
purchase price required in connection with such merger and the transaction
costs associated therewith (assuming that the transaction costs of BRI and
BRI OP incurred in connection with the BRI Merger and the BRI OP Merger
(other than severance costs) do not exceed $11,000,000), but no assurance can
be made with respect to the foregoing.
ARTICLE 3.
MANAGEMENT OF PARTNERSHIP BUSINESS;
POWERS AND DUTIES OF THE ADMINISTERING GENERAL PARTNER
3.1 Management and Control.
(a) Except as limited specifically herein, the powers of the
General Partners shall include all powers, statutory and otherwise, possessed
by general partners under the laws of the State of Delaware. No General
Partner may be removed by the Limited Partners with or without cause.
(b) Except as otherwise expressly and specifically provided in
this Agreement, no Limited Partner shall have any authority to bind, to act
for, to execute any document or instrument on behalf of or to assume any
obligation or responsibility on behalf of the Partnership or any other
Partner.
(c) The provisions of this Agreement relating to the management
and control of the business and affairs of the Partnership shall also be
construed to be fully applicable to the management and control of each
Subsidiary, and any and all matters listed in Section 3.3 shall constitute
Majority Decisions for purposes hereof whether such matter relates to the
Partnership or any Subsidiary of the Partnership, any and all matters listed
in Section 3.4 shall constitute Unanimous Decisions for purposes hereof
whether such matter relates to the Partnership or any Subsidiary of the
Partnership and the provisions of Section 3.2 shall apply with respect to the
Partnership as well as to any Subsidiary of the Partnership. Without
limitation of the foregoing, given that the Partnership will, after
consummation of the transactions contemplated by the BRI Merger Agreement and
the BRI OP Merger Agreement, indirectly control the management of and will
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own 100% of the sole general partner of BRI OP, each of the General Partners
shall have management rights over BRI OP, and the Partnership, in its
capacity as the general partner, will not take any actions in respect of
"Majority Decisions" or "Unanimous Decisions" without the approval of the
required General Partners (as if such decisions were made by the
Partnership).
3.2 Role of the Administering General Partner and Limitations on
its Authority.
(a) In addition to such powers and rights of the Administering
General Partner as are expressly set forth herein, and subject to the express
restrictions set forth in Sections 3.3 and 3.4, the Administering General
Partner shall have the right and the duty to manage the business of the
Partnership, to execute documents and to implement the decisions made on
behalf of the Partnership by the General Partners in accordance with the
terms hereof and applicable laws and regulations, and such other rights and
powers as are granted to the Administering General Partner hereunder and as
the other General Partners may from time to time expressly delegate to the
Administering General Partner (provided, that any such obligations or
responsibilities that are delegated to the Administering General Partner
shall be subject to the Administering General Partner's acceptance to the
extent not set forth herein). The Administering General Partner shall devote
such time to the Partnership and its business as shall be reasonably
necessary to conduct the business of the Partnership in an efficient manner
and to carry out the Administering General Partner's responsibilities as set
forth herein. Without limiting the generality of the foregoing but subject
to WHGP's and Blackstone GP's rights with respect to Majority Decisions and
Unanimous Decisions, the Administering General Partner shall have the right
and duty to do, accomplish and complete, using Partnership funds at all times
except where expressly provided to the contrary in this Agreement, for and on
behalf of the Partnership with reasonable diligence and in a prompt and
businesslike manner, exercising such care and skill as a prudent owner with
sophistication and experience in owning, operating and managing property like
the Properties would exercise in dealing with its own property, all of the
following:
(1) applying for and using diligent efforts to obtain
any and all necessary consents, approvals and permits required for the
construction, occupancy and operation of the Properties;
(2) paying, before delinquency and prior to the addition
of interest or penalties, all taxes, assessments and other impositions
applicable to the Properties, and retaining counsel to initiate any action or
proceeding seeking to reduce such taxes, assessments or other impositions;
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(3) verifying that appropriate insurance (including any
required by the terms of any Property Loan) is maintained by each contractor
performing work on the Properties;
(4) assisting in obtaining any and all necessary
financing required to carry out the purposes of the Partnership;
(5) procuring and arranging all necessary insurance to
the extent available at commercially reasonable rates for the Partnership in
accordance with the insurance program adopted by the Partnership from time to
time pursuant to Section 3.3(12) below; causing the Investor Group Partners
to be named as additional insureds on all liability policies maintained by
the Partnership; delivering to the General Partners copies of all insurance
policies maintained by the Partnership from time to time, including renewals
or replacements of any expiring policies prior to the expiration thereof;
(6) demanding, receiving, acknowledging and instituting
legal action for recovery of any and all revenues, receipts and
considerations due and payable to the Partnership, in accordance with prudent
business practices;
(7) executing and delivering leases and other legal
documents necessary to carry out the business of the Partnership (which
leases and legal documents shall have first been approved by either one or
both of the other two General Partners if their approval is required pursuant
to this Agreement, including without limitation, Sections 3.3 and 3.4 below,
or shall otherwise be in accordance with the relevant Approved Budget and
Approved Business Plan);
(8) keeping all books of account and other records of
the Partnership and delivering all reports in the manner provided in Article
5 below;
(9) maintaining all funds of the Partnership in a
Partnership bank account in the manner provided in Article 5 below, which
funds shall not be commingled with the funds of any other Person;
(10) protecting and preserving the title and interests of
the Partnership in the Properties, and including keeping the Properties free
from mechanics' and materialmen's liens;
(11) preparing for approval by the General Partners and
implementing once the same shall have been approved in accordance herewith,
all Approved Budgets and Approved Business Plans, including negotiating all
contracts and expending funds in accordance therewith;
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(12) opening and maintaining bank accounts to the
extent required or permitted by Section 5.5;
(13) coordinating the defense of any claims, demands,
suits or legal proceedings made or instituted against the Partnership by
other parties, through legal counsel for the Partnership engaged in
accordance with the terms of this Agreement; giving WHGP and Blackstone GP
prompt notice of the receipt of any material claim or demand or the
commencement of any suit or legal proceeding and promptly providing WHGP and
Blackstone GP all information relevant or necessary thereto;
(14) monitoring and complying with (i) the terms and
provisions of any restrictive covenants or easement agreements affecting the
Properties or any portion thereof, and any and all contracts entered into or
assumed by the Partnership, including, without limitation, the exceptions
noted in any title policy, and (ii) the terms and provisions of any note,
mortgage and other loan documents assumed or executed by the Partnership,
including any Property Loan documents;
(15) delivering to the General Partners copies of any
notices received from lenders, or other persons with whom the Partnership has
material contractual obligations, alleging any material deficiencies or
defaults by the Partnership under the said contractual arrangements;
(16) paying (or causing to be paid), prior to
delinquency, all insurance premiums, debts and other obligations of the
Partnership, including amounts due under any loans of the Partnership and
costs of construction, operation and maintenance of the Properties;
(17) subject to the provisions of this Agreement,
developing, operating, maintaining and otherwise managing the Properties in
an efficient manner and in accordance with the relevant Approved Budget and
Approved Business Plan;
(18) promptly complying with all present and future laws,
ordinances, orders, rules, regulations and requirements of all federal, state
and municipal governments, courts, departments, commissions, boards and
officers, the requirements of any insurance policy (or any insurer
thereunder) covering the Properties (and any improvements thereon), any
national or local Board of Fire Underwriters, or any other body exercising
functions similar to those of any of the foregoing, which may be applicable
to any of the Properties (and any improvements thereon) and the operation and
management thereof, and when and to the extent approved by the General
Partners, the Administering General Partner shall contest or assist the
Partners in contesting the validity or application of any such law,
ordinance, order, rule, regulation or requirement;
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(19) provided that Douglas Krupp (or, if the last
paragraph of this Section 3.2 applies, George Krupp) is still acting as
chairman and chief executive officer of the Partnership, selling the ten
(10) assets listed on Schedule 3.2(a)(19) hereto within the time period
contemplated by the Approved Business Plan to parties which are not
Affiliated with the Berkshire Group and in which the Berkshire Group and its
Affiliates have no continuing interest, for prices that yield the Partnership
net proceeds (after all transaction costs, transfer or similar taxes and debt
prepayment fees and expenses) equal to, in respect of each such Property, at
least 95% of the amounts set forth on Schedule 3.2(a)(19) hereto opposite
such Property, provided that the aggregate amount of all such net sale
proceeds shall not be less than 97.5% of the aggregate of all such amounts
set forth on Schedule 3.2(a)(19) hereto;
(20) provided that Douglas Krupp (or, if the last
paragraph of this Section 3.2 applies, George Krupp) is still acting as
chairman and chief executive officer of the Partnership, selling certain
individual assets in any calendar year not in excess of $100 million in gross
proceeds, provided that (i) the price for each sold asset yields the
Partnership net proceeds (after all transaction costs, transfer or similar
taxes and debt prepayment fees and expenses) equal to at least 103% of the
allocated acquisition cost of such asset as set forth on Schedule 3.2(a)(20)
hereto and (ii) if any such assets are held by an entity that is a REIT
(other than any REIT that holds a single Property), independent tax counsel
approved by a majority of the General Partners renders an opinion that such
sale will not be a "prohibited transaction" within the meaning of Section 857
of the Code;
(21) (i) in the event the Partnership draws down the
Bridge Loan, incurring indebtedness on or prior to May 1, 2000 to refinance
all or part of the Bridge Loan, provided that such indebtedness satisfies the
Freddie Mac Parameters or (ii) in the event the Partnership determines not to
draw down the Bridge Loan, incurring indebtedness satisfying the Freddie Mac
Parameters contemporaneously with the Closing Date (provided that a
commitment letter relating to indebtedness satisfying the Freddie Mac
Parameters is obtained by July 15, 1999, definitive agreements relating to
such indebtedness are executed by September 1, 1999, and at no time after
July 15, 1999 do WHGP and Blackstone GP reasonably conclude that there is a
material risk the indebtedness satisfying the Freddie Mac Parameters will not
be agreed to, closed and funded on or prior to the anticipated Closing
Date);
(22) implementing, in the form approved pursuant to the
terms of this Agreement, Unanimous Decisions and Majority Decisions approved
by the General Partners pursuant to the terms of this Agreement (including,
without limitation, Approved Business Plans);
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(23) performing all other services reasonably necessary
or required for the ownership, development, maintenance, marketing and
operation by the Partnership of the Properties or otherwise required to be
performed by the Administering General Partner pursuant to this Agreement and
not otherwise prohibited hereunder; and
(24) retaining legal firms to represent the Partnership
and its Subsidiaries provided that such firms are selected with due care and
are recognized as having expertise in the area for which they have been
retained.
(b) The Administering General Partner shall not (and shall not
have any right, power or authority to), without the prior approval of either
WHGP or Blackstone GP, or of both WHGP and Blackstone GP, as applicable, bind
or take any action on behalf of or in the name of the Partnership or any
Subsidiary, or enter into any commitment or obligation binding upon the
Partnership or any Subsidiary, except for actions authorized under this
Agreement (including all actions authorized by Section 3.2(a)) or actions
authorized by WHGP, Blackstone GP or the General Partners in the manner set
forth herein. Neither WHGP nor Blackstone GP shall have the authority to
take any action on behalf of or in the name of the Partnership or any
Subsidiary except for actions authorized under this Agreement.
(c) (1) Notwithstanding anything contained herein to the
contrary, BGP shall be removed as Administering General Partner and as a
General Partner, and be relieved of its obligations as same, and shall have
no further rights with respect to approvals of or consent to any Majority
Decision or Unanimous Decision in the event that (i) Berkshire, BGP or any of
their respective Affiliates Transfers any of its interests in the Partnership
in violation of the terms of this Agreement, (ii) the Partnership or any
member of the Blackstone Group or the Whitehall Group acquires the Interest
of the Berkshire Group pursuant to the terms of Section 9.10 of this
Agreement or (iii) a default by Berkshire, BGP or one of their respective
Affiliates of a loan secured by interests of Berkshire, BGP or an Affiliate
in the Partnership and such loan becomes due as a result of such default.
(2) Notwithstanding anything contained herein to the
contrary, BGP shall be removed as Administering General Partner and as a
General Partner in the event that Douglas Krupp is removed as chief executive
officer of the Partnership for Cause or Company Cause at any time or Douglas
Krupp resigns as chief executive officer of the Partnership prior to the
fifth anniversary of the Closing Date, and in connection with such removal or
resignation, (i) the general partnership Interest of BGP shall automatically
(and without any notice or other action) be converted into a new class of
limited partnership interest (and there shall be no other limited
partnership interests of such class), (ii) such limited partnership Interest
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shall be entitled (by means of a class vote or similar mechanism) to
exercise the rights that BGP had under this Agreement as a General Partner
(provided, that BGP shall not have the right to vote with respect to the
Unanimous Decisions described in clauses (5)(it being understood and agreed
that upon such removal or resignation and such conversion of Interests, the
Berkshire Group shall not be obligated to fund any Additional Capital Call
made pursuant to such clause (5) but shall be subject to dilution as set
forth in Section 6.3), (10), (14) and (16) of Section 3.4 and shall not be
entitled to vote in respect of any Majority Decision (other than the Majority
Decisions described in clauses (4), (7) and (16) of Section 3.3, as to which
BGP shall have the right to vote) and (iii) from and after the date of such
removal, the remaining General Partners shall then have the right to sell the
Partnership or all or substantially all of the assets of the Partnership
(including by means of a merger, consolidation or other business combination)
provided that, as a result of such sale, the members of the Berkshire Group
receive, in the aggregate, an amount equal to the greater of (x) the Fair
Market Value of the Berkshire Group's Interest (excluding the DK IMP which
shall be forfeited upon the occurrence of any of such events) on the date of
such termination or resignation or (y) the amount equal to the aggregate
amount of Capital Contributions made by the Berkshire Group prior to the date
of such termination or resignation less any prior distributions made to the
Berkshire Group.
In the event that Douglas Krupp ceases to be chief executive
officer of the Partnership as a result of the death or disability of Douglas
Krupp (but not as the result of the termination by the Partnership of Douglas
Krupp's employment by the Partnership or as a result of the resignation by
Douglas Krupp of his employment by the Partnership), the Partnership will
offer George Krupp, Douglas Krupp's brother, the opportunity to serve as
chief executive officer of the Partnership on the same terms and conditions
as Douglas Krupp is employed as the chief executive officer of the
Partnership pursuant to this Agreement and the DK Employment Agreement.
3.3 Majority Decisions. Notwithstanding anything to the
contrary in this Agreement, no act shall be taken, sum expended, decision
made or obligation incurred by the Partnership or any Subsidiary, the
Administering General Partner or any of the General Partners with respect to
a matter within the scope of any of the Majority Decisions except as
expressly reserved as Unanimous Decisions or Administering Partner Decisions
pursuant to Section 3.2 or Section 3.4, unless and until the prior written
consent of at least two General Partners shall have been obtained pursuant to
and in accordance with this Section 3.3 and Section 3.5. Any two of the
General Partners shall have the full and complete right, power, authority and
discretion to decide, and take all actions necessary to implement, any
Majority Decision:
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The "Majority Decisions" are:
(1) making a Mandatory Capital Call pursuant to the
terms of Section 6.2(a) or a Financing Capital Call pursuant to the terms of
Section 6.2(b);
(2) approving any Annual Budget or Business Plan or
modifying or deviating from or making expenditures (whether operating or
capital in nature) or incurring any obligations in excess of any of the
foregoing except to the extent the Administering General Partner is so
permitted by Section 3.2 or by this Section 3.3; provided, however, that, so
long as Douglas Krupp (or if the last paragraph of Section 3.2 applies,
George Krupp) is still acting as chairman and chief executive officer of the
Partnership, the Administering General Partner may, without the approval of
any other General Partner, (i) incur payroll expenses which do not exceed
105% of the annual amount for such item on the Approved Budget and (ii) make
additional expenditures or incur additional obligations which, in the
aggregate, do not exceed 105% of annual expenses (other than payroll
expenses) as set forth in the Approved Budget; and provided further that
without the consent of the Administering General Partner no line item in an
Approved Budget may provide for expenditures (other than capital items or
reserves relating thereto) of more than 105% of the corresponding line item
in the previous Approved Budget.
(3) without limiting the Administering General Partner's
ability to take action under 3.2(a)(19), (20) or (21), taking any action in
respect of the Properties relating to environmental matters; provided,
however, that any General Partner is hereby authorized upon prior notice to
the other General Partners to take such action as may be reasonably required
to mitigate or eliminate any material environmental condition that poses
imminent danger to human health or safety; provided further, that such
emergency expenses referred to in the preceding clause shall not, without the
approval of all of the General Partners, exceed $100,000 in the aggregate in
any Budget Year;
(4) subject to the provisions of Article 9 hereof,
dissolving and winding-up the Partnership or electing to continue the
Partnership or electing to continue the business of the Partnership;
(5) incurring, renewing, refinancing or paying or
otherwise discharging (or agreeing to do any of the foregoing) indebtedness
of the Partnership (other than paying or discharging indebtedness secured by
an asset with proceeds from sales of such asset, which the Administering
General Partner shall have authority to do without the need to obtain
approval of another General Partner) provided that the Administering General
Partner (in addition to WHGP and Blackstone GP acting jointly) may incur
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(i) indebtedness expressly authorized by an Approved Business Plan or an
Approved Budget or (ii) indebtedness to Freddie Mac, or another institutional
lender, satisfying the Freddie Mac Parameters on or prior to the applicable
time periods specified in Section 3.2(a)(21). Notwithstanding the foregoing,
in the event (i) the Administering General Partner does not obtain financing
satisfying the Freddie Mac Parameters on or prior to May 1, 2000 (if the
Bridge Loan is drawn upon) or (ii) the Administering General Partner does not
obtain a commitment letter relating to indebtedness satisfying the Freddie
Mac Parameters by July 15, 1999 or definitive agreements relating to such
indebtedness have not been executed by September 1, 1999 (or if at any time
after July 15, 1999 WHGP and Blackstone GP reasonably conclude that there is
a material risk the indebtedness satisfying the Freddie Mac Parameters will
not be agreed to, closed and funded on or prior to the anticipated Closing
Date), two General Partners may take action necessary to incur, refinance,
pay and otherwise discharge up to $650,000,000 of indebtedness on terms other
than the Freddie Mac Parameters as if such incurrence were a Majority
Decision provided that, (A) the General Partners use commercially reasonable
efforts to obtain financing on terms as close as possible to the Freddie Mac
Parameters, (B) any such financing shall be fixed rate or be subject to
appropriate hedging arrangements and (C) the recourse of any lender of such
financing permitted to be incurred pursuant to this sentence shall be limited
to the Partnership Assets (and shall not be recourse to any Partner without
such Partner's approval);
(6) modifying (i) any loan documentation executed by the
Partnership or (ii) any other material agreement, except if such modification
is contained in an Approved Business Plan;
(7) instituting proceedings to adjudicate the
Partnership a bankrupt, or consenting to the filing of a bankruptcy
proceeding against the Partnership, or filing a petition or answer or consent
seeking reorganization of the Partnership under the Bankruptcy Code or any
other similar applicable federal, state or foreign law, or consenting to the
filing of any such petition against the Partnership, or consenting to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy
or insolvency of the Partnership or of its property, or making an assignment
for the benefit of creditors of the Partnership, or admitting in writing the
Partnership's inability to pay its debts generally as they become due;
(8) taking any action that would constitute an event of
default under any loan agreement to which the Partnership is a party;
(9) organizing or forming any Subsidiary of the
Partnership, except as otherwise expressly provided herein;
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(10) approving or filing any tax return or tax report on
behalf of the Partnership (it being understood and agreed that the
Administering General Partner shall prepare the first draft of such tax
returns and deliver such drafts to the other General Partners by no later
than February 1 of each year and that such tax returns shall be completed
before February 15 of each year);
(11) approving an insurance program for the Partnership
or any of the Properties or making a material change to such approved
insurance program;
(12) settling a property insurance claim or condemnation
action involving a claim in excess of one hundred thousand dollars ($100,000)
or that, when added to all other insurance or condemnation claims during a
single calendar year, exceeds two hundred fifty thousand dollars ($250,000);
(13) making or agreeing to any material changes to the
zoning of any of the Properties or approving the terms and provisions of any
material restrictive covenant or material easement agreement affecting any of
the Properties or any portion thereof (other than utility easements and the
like granted or released in the ordinary course);
(14) establishing any reserves for the Partnership (in
addition to capital expenditure reserves) in excess of $250,000 in the
aggregate but less than $2,000,000 in the aggregate unless set forth in the
Approved Budget;
(15) except as expressly set forth in an Approved
Business Plan, approving or disapproving of a creditors' plan, the filing of
an involuntary petition of bankruptcy or the dismissal or discharge of a
claim of bankruptcy in connection with bankruptcy proceedings involving any
Person contracting with the Partnership other than contractors against whom
the Partnership's claim is less than $100,000;
(16) taking any action that involves or relates to, or
entering into any agreement with, any General Partner or any Affiliate
thereof (it being understood and agreed that such General Partner shall
recuse itself from the consideration of any such matter);
(17) executing, modifying, accepting the surrender of or
terminating any non-residential lease or other arrangement involving the
rental, use or occupancy of more than 5,000 square feet of the Properties
(provided that the subleasing a portion of BRI's current principal office at
One Beacon Place Boston, Massachusetts may be effected by the Administering
General Partner as if such decision were permitted under Section 3.2), except
in accordance with the applicable Approved Business Plan; provided, however,
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that the Administering General Partner may modify a lease of all or any
portion of the Properties if such lease would still satisfy the applicable
Approved Business Plan as modified; and provided further, however, that the
Administering General Partner may terminate any lease (and bring eviction and
legal proceedings against the tenant thereunder) where the tenant has
defaulted in its rent payments or is otherwise in material default;
(18) unless required pursuant to the terms of any ground
lease or mortgage encumbering any of the Properties, deciding whether to
repair or rebuild in case of material damage to any of the improvements on
any Property, or any part thereof, arising out of a casualty or condemnation
(except such emergency repairs as may be necessary to protect such Property);
(19) except as otherwise expressly set forth in Sections
3.2(a), 3.10 and Article 9 of this Agreement, selling any of the Partnership
Assets or Properties;
(20) entering into hedging, interest rate protection or
similar arrangements with respect to up to 50% of the anticipated amount of
debt financing to be incurred by the Partnership or its Subsidiaries in
connection with the BRI Merger and the BRI OP Merger;
(21) exercising any rights by the Partnership under the
DK Employment Agreement or Section 9.10 hereof; and
(22) any action that is not a Unanimous Decision or that
the Administering General Partner has the authority to effect pursuant to
Section 3.2(a) (it being understood that in the case of any inconsistency
between Sections 3.2(a)(19), 3.2(a)(20) and 3.2(a)(21) and this Section 3.3,
the foregoing Sections will prevail); provided that two General Partners may
modify Section 3.2(a) (other than clauses (19), (20) and (21) thereof) to
provide that any such actions set forth in Section 3.2(a) shall constitute
Majority Decisions.
3.4 Unanimous Decisions. Notwithstanding anything to the
contrary in this Agreement, no act shall be taken, sum expended, decision
made or obligation incurred by the Partnership, the Administering General
Partner or any of the General Partners with respect to a matter within the
scope of any of the Unanimous Decisions, unless and until the prior written
consent of all of the General Partners shall have been obtained pursuant to
and in accordance with this Section 3.4 and Section 3.5. The General
Partners, acting unanimously, shall have the full and complete right, power,
authority and discretion to decide, and take all actions necessary to
implement, any Unanimous Decision.
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The "Unanimous Decisions" are:
(1) taking any action in contravention of, amending,
modifying or waiving any of the provisions of this Agreement or the
Certificate;
(2) except as permitted by Article 9, approving the
admission to the Partnership of a successor or a new Partner, removing any
Partner, designating or approving the classification of any new class of
Partners (and establishing the designations, preferences and relative rights
and duties of each class of Partners), or making any public or private
offering for the sale of equity interests or securities issued by the
Partnership;
(3) except as provided in Article 9, merging or
consolidating the Partnership with or into another Person (or engaging in any
other transaction having substantially the same effect); it being agreed that
the terms of Section 17-211(g) of the Act shall be applicable such that the
General Partners acting pursuant to this Section 3.4 shall have the right to
effect any amendment to this Agreement or effect the adoption of a new
partnership agreement for a limited partnership if it is the surviving or
resulting limited partnership on the merger or consolidation (except as may
be expressly prohibited under Section 3.7(b) or Section 3.7(c));
(4) altering the nature of the business of the
Partnership from the businesses permitted by Section 2.4(a);
(5) making an Additional Capital Call other than
pursuant to Sections 6.2(a) and 6.2(b);
(6) disposing of all or any portion of the property
known as Berkshire Towers or the subsidiary that owns such property prior to
the fifth anniversary of the Closing Date, provided, however, that such
disposition shall be a Majority Decision if it is made in a tax deferred
transaction;
(7) acquiring any real property or interest therein or
other material assets;
(8) except as set forth in Article 9, selling the
Partnership or all or substantially all of the Partnership Assets prior to
the date which is forty-two months after the Closing Date;
(9) changing, amending or terminating the BRI Merger
Agreement or the BRI OP Merger Agreement; executing the foregoing
documentation or any documents related thereto or executed in connection
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therewith; or accepting any closing deliveries, or making any election or
granting any consents, approvals or waivers of conditions to the
Partnership's obligation to close the merger with BRI pursuant to the
foregoing documentation or any documents related thereto or executed in
connection therewith;
(10) approving the IMP (and the persons to whom such IMP
is allocated) and admitting or removing any Class E Limited Partner;
(11) incurring, refinancing, paying and otherwise
discharging indebtedness in connection with the financing of the transactions
contemplated by the BRI Merger Agreement and the BRI OP Merger Agreement if
the all-in, blended interest rate for such financing exceeds a per annum
rate equal to 10%;
(12) selecting or varying depreciation and accounting
methods and making or revoking any other decisions or elections with respect
to federal, state, local or foreign tax matters or other financial purposes;
(13) establishing reserves for the Partnership (in
addition to capital expenditure reserves) in an amount equal to or in excess
of $2,000,000 in the aggregate unless set forth in the Approved Budget;
(14) changing the Partnership's accountants and
independent auditors from PriceWaterhouse Coopers (it being agreed and
understood that the General Partners intend that PriceWaterhouse Coopers
shall act as the Partnership's initial accountants); making any accounting
decisions for the Partnership (other than those specifically provided for in,
or necessary to carry out, other sections of this Agreement); or approving
any financial statements prepared by the Partnership's auditors;
(15) using Partnership funds to extend credit, make an
Investment, make a loan or become a guarantor or surety for debt of another
party;
(16) except as provided in Section 4.2(b), entering into
any property management, leasing, development or similar agreement;
(17) entering into hedging, interest rate protection or
similar arrangements with respect to an amount of the debt financing to be
incurred by the Partnership or its Subsidiaries in connection with the BRI
Merger and the BRI OP Merger in excess of 50% of such indebtedness; and
(18) except as expressly set forth in the Approved
Business Plan, taking any action that reasonably would be expected to have a
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material adverse effect on the assets, liabilities, income or expenses of the
Properties.
Notwithstanding anything else to the contrary herein, but subject to
Section 3.7(b), Article 9 and Section 11.1, any action or decision that is
not a Unanimous Decision or a decision permitted pursuant to Section 3.2 to
be taken by the Administering General Partner without the consent of any
other General Partner shall be deemed to be a Majority Decision and may be
taken or made by the General Partners acting together without the consent or
approval of any other Partner.
3.5 Consents of General Partners. If BGP consents to any
Majority Decision or Unanimous Decision in its capacity as the Administering
General Partner, BGP need not also give its consent to such Majority Decision
or Unanimous Decision in its capacity as a General Partner. In the event of
any need for consent of the General Partners to any Majority Decision or
Unanimous Decision, the Administrating General Partner, or the requesting
General Partner as the case may be, shall make such request of the General
Partners and shall provide the General Partners with any information
reasonably necessary for the General Partners to make an informed decision.
If a General Partner does not respond within ten (10) Business Days after
receipt of such request for consent to a Majority Decision or Unanimous
Decision, such General Partner shall be deemed to have rejected such request;
provided that a request pursuant to Section 3.3(a)(12), shall be deemed to be
approved by a General Partner that does not respond within such ten Business
Day period. Each General Partner (including the Administering General
Partner) shall use its good faith reasonable efforts to respond promptly to
requests for consent and to keep the other General Partners informed of the
status of any matter regarding which such General Partner intends to request
the General Partners' consent under Section 3.3 or Section 3.4. No General
Partner shall be permitted to enter into a separate agreement with another
General Partner regarding the voting of its General Partner interests or the
granting of its consent to any Majority Decision or Unanimous Decision.
3.6 Meetings of General Partners; etc. The Administering
General Partner shall from time to time, but no less frequently than every
fiscal quarter, meet with WHGP and Blackstone GP at WHGP's or Blackstone GP's
request to discuss the business and affairs of the Partnership or to discuss
any particular matter reasonably requested by WHGP or Blackstone GP. WHGP
and Blackstone GP shall promptly inform BGP of actions taken by WHGP and
Blackstone GP with respect to any Majority Decision. No General Partner shall
be responsible to the Partners for any adverse consequences, of actions taken
in accordance with the terms of this Agreement or without its consent.
Notice of meetings of the General Partners shall be given in the manner
provided in Section 12.2 hereof at least seventy-two (72) hours before the
time of such meeting (unless each General Partner waives such notice). No
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action may be taken at any meeting of the General Partners unless a quorum of
at least two (2) General Partners shall be present thereat; and no action may
be taken at any such meeting at which less than all of the General Partners
are present unless such action was included in the notice for such meeting.
The General Partners may act by written consent in lieu of a meeting.
3.7 No Participation by or Authority of Limited Partners;
Limited Rights.
(a) No Limited Partner shall have the right to participate in
the management or conduct of the Partnership. No Limited Partner shall
transact business for the Partnership, nor shall any Limited Partner have
power to sign, act for or bind the Partnership, all of such powers being
vested solely and exclusively in the General Partners. Except as required by
law or as expressly provided in this Section 3.7, no holder of Limited
Partnership Interests shall be entitled to vote at any meeting of the
Partners or for any other purpose or otherwise to participate in any action
taken by the Partnership or the Partners, or to receive notice of any meeting
of the Partners. When entitled to vote on a matter being submitted to
holders of Partnership Interests of more than one class or series, all
classes of Interests in the Partnership shall vote together as one class with
each interest in the Partnership having a vote equal to the Partnership
Percentage Interest related to such Interest.
(b) Notwithstanding anything in this Agreement to the contrary,
so long as any Class A Preferred Units are outstanding, the Partnership shall
not, without the prior approval of the holders of at least a majority of the
outstanding Class A Preferred Units held by Persons other than the General
Partners and their respective Affiliates, (i) amend any provisions of this
Agreement in any manner that (x) adversely affects the holders of the Class A
Preferred Units disproportionately with respect to the rights of holders of
other classes of Partnership Units or (y) alters the preferences, rights,
privileges or powers of, or restrictions provided for the benefit of, the
Class A Preferred Units (it being understood and agreed that this Section
3.7(b) shall not prevent the Partnership from authorizing or creating any
class of Partnership Units on a parity with the Class A Preferred Units or
junior to the Class A Preferred Units as to distributions or liquidations),
(ii) authorize or create any class of Partnership Units with a priority as to
distributions or liquidations over the Class A Preferred Units (it being
understood and agreed that this Section 3.7(b) shall not prevent the
Partnership from issuing any debt securities), (iii) issue any additional
Class A Preferred Units or (iv) except as expressly provided herein, redeem
or repurchase any Interests (other than the Interests of Class E Limited
Partners which may be redeemed at any time).
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(c) Notwithstanding anything in this Agreement to the contrary,
so long as any Class B Units are outstanding, the Partnership shall not,
without the prior approval of the holders of at least a majority of such
outstanding Class B Units held by Persons other than the General Partners and
their respective Affiliates, amend any provisions of this Agreement in any
manner that (i) adversely affects such holders of such Class B Units
disproportionately with respect to the rights of holders of other classes of
Partnership Units or (ii) alters the preferences, rights, privileges or
powers of, or restrictions provided for the benefit of, the Class B Units (it
being understood and agreed that this Section 3.7(c) shall not prevent the
Partnership from authorizing or creating any class of Partnership Units,
whether on a parity, junior or senior to the Class B Units as to
distributions or liquidations).
3.8 Acts of the Partnership and the Partners; Representatives.
(a) Whenever in this Agreement or elsewhere it is provided that
consent is required of, a demand shall be made by, or acts shall be performed
by or at the direction of the Administering General Partner, all such
consents, demands and acts are to be made, given or performed upon the
consent of any of the Persons listed on Schedule 3.8 attached hereto (as the
same may be amended from time to time by the Administering General Partner)
under the heading "Representatives of the Administering General Partner" who
shall be vested with the authority of the Administering General Partner,
until such time, as any, as the General Partners shall receive a notice from
the Administering General Partner designating one or more new
representatives.
(b) Whenever in this Agreement or elsewhere it is provided that
consent is required of, a demand shall be made by, or acts shall be performed
at the direction of WHGP, all such consents, demands and acts are to be made,
given or performed upon the consent of any of the Persons listed on Schedule
3.8 attached hereto (as the same may be amended from time to time by WHGP)
under the heading "Representatives of WHGP" who shall be vested with the
authority of WHGP, until such time, as any, as the Administering General
Partner and Blackstone GP shall receive a notice from WHGP designating one or
more new representatives.
(c) Whenever in this Agreement or elsewhere it is provided that
consent is required of, a demand shall be made by, or acts shall be performed
at the direction of Blackstone GP, all such consents, demands and acts are to
be made, given or performed upon the consent of any of the Persons listed on
Schedule 3.8 attached hereto (as the same my be amended from time to time by
Blackstone GP) under the heading "Representatives of Blackstone GP" who shall
be vested with the authority of Blackstone GP, until such time, as any, as
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the Administering General Partner and WHGP shall receive a notice from
Blackstone GP designating one or more new representatives.
3.9 Waiver of Rights by the Limited Partners. To the fullest
extent permitted by law, subject to Sections 3.7(b) and (c) and subject to
compliance with the agreements referenced in Section 2.10, each of the
Limited Partners hereby (a) waives any rights it may have to (i) consent to,
(ii) request statutory appraisal rights with respect to or (iii) otherwise
approve, any merger, combination, sale of Partnership Assets, cross-
collateralized financing or refinancing or other similar transaction with
respect to the Partnership and (b) releases each Partner of the Whitehall
Group, the Berkshire Group and the Blackstone Group from any claims that the
Limited Partners might have had with respect to such rights had they not been
waived (it being understood and agreed that such waivers shall not constitute
a waiver of fiduciary duties owed to the Limited Partners).
3.10 Sales of Certain Properties by WHGP and Blackstone GP.
(a) In the event that the Administering General Partner does not
sell the ten (10) assets as set forth in Section 3.2(a)(19) within the time
period contemplated by the initial Business Plan the WHGP and Blackstone GP,
acting together as if such decision were a Majority Decision, may cause the
Partnership to sell (or to enter into an agreement to sell) such assets
during the immediately succeeding six (6) month period to parties that are
not Affiliated with either the Whitehall Group or the Blackstone Group and in
which neither the Whitehall Group nor the Blackstone Group have a continuing
interest, provided that such sales would satisfy the requirements of Section
3.2(a)(19) had the Administering General Partner effected such sales.
(b) In the event that the Administering General Partner does not
sell Properties in any calendar year for gross proceeds of at least
$50,000,000 pursuant to Section 3.2(a)(20), during the six months following
such calendar year, WHGP and Blackstone GP, acting together as if such
decision were a Majority Decision, may cause the Partnership to sell
Properties for an amount of gross proceeds equal to the lesser of (i)
$50,000,000 or (ii) the excess of $100,000,000 over the gross proceeds
received by the Partnership in respect of Property sales during the preceding
calendar year pursuant to Section 3.2(a)(20); provided that such Property
sales pursuant to this clause (b) would satisfy the requirements of Section
3.2(a)(20) had they been effected by the Administering General Partner.
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ARTICLE 4.
RIGHTS AND DUTIES OF PARTNERS
4.1 Duties and Obligations of the Administering General Partner.
In addition to such duties as are described elsewhere in this Agreement, the
Administering General Partner shall (i) prepare and deliver to WHGP and
Blackstone GP (or cause to be prepared and delivered to WHGP and Blackstone
GP) the Business Plan for each Budget Year, (ii) deliver to WHGP and
Blackstone GP promptly upon its receipt, copies of all (x) summonses and
complaints served on the Partnership, or the Administering General Partner
(as a general partner of the Partnership) and (y) notices of default on any
loan or other indebtedness of the Partnership or on any liens against any
Partnership Asset, (iii) monitor compliance by the Partnership with any loan
agreements, mortgages, purchase agreements and other material agreements to
which the Partnership is bound (and take appropriate steps to cure any non-
compliance to the extent permitted under this Agreement or otherwise promptly
notify WHGP and Blackstone GP of any noncompliance of which it has obtained
knowledge) and (iv) manage the Partnership and the Partnership Assets with
the same care as it would use if it owned the Partnership Assets
individually.
4.2 Other Activities of the Partners.
(a) So long as Douglas Krupp or George Krupp shall be the chief
executive officer of the Partnership, or BGP or another Affiliate of Douglas
Krupp or George Krupp is the Administering General Partner (the "Restricted
Period"), Berkshire and BGP shall comply, and shall cause the Berkshire
Principals and their respective Affiliates (including, without limitation,
(i) any immediate family members of the Berkshire Principals or trusts
established for the benefit of such family members of the Berkshire
Principals and (ii) any public or private partnership or other entities
(other than BRI) in which any Berkshire Principals or any of their Affiliates
owns, directly or indirectly, a general partner interest or an economic
interest (as limited partner, member or stockholder) of 50% or more (the
"Krupp Affiliated Entities")) (any of the foregoing, a "Covered Person") to
comply with the provisions of this Section 4.2. Berkshire and BGP
acknowledge that this covenant is a material inducement to Whitehall, WHGP,
Blackstone LP and Blackstone GP entering into this Agreement and that a
material breach of this covenant that is not cured after written notice and a
reasonable period to cure shall constitute a material breach of this
Agreement entitling such Partners to exercise all remedies available to them
at law or in equity. Berkshire and BGP represent that all of the Krupp
Affiliated Entities are identified on Schedule 4.2(b).
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(b) During the Restricted Period, no Covered Person may,
directly or indirectly, develop a new multifamily property (other than
development that completes previously commenced construction or a multifamily
property that is a part of a portfolio of multifamily property acquired by
such Covered Person) located within a one mile radius of any Property held
by the Partnership.
(c) During the Restricted Period each Covered Person shall offer
the Partnership the opportunity to act as property manager for each
multifamily property owned by such Covered Person that is not managed by a
third party property manager unaffiliated with the Partnership or any Covered
Person for a management fee equal to the amount (or percentage) that is
market at such time.
(d) Subject to this Section 4.2, each Partner may engage or
invest in any other activity or venture or possess any interest therein
independently or with others. Subject to this Section 4.2, none of the
Partners, the Partnership or any other Person employed by, related to or in
any way affiliated with any Partner or the Partnership shall have any duty or
obligation to disclose or offer to the Partnership or the Partners, or obtain
for the benefit of the Partnership or the Partners, any other activity or
venture or interest therein including, without limitation, any multifamily
property. Except in the event of a breach of the limitations set forth in
subparagraph (a) or (b) above, none of the Partnership, the Partners, the
creditors of the Partnership or any other Person having any interest in the
Partnership shall have (A) any claim, right or cause of action against any
Partner or any other Person employed by, related to or in any way affiliated
with, any Partner by reason of any direct or indirect investment or other
participation, whether active or passive, in any such activity or venture or
interest therein, or (B) any right to any such activity or venture or
interest therein or the income or profits derived therefrom.
(e) During the Restricted Period Berkshire and BGP agree to give
written notice to the Partnership and each of the General Partners of the
acquisition by any Covered Person of a multifamily property promptly
following the acquisition by such Covered Person of any such property or any
direct or indirect interest therein (but in no event more than sixty (60)
days following such acquisition).
4.3 Indemnification.
(a) Notwithstanding anything in this Agreement to the contrary,
no Partner, or General Partner or tax matters partner shall be liable,
responsible or accountable in damages or otherwise to the Partnership, any
third party or to any other Partner for (i) any act performed within the
scope of the authority conferred on such Partner or General Partner by this
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Agreement except for the gross negligence or willful misconduct of such
Partner or General Partner in carrying out its obligations hereunder or any
act that is in breach of its fiduciary duties, (ii) such Partner's or General
Partner's failure or refusal to perform any act, except those required by the
terms of this Agreement, (iii) such Partner's or General Partner's
performance of, or failure to perform, any act on the reasonable reliance on
advice of legal counsel to the Partnership or (iv) the negligence, dishonesty
or bad faith of any agent, consultant or broker of the Partnership selected,
engaged or retained in good faith. In any threatened, pending or completed
action, suit or proceeding, each Partner, General Partner and tax matters
partner shall be fully protected and indemnified and held harmless by the
Partnership against all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, proceedings, costs, expenses and disbursements of
any kind or nature whatsoever (including, without limitation, reasonable
attorneys' fees, costs of investigation, fines, judgments and amounts paid in
settlement, actually incurred by such Partner or General Partner in
connection with such action, suit or proceeding) by virtue of its status as
Partner, General Partner or tax matters partner or with respect to any action
or omission taken or suffered in good faith, other than liabilities and
losses resulting from the gross negligence or willful misconduct of such
Partner, General Partner or tax matters partner. The indemnification
provided by this Section 4.3 shall be recoverable only out of the assets of
the Partnership, and no Partner or General Partner shall have any personal
liability (or obligation to contribute capital to the Partnership) on account
thereof.
(b) Each General Partner shall defend and indemnify the
Partnership and the other Partners against, and shall hold it and them
harmless from, any damage, loss, liability, or expense, including reasonable
attorneys' fees, as and when incurred by the Partnership or the other
Partners in connection with or resulting from such indemnifying General
Partner's gross negligence, malfeasance, fraud, breach of fiduciary duty or
willful misconduct.
4.4 Compensation of Partners and their Affiliates; Goldman,
Sachs & Co. as Financial Advisor.
(a) No General Partner nor any other Partner, nor any of their
respective Affiliates, shall be entitled to compensation from the Partnership
in connection with any matter that may be undertaken in connection with the
fulfillment of its duties and responsibilities hereunder, except as provided
in this Section 4.4, or as set forth in an approved Business Plan.
(b) For so long as Whitehall is a Partner of the Partnership, to
the extent the Partnership seeks to retain an investment bank for (i) an
initial public offering of the Partnership or (ii) any other sale, merger or
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financing transaction relating to the Partnership involving an amount in
excess of $100 million, the Partnership shall offer to Goldman, Sachs & Co.
or one or more of its Affiliates the opportunity to act as (A) lead
investment banker with respect to an initial public offering or (B) co-lead
investment banker with respect to a transaction described in clause (ii)
above; provided, however, that in the event of a sale, merger or financing
other than an initial public offering, the Partnership may, at the election
of BGP or Blackstone GP engage a second investment banker of its choice to
act as co-lead financial advisor. In the event that the Partnership engages
Goldman, Sachs & Co. and/or one of its Affiliates in connection with such an
initial public offering or to arrange a purchase, sale, financing,
refinancing, securitization or similar transaction in respect of the
Partnership, or all or any portion of the Properties, Goldman, Sachs & Co.
and/or such Affiliate shall be entitled to receive from the Partnership its
customary fees, commissions and indemnification for such services charged to
independent third parties. In addition, in the event of any sale, merger or
other disposition relating to the Partnership and involving an amount in
excess of $100 million, the Partnership shall pay to an Affiliate of
Blackstone LP an advisory fee, equal to 33% of the total fees paid to
Goldman, Sachs & Co. in connection with such engagement. Notwithstanding the
foregoing, the aggregate amount of fees so paid to Goldman, Sachs & Co. or
its Affiliates and to such Affiliate of Blackstone LP shall not exceed in the
aggregate customary amounts that would be payable to one investment banker in
a transaction of that type.
(c) Each of BGP and Berkshire, on behalf of itself and each
member of the Berkshire Group and their respective Affiliates, hereby agrees
that for so long as any member of the Berkshire Group or any Affiliate
thereof shall control the owner of the properties listed on Schedule 4.4(c)
hereto (the "Managed Properties") and until the latter to occur of (i) the
end of the Restricted Period or (ii) the third anniversary of the Closing
Date, subject to its fiduciary duties as general partner of such owners,
Berkshire shall cause the owner of such Managed Properties not to terminate
or reduce the management fees payable under, or seek to terminate or reduce
the management fees payable under, any of the management or similar contracts
relating to such Managed Properties to which BRI, the Partnership or any of
their respective Affiliates is a party without the prior written consent of
Blackstone GP and WHGP; provided that the owner of such Managed Properties
may, after the third anniversary of the Closing Date, reduce the management
fee paid under such agreements to four percent (4%) of the gross revenues of
the properties subject to such management agreements. In addition, each of
BGP and Berkshire, on behalf of itself and each member of the Berkshire Group
and their respective Affiliates, hereby agrees that it will use its best
efforts, prior to the Closing Date (and following the Closing Date if the
amendments or waivers referred to in this Section 4.4(c) are not made or
obtained prior to the Closing Date) to cause The Berkshire Companies Limited
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Partnership to amend the Administrative Services Agreement, dated as of
February 28, 1997, as amended (as so amended, the "Administrative Services
Agreement"), between a subsidiary of BRI and The Berkshire Companies Limited
Partnership to provide that (i) the transactions contemplated by this
Agreement and the merger agreement between BRI and the Partnership shall not
constitute a "Change in Control" for purposes of the Administrative Services
Agreement, (ii) no termination or similar fee shall be payable by BRI, the
Partnership or their respective successors, assigns or Affiliates in
connection with any termination of such Administrative Services Agreement,
(iii) The Berkshire Companies Limited Partnership will not terminate or
reduce the fees payable under, or seek to terminate or reduce the fees
payable under, the Administrative Services Agreement without the prior
written consent of Blackstone GP and WHGP.
By its execution below solely for the purpose of this paragraph, The
Berkshire Companies Limited Partnership hereby agrees, and Berkshire hereby
agrees, on behalf of its Affiliates, including The Berkshire Companies
Limited Partnership, that, upon and after consummation of the transactions
contemplated by the BRI Merger Agreement and the BRI OP Merger Agreement, no
further BRI OP Units or other consideration shall be issuable to The
Berkshire Companies Limited Partnership or any other person under the terms
of the Advisory Contribution Agreement, dated as of February 26, 1996, by and
among BRI, BRI OP and The Berkshire Companies Limited Partnership.
(d) The Partnership will enter into an employment agreement with
Douglas Krupp in substantially the form set forth on Exhibit 1 hereto (the
"DK Employment Agreement") effective as of the Closing Date.
4.5 Dealing with Partners.
(a) Subject to paragraph (b) below, the fact that a Partner, an
Affiliate of a Partner, or any officer, director, employee, partner,
consultant or agent of a Partner, is directly or indirectly interested in or
connected with any Person employed by the Partnership to render or perform a
service, or from or to whom the Partnership may buy or sell any property or
have other business dealings, shall not prohibit a General Partner from
employing such Person or from dealing with such Person on customary terms and
at competitive rates of compensation, and neither the Partnership nor any of
the other Partners shall have any right in or to any income or profits
derived therefrom by reason of this Agreement. The foregoing is not intended
to modify the restrictions on the authority of the Administering General
Partner under Sections 3.3 and 3.4.
(b) Except as provided in Section 4.4, the Partnership shall not
employ to render or perform a service, buy or sell any property from or to,
or have any other business dealings with, any Person who is a Partner in the
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Whitehall Group, the Blackstone Group or the Berkshire Group or any Affiliate
of any Partner in the Whitehall Group, the Blackstone Group or the Berkshire
Group without the prior approval of both of the disinterested General
Partners.
4.6 Use of Partnership Property. No Partner shall make use of
the funds or property of the Partnership, or assign its rights to specific
Partnership property, other than for the business or benefit of the
Partnership.
4.7 Designation of Tax Matters Partner. WHGP shall act as the
"tax matters partner" of the Partnership, as provided in the regulations
pursuant to Section 6231 of the Code. Each Partner hereby approves of such
designation and agrees to execute, certify, acknowledge, deliver, swear to,
file and record at the appropriate public offices such documents as may be
deemed necessary or appropriate to evidence such approval. The Partnership
and each General Partner further agrees to indemnify WHGP for any claims made
against it in its capacity as tax matters partner in accordance with Section
4.3. To the extent and in the manner provided by applicable Code sections
and regulations thereunder, the Tax Matters Partner (a) shall furnish the
name, address, profits interest and taxpayer identification number of each
Partner to the IRS and (b) shall inform each Partner of administrative or
judicial proceedings for the adjustment of Partnership items required to be
taken into account by a Partner for income tax purposes. The Tax Matters
Partner shall not enter into an agreement with the IRS or any other taxing
authority to extend the limitation period for assessment of any federal,
state or local income, franchise or unincorporated business tax of any
Partner or owner thereof nor settle with the IRS or any other taxing
authority to disallow deductions or increase income from the Partnership with
respect to any Partner, unless all of the General Partners shall have agreed
thereto. Each Partner hereby reserves all rights under applicable law,
including the right to retain independent counsel of its choice at its
expense (which counsel shall receive the full cooperation of the Tax Matters
Partner and shall be entitled to prior review of submissions by the
Partnership in respect of any dispute with relevant taxing authorities).
4.8 Guarantees.
(a) The General Partners acknowledge that certain of the
Partners (individually, an "Indemnitor Partner," and collectively, the
"Indemnitor Partners") would, absent a guarantee of Partnership indebtedness,
be required to recognize income or gain under the Code in respect of their
interests in the Partnership. For purposes of this Section 4.8, the amount
of Partnership liabilities that an Indemnitor Partner would need to
guarantee, at any time, so as to enable such Indemnitor Partner to defer the
recognition of income or gain that would otherwise result by virtue of the
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liability allocation rules under Code Section 752 and Section 465 and the
Treasury Regulations thereunder is referred to herein as the "Minimum Debt
Amount" and the aggregate of the Minimum Debt Amounts of all the Indemnitor
Partners on the date first written above is referred to herein as the
"Aggregate Minimum Debt Amount."
(b) On the Closing Date and otherwise upon written request from
an Indemnitor Partner, the General Partners on behalf of the Partnership
shall permit such Partner to guarantee (a "Guarantee") an amount of the
"least risky portion" of Partnership indebtedness then available (it being
understood and agreed that, subject to the following sentence, this Section
4.8 shall not impose any obligations on the Partnership with respect to the
incurrence or maintenance of any amount of indebtedness) equal to such
Indemnitor Partner's then Minimum Debt Amount, pursuant to a guarantee
substantially in the form attached hereto as Exhibit 2 to the extent not
prohibited by the applicable lenders. The General Partners agree that until
the earliest of (i) the date that is sixty-six months after the Closing Date,
or (ii) the sale of all or substantially all of the Partnership's assets
(other than any transaction described in Section 9.13(a)) or (iii) the sale
of the Partnership's assets pursuant to a plan of liquidation of the
Partnership the Partnership shall maintain at least $110,000,000 of
Partnership indebtedness (including by reason of any guarantees made by the
Partnership of indebtedness of partnerships in which the Partnership is a
partner directly or indirectly, the form of such guarantees to be provided to
BRI OP prior to the closing of the BRI OP Merger Agreement and subject to the
reasonable approval of BRI OP). In the event that the minimum debt provision
of the previous sentence ceases to apply, the Partnership shall use
reasonable efforts to continue to maintain such minimum debt; provided that
such reasonable efforts are consistent with the Partnership's Approved
Business Plan and that no Indemnitor Partner shall have any rights to assert
that the Partnership has not used such reasonable efforts to so maintain such
indebtedness. In the event that the sum of the Minimum Debt Amounts of the
Indemnitor Partners other than Berkshire and BGP who request a Guarantee of
indebtedness exceeds the Aggregate Minimum Debt Amount of such Partners or
the amount of available debt, each such Indemnitor Partner shall be entitled
to a Guarantee of indebtedness pro rata based upon the respective Minimum
Debt Amounts of such Indemnitor Partners then requesting Guarantees as of the
date first written above. The General Partners on behalf of the Partnership
shall use commercially reasonable efforts to cause any lender of Partnership
indebtedness that is the subject of the Guarantee to acknowledge and accept
such Guarantee, and such Indemnitor Partner's obligation thereunder and to
cause the Partnership to acknowledge and accept the indemnification
obligation of such Indemnitor Partner contained in any such Guarantee.
(c) Nothing in this Section 4.8 shall prohibit or preclude the
General Partners, at any time and in their sole discretion (but subject to
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any other provision of this Agreement), from refinancing, paying down or
paying off any Partnership indebtedness or permitting new Partners to
guarantee excess amounts of debt, or indemnify the General Partners for, any
portion of the Partnership indebtedness; provided, however, with respect to
any Partnership indebtedness that is subject to a Guarantee and which is to
be refinanced, paid down or paid off, the Administering General Partner shall
notify, in writing (the "Notice"), each such Indemnitor Partner of such
refinancing, paydown or payoff, and such Indemnitor Partner shall have
fifteen (15) days from the date of receipt of the Notice to execute a
substitute Guarantee (a "Substitute Guarantee") for an amount of the "least
risky portion" of Partnership indebtedness then in existence determined in
the manner described in subsection (b) above pursuant to a guarantee having
substantially similar terms as the Guarantee that is being substituted. If,
within fifteen (15) days of the Indemnitor Partner's receipt of the Notice,
the Indemnitor Partner notifies the Administering General Partner, in
writing, of the Indemnitor Partner's desire to execute a Substitute Guarantee
as described in the Notice, then the Administering General Partner shall,
subject to the limitations set forth herein: (i) permit such Indemnitor
Partner to execute such Substitute Guarantee; (ii) use commercially
reasonable efforts to cause the lender of the Partnership indebtedness that
is guaranteed by the Substitute Guarantee to acknowledge and accept such
Substitute Guarantee, and such Indemnitor Partner's obligations thereunder,
and (iii) cause the Partnership to acknowledge and accept the indemnification
obligation of such Indemnitor Partner contained in such Guarantee.
(d) Notwithstanding anything herein to the contrary, provided
that the General Partners and the Partnership satisfy their obligations under
this Section 4.8, at no time and under no circumstances shall an Indemnitor
Partner have any recourse against the Partnership, the General Partners or
any other Person, and none of the Partnership, the General Partners nor any
other Person shall have any liability under this Section 4.8 or otherwise in
the event that a Guarantee or Substitute Guarantee (i) is not acknowledged or
accepted by any lender and/or (ii) does not result in the deferral of taxes.
ARTICLE 5.
BOOKS AND RECORDS; ANNUAL REPORTS
5.1 Books of Account. At all times during the continuance of
the Partnership, the Administering General Partner shall keep or cause to be
kept true and complete books of account in which shall be entered fully and
accurately each transaction of the Partnership. Such annual books shall be
kept on the basis of the Fiscal Year in accordance with the accrual method of
accounting, and shall reflect all Partnership transactions in accordance with
generally accepted accounting principles. Any Investor Group Partner shall
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have the right to inspect, copy and audit the books and records of the
Partnership at reasonable times and upon reasonable notice.
5.2 Availability of Books of Account. All of the books of
account referred to in Section 5.1, together with an executed copy of this
Agreement and the Certificate, and any amendments thereto, shall at all times
be maintained at the principal office of the Partnership or such other
location as the Administering General Partner may propose and WHGP and
Blackstone GP shall approve (which other location, upon such approval, shall
be communicated to all of the Partners), and upon reasonable notice to the
Administering General Partner, shall be open to the inspection and
examination of the General Partners or their representatives during
reasonable business hours.
5.3 Annual Reports and Statements; Annual Budgets and Business
Plans.
(a) For each Fiscal Year, the Administering General Partner
shall send to each Person who was a Partner at any time during such Fiscal
Year, by no later than February 15 of the next Fiscal Year, an annual report
of the Partnership including an annual balance sheet, profit and loss
statement and a statement of changes in financial position, and a statement
showing distributions to the Partners all as prepared in accordance with
generally accepted accounting principles consistently applied and audited by
the Partnership's independent public accountants, which initially shall be
PricewaterhouseCoopers, and a statement showing allocations to the Partners
of taxable income, gains, losses, deductions and credits, as prepared by such
accountants (it being acknowledged that the Administering General Partner's
obligations hereunder are not to guaranty timely delivery of audits, tax
returns or similar third-party work product, and the failure of the auditor
or another third party to make such delivery shall not itself constitute a
default hereunder on the part of the Administering General Partner). For
each quarter, the Administering General Partner shall send to each Person who
was a Partner at any time during such quarter, within forty-five (45) days
after the end of such quarter, quarterly financial statements of the
Partnership including a quarterly balance sheet, profit and loss statement
and a statement of changes in financial position, and a statement showing
distributions to the Partners all as prepared in accordance with generally
accepted accounting principles consistently applied. In addition, the
Administering General Partner shall send (i) to each General Partner within
twenty-five (25) days after the end of each month of each Fiscal Year a
monthly report setting forth the financial and operating information on an
accrual basis and in form and substance approved by the General Partners
(acting reasonably) after the date hereof, (ii) to each Partner by no later
than February 15 of each year, completed IRS Schedules K-1 prepared by the
Partnership's accountants in accordance with Section 3.3(ii), and (iii) to
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each Partner such other information concerning the Partnership and reasonably
requested by any Partner as is necessary for the preparation of each
Partner's federal, state and local income or other tax returns. Each General
Partner agrees that the Partnership will use and comply with the requirements
and deadlines of the Whitehall REPSYS management reporting system (to the
extent that compliance with such reporting system does not cause the
Partnership to incur additional material costs). The Administering General
Partner shall prepare and deliver to the lender under any loan documents to
which the Partnership is a party all reports and statements required by such
lender.
(b) The Administering General Partner shall prepare or cause to
be prepared a proposed Annual Budget and related Business Plan for the
Partnership as a whole. The initial Annual Budget and Business Plan, which
have been approved by all of the General Partners, are attached hereto as
Schedule 5.3(b). Not later than November 15 of the prior Budget Year with
respect to each subsequent Budget Year, the Administering General Partner
shall prepare for the Partnership for the Budget Year in question, a proposed
Annual Budget and a proposed Business Plan for the Partnership as a whole.
Not later than thirty (30) days after receipt by WHGP and Blackstone GP of a
proposed Annual Budget or Business Plan (or such longer period as WHGP or
Blackstone GP may reasonably request on notice to the Administering General
Partner), WHGP or Blackstone GP may deliver a notice (an "Objection Notice")
to the Administering General Partner stating that WHGP or Blackstone GP
objects to any information contained in or omitted from such proposed Annual
Budget or Business Plan and setting forth the nature of such objections.
With respect to all or any portion of such proposed Annual Budget or Business
Plan as to which no Objection Notice is delivered prior to such thirtieth
(30th) day (or such longer period as WHGP or Blackstone GP may have
reasonably requested), the proposed Annual Budget or Business Plan or such
portion thereof will be deemed to have been accepted and consented to by WHGP
and Blackstone GP. If the Objection Notice is timely delivered, the
Administering General Partner shall modify the proposed Annual Budget or
Business Plan, taking into account WHGP's and/or Blackstone GP's, as
applicable, objections, shall resubmit the same to WHGP and Blackstone GP for
WHGP's and Blackstone GP's approval within 15 days thereafter, and WHGP and
Blackstone GP may deliver further Objection Notices (if any) within 15 days
thereafter (in which event, the re-submission and review process described
above in this sentence shall continue until the Annual Budget or Business
Plan in question is accepted and consented to by WHGP and/or Blackstone GP or
deemed to be so accepted and consented to). As to any portion of a proposed
Annual Budget or Business Plan that is the subject of an Objection Notice,
the Annual Budget or Business Plan (as the case may be) for the immediately
preceding year shall be deemed to control pending resolution by WHGP and/or
Blackstone GP of the disputed items (as adjusted in accordance with Section
3.3(2) above). Notwithstanding the foregoing, approval of the Annual Budget
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and the Business Plan shall at all times be a Majority Decision and no
General Partner shall have the right to submit an Objection Notice after the
approval of an Annual Budget or Business Plan by the General Partners in
accordance with Section 3.3.
5.4 Accounting and Other Expenses. All out-of-pocket expenses
payable to Persons, including Affiliates of the Administering General Partner
that are retained in accordance with the terms of this Agreement, in
connection with the keeping of the books and records of the Partnership and
the preparation of audited or unaudited financial statements and federal and
local tax and information returns required to implement the provisions of
this Agreement or required by any governmental authority with jurisdiction
over the Partnership or otherwise required to be paid in connection with the
management or operation of the Partnership shall be borne by the Partnership
as an ordinary expense of its business. The Partnership shall reimburse the
Administering General Partner's consultants for the preparation of K-1's, and
federal and local tax and information returns.
5.5 Bank Account. The Administering General Partner shall, as
soon as reasonably practicable, establish and maintain segregated bank
accounts in the Partnership's name and for the Partnership's business, which
accounts shall, to the extent reasonably practicable, be interest-bearing.
Withdrawals or checks, other than withdrawals or checks made or issued in
respect of required mortgage payments, in excess of $500,000 (or, upon notice
to the Administering General Partner, such lesser or greater amount as WHGP
and Blackstone GP may from time to time determine) shall require the
signature of an authorized representative of WHGP or Blackstone GP.
Withdrawals or checks not in excess of $500,000 (or upon notice to the
Administering General Partner, such lesser or greater amount as WHGP and
Blackstone GP may from time to time determine) and withdrawals and checks
made or issued in respect of required mortgage payments may be made by an
authorized representative of the Administering General Partner to the extent
that the Administering General Partner is permitted hereunder to incur the
expense or other liability paid or discharged without the prior consent or
approval of the other General Partners.
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ARTICLE 6.
CAPITAL CONTRIBUTIONS, LOANS
AND LIABILITIES
6.1 Initial Capital Contributions of the Partners.
(a) Each Class C Partner shall, on or prior to the Closing Date,
make initial cash Capital Contributions, to the Partnership in the aggregate
amounts set forth opposite such Class C Partner's name on Schedule 6.1(a)
hereto and the Partnership shall, in consideration of such Capital
Contribution, issue to each such Class C Partner the number of Class C
Preferred Units set forth opposite such Class C Partner's name on Schedule
6.1 hereto. Each Class C Partner shall be deemed to have made a Capital
Contribution to the Partnership in an amount equal to the amount of cash so
contributed to the Partnership.
(b) As contemplated by Section 2.7(c), each Class D Partner
shall, on or prior to the Closing Date, make an initial Capital Contribution
to the Partnership of 512,203 shares of common stock of BRI and 4,904,066 BRI
OP Units held by Berkshire, BGP and their respective Affiliates on such date
free and clear of any and all liens and encumbrances, such Capital
Contributions having an agreed value equal to the product of (i) the number
of shares plus the number of such BRI Units so contributed to the Partnership
and (ii) $12.25. In consideration for such Capital Contributions, the
Partnership shall issue to Berkshire and BGP a number of Class D Units equal
to the sum of the number of shares of common stock of BRI plus the number of
BRI OP Units so contributed to the Partnership.
(c) Each holder of BRI OP Units electing to receive Class A
Preferred Units in the merger of BRI OP and a subsidiary partnership of the
Partnership (the "Partnership Merger") shall be considered to have made, as a
result of the Partnership Merger, an initial Capital Contribution to the
Partnership on the Closing Date of all BRI OP Units held by such holder on
such date (it being understood and agreed that all such BRI OP Units shall,
immediately prior to the consummation of such Partnership Merger, be free and
clear of any and all liens and encumbrances). In consideration for such
Capital Contributions, the Partnership shall issue to such holder of BRI OP
Units a number of Class A Preferred Units equal to the number of BRI OP Units
so contributed to the Partnership. Each such holder shall be deemed to have
made a Capital Contribution to the Partnership in an amount equal to the
product of (i) the number of BRI OP Units so contributed to the Partnership
by such holder of BRI OP Units and (ii) $12.25.
(d) Each holder of BRI OP Units electing to receive Class B
Units in the Partnership Merger shall be considered to have made, as a result
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of the Partnership Merger, an initial Capital Contribution to the Partnership
on the Closing Date of all BRI OP Units held by such holder on such date (it
being understood and agreed that all such BRI OP Units shall, immediately
prior to the consummation of such Partnership Merger, be free and clear of
any and all liens and encumbrances). In consideration for such Capital
Contributions, the Partnership shall issue to such holder of BRI OP Units a
number of Class B Units equal to the number of BRI OP Units so contributed to
the Partnership. Each such holder shall be deemed to have made a Capital
Contribution to the Partnership in an amount equal to the product of (i) the
number of BRI OP Units so contributed to the Partnership by such holder of
BRI OP Units and (ii) $12.25.
(e) Schedule 6.1 hereto, as such schedule may be amended from
time to time, sets forth the respective number and type of Units held by,
and the Class A Preferred Percentage Interest, Class B Percentage Interest,
Class C Percentage Interest, Class D Percentage Interest and Class E
Percentage Interest of, each of the Partners.
(f) Intentionally omitted.
(g) The General Partners may, acting by unanimous decision
pursuant to Section 3.4, cause the Partnership to admit officers, employees
or consultants of the Partnership as Class E Limited Partners and in
connection therewith, in their sole discretion, apportion Class E Percentage
Interests to such Class E Limited Partners. Each such officer, employee or
consultant shall become a Class E Limited Partner only when (i) such person
executes a written acceptance of all of the terms and conditions of this
Agreement and (ii) the Administering General Partner has entered such person
as a Partner on the books and records of the Partnership. The General
Partners may, acting as if such decision were a Unanimous Decision, remove
any Class E Limited Partner for Cause or Company Cause (as determined by the
General Partners), and in the event of such removal such Class E Limited
Partner shall forfeit his Class E Limited Partnership Interest. In addition,
the Partnership may, upon the approval of all of the General Partners as if
such decision were a Unanimous Decision, enter into agreements with one or
more Class E Limited Partners providing for, among other things, the
repurchase or forfeiture of Class E Limited Partnership Interests in
accordance with the terms of such agreements.
(h) On the date hereof and prior to the Closing Date, the Class
C Partners may make Capital Contributions to fund the Partnership's
obligations (or make payments in respect of obligations) that arise prior to
the Closing Date, including, without limitation, the Partnership's
obligations to provide an escrowed amount under the terms of the BRI Merger
Agreement or to purchase interest rate hedge agreements). All such Capital
Contributions or payments made by such Class C Partners shall be deemed to be
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made pursuant to Section 6.1(a). Any amounts paid by Berkshire or BGP to
fund such obligations shall be treated as an advance to the Partnership and
shall be repaid by the Partnership contemporaneously with the closing under
the BRI Merger Agreement (together with a 12% return thereon). This clause
(h) shall not apply with respect to the payment of fees and expenses that are
to be reimbursed pursuant to Section 2.9(a)
6.2 Additional Contributions.
(a) If two of the General Partners, acting together as if such
decision were a Majority Decision, determine that funds are necessary with
respect to required debt service payments, the payment of taxes required to
be paid in respect of the Properties or the operations of the Partnership,
operating deficits, insurance premiums and similar matters, or by an
emergency that threatens injury to persons or damage to property, (a
"Necessary Expenditure"), such General Partners shall have the right to make
a capital call (a "Mandatory Capital Call") with respect to the Investor
Group Partners in an amount as reasonably determined by such General Partners
making such Mandatory Capital Call in order to remedy such matter and shall
as promptly as reasonably possible deliver a notice to each of the other
Investor Group Partners (by telephone, telecopier or such other means as is
necessary in order to remedy such emergency potential injury or damage)
describing the amount and nature of such Necessary Expenditure and making a
Mandatory Capital Call for such amount. Notwithstanding anything contained
herein to the contrary, in no event may the General Partners make Mandatory
Capital Calls in excess of an aggregate amount equal to the amount obtained
by dividing (a) $10,000,000 by (b) the aggregate Partnership Percentage
Interests of Berkshire and BGP on the date hereof (the "Mandatory Capital
Call Limit") (it being understood and agreed that any Additional Capital Call
or portion thereof in respect of Necessary Expenditures in an amount which
when aggregated with the amounts of all previous Mandatory Capital Calls
exceeds the Mandatory Capital Call Limit shall be subject to Section 6.2(c)).
Each Investor Group Partner shall be required to contribute to the capital of
the Partnership an amount of cash equal to such Investor Group Partner's pro
rata portion (based on such Investor Group Partner's Partnership Percentage
Interest as compared to the Partnership Percentage Interests of all of the
other Investor Group Partners) which contribution shall be made as promptly
as reasonably determined by the General Partners making such Mandatory
Capital Call (but in no event sooner than twenty (20) business days following
the delivery of the notice of a Mandatory Capital Call) in order to remedy
such matter requirement, emergency, potential injury or damage. The
Partnership shall use reasonable efforts to minimize the costs and
expenditures to the Partnership in connection with such requirement,
emergency, potential injury or matter.
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(b) Two of the General Partners, acting together as if such
decision were a Majority Decision, may, during the period ending on the date
that is the later of (i) the first anniversary following the Closing Date and
(ii) three months after the maturity of the Bridge Loan, require the funding
of one or more Additional Capital Calls in an aggregate amount not to exceed
$30,000,000 (a "Financing Capital Call"). In the event such General Partners
determine to make such a Financing Capital Call, such General Partners shall
as promptly as reasonably possible deliver a notice to each of the other
Investor Group Partners (in the manner provided in Section 12.2) describing
the amount and nature of such Financing Capital Call. Each of Berkshire,
Whitehall and Blackstone LP shall be required to contribute to the capital of
the Partnership an amount in cash equal to one-third (1/3) of the amount of
such Financing Capital Call, which contribution shall be made as promptly as
possible, but in no event later than twenty (20) business days following the
delivery of notice of such Financing Capital Call.
(c) Any Additional Capital Calls not described in clause (a) or
clause (b) of this Section 6.2 (including, without limitation, an Additional
Capital Call on account of a Necessary Expenditure in excess of the Mandatory
Capital Call Limit) shall be Unanimous Decisions subject to the approval
requirements of Section 3.4. In the event that such an Additional Capital
Call is so approved, each of the Investor Group Partners shall be required to
contribute to the capital of the Partnership an amount in cash equal to such
Partner's pro rata portion (based on such Investor Group Partner's
Partnership Percentage Interest as compared to the Partnership Percentage
Interests of all of the other Investor Group Partners) which contribution
shall be made as promptly as possible, but in no event later than thirty (30)
days, after such approval.
(d) Unless otherwise determined by the unanimous vote of the
General Partners, the Partnership shall issue Class C Preferred Units as
consideration for Additional Contributions and such Class C Preferred Units
shall be issued by the Partnership at a price of $12.25 per Class C
Preferred Unit.
(e) The amount of any U.S. federal and state tax liability of
the direct or indirect owners of the Berkshire Group (after giving effect to
any losses allocated to the Berkshire Group under Section 7.2 hereof) arising
from gain recognized by the Partnership in connection with the merger of BRI
with the Partnership (or a Subsidiary thereof) (as a result of the shares of
common stock in Berkshire Realty Company, Inc. contributed to the Partnership
by the Berkshire Group) will be deemed to constitute an Additional
Contribution made pro rata by the Berkshire Group on the date such tax
liability is paid, up to a maximum of $1.5 million, and the Berkshire Group
shall receive Class D Units in exchange for such deemed Additional
Contributions valued at $12.25 per class D Unit.
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6.3 Dilution for Failure to Fund Capital Calls.
(a) If any Partner shall fail to make a capital contribution
required pursuant to an Additional Capital Call in the amount and within the
time periods specified therein (such Partner is hereinafter referred to as a
"Non-Contributing Partner"), the Administering General Partner (or, if the
Administering General Partner is the Non-Contributing Partner, WHGP or
Blackstone GP) shall give notice of such failure to all other Investor Group
Partners and the amount of the capital contribution not funded by the Non-
Contributing Partner (such amount is hereinafter referred to as the "Failed
Contribution") and, within twenty (20) business days after receiving notice
of such failure, any Investor Group Partner or Investor Group Partners that
is or are not in default with respect to the Failed Contribution or any
contribution required to be made in connection with such Additional Capital
Call may fund all or part of such Failed Contribution (each such funding
Partner is hereinafter referred to as a "Contributing Partner"). If more
than one Partner desires to be a Contributing Partner, each such Partner
shall have the right to fund a portion of such Failed Contribution (the
"Funded Portion") pro rata in proportion to the relative Partnership
Percentage Interests of such Contributing Partners. At any time after
funding all or part of a Failed Contribution, the Partnership Percentage
Interest of each such Contributing Partner(s) shall be increased to the
percentage (rounded up to the nearest one hundredth of one percent) equal to
the sum of (i) such Contributing Partner's Partnership Percentage Interest
immediately prior to giving effect to the Capital Contributions pursuant to
such Additional Capital Call plus (ii) the percentage equal to the quotient
of (x) the sum of (A) the amount funded by such Contributing Partner pursuant
to such Additional Capital Call (other than the Funded Portion) plus (B) the
product of 2.0 (200%) times the Funded Portion funded by such Contributing
Partner divided by (y) the sum of all Partners' (other than the Class A
Preferred Limited Partners) Capital Contributions after giving effect to the
Capital Contributions funded pursuant to such Additional Capital Call
(including the Funded Portions). The Partnership Percentage Interest of the
Non-Contributing Partner shall be decreased by the aggregate amount of the
increase in the Partnership Percentage Interests of all Contributing Partners
as a result of the failure of the Non-Contributing Partner to fund the
capital calls in question.
Notwithstanding the foregoing, the words "1.0 (100%)" shall replace
the words "2.0 (200%)" for determining the applicable dilution for a Non-
Contributing Partner in respect of any Additional Capital Call made pursuant
to clause (a) of Section 6.2, to the extent, but only to the extent, that
Berkshire's share of such Additional Capital Contribution is in excess of
$10,000,000.
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(b) In the event that the Partnership Percentage Interest of a
Non-Contributing Partner or of a Contributing Partner is adjusted pursuant to
the foregoing provisions of this Section 6.3, the Class C Percentage Interest
or other Percentage Interest relating to a class of Partnership Units of such
Contributing Partner or Non-Contributing Partner and the number of
Partnership Units of each class held by such Non-Contributing Partner shall
likewise be adjusted, using the same dilution factors as are used in
determining the adjustment to the Partnership Percentage Interests (it being
understood and agreed that such adjustments will result in an adjustment to
the Partnership Percentage Interest of the Non-Contributing and Contributing
Partner and to the Class C Percentage Interest (or such other applicable
Percentage Interest) and to the number of Partnership Units of each class
held by the Contributing Partner and the Non-Contributing Partner).
(c) In the event one or more of the Investor Group Partners fund
an Additional Capital Call, the Limited Partners other than the Investor
Group Partners shall not be required or entitled to fund any portion of such
Additional Capital Call and the Partnership Percentage Interest of such
Limited Partners (and of the Investor Group Partners) shall be adjusted as
provided in clause (a) of this Section 6.3; provided, however, that the words
"1.0 (100%)" shall replace the words "2.0 (200%)" for purposes of all such
calculations.
(d) Notwithstanding anything contained herein to the contrary,
the Class A Preferred Limited Partners, Class B Limited Partners and Class E
Limited Partners shall have no obligation to contribute any additional
capital to the Partnership and the Partnership Percentage Interest of the
Class A Preferred Limited Partners , Class B Limited Partners and Class E
Limited Partners (which shall at all times be zero (0%), shall not be diluted
by operation of this Section 6.3.
6.4 Capital of the Partnership. Except as otherwise expressly
provided herein, no Partner shall be entitled to withdraw or receive any
interest or other return on, or return of, all or any part of its Capital
Contribution, or to receive any Partnership property (other than cash) in
return for its Capital Contribution. No Partner shall be entitled to make a
Capital Contribution to the Partnership except as expressly authorized by
this Agreement or to make any loans to the Partnership except with the
unanimous consent of the General Partners.
6.5 Liability of General Partners. All debts and obligations of
the Partnership shall be paid or discharged first with the assets of the
Partnership before the General Partners shall be obligated to pay or
discharge such debts or obligations (and then such obligation shall be only
to the extent required by applicable law). The General Partners shall not be
liable for the return of the Capital Contribution of any Limited Partner.
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6.6 Limited Liability of Limited Partners. Except as provided
in Section 4.8, no Limited Partner shall be bound by, or be personally liable
for, the expenses, liabilities, indebtedness or obligations of the
Partnership or of the General Partners. The liability of each Limited
Partner shall be limited solely to the amount of its Capital Contribution;
provided, however, that after a Limited Partner has received a distribution
from the Partnership, such Limited Partner may be liable to the Partnership
for the amount of the distribution but only to the extent required by the
Act. Without affecting the rights and remedies provided under Sections 6.2
through 6.5 hereof, the Limited Partners shall not be required to contribute
any amounts to the Partnership other than their Initial Capital
Contributions. Nothing contained in this Agreement shall be deemed to confer
on any Limited Partner the right to control the business of the Partnership
for purposes of the Act.
ARTICLE 7.
CAPITAL ACCOUNTS, PROFITS
AND LOSSES AND ALLOCATIONS
7.1 Capital Accounts.
(a) The Partnership shall maintain a Capital Account for each
Partner in accordance with federal income tax accounting principles. Each
Partner's Capital Account as of the Effective Date will be equal to its
original Capital Contribution pursuant to Section 6.1. In the event any
General Partner or any controlling person of such General Partner files a
bankruptcy or similar proceeding with respect to the Partnership without
first obtaining the prior written approval of at least one other General
Partner, the Capital Account, the Partnership Percentage Interest, Class C
Percentage Interest and/or Class D Percentage Interest of such General
Partner and of whichever of the Berkshire Group, the Whitehall Group or The
Blackstone Group of which it is a member shall be reduced to zero (0).
(b) The Capital Account of each Partner shall be increased by
(i) the amount of any cash and the agreed Book Value of any property (net of
liabilities encumbering such property) as of the date of contribution
subsequently contributed as a Capital Contribution to the capital of the
Partnership by such Partner and (ii) the amount of any Profits allocated to
such Partner. The Capital Account of each Partner shall be decreased by (i)
the amount of any Losses allocated to such Partner and (ii) the amount of
distributions (including the fair market value of any property distributions
(net of liabilities encumbering such Properties)) to such Partner. In all
respects, the Partner's Capital Accounts shall be determined in accordance
with the detailed capital accounting rules set forth in Treasury Regulations
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Section 1.704-1(b)(2)(iv) and shall be adjusted upon the occurrence of
certain events as provided in Treasury Regulations Section 1.704-
1(b)(2)(iv)(f).
(c) A transferee of all (or a portion) of an Interest shall
succeed to the Capital Account (or portion of the Capital Account)
attributable to the transferred Interest.
7.2 Profits and Losses.
(a) The profits and losses of the Partnership ("Profits" and
"Losses") shall be the net income or net loss (including capital gains and
losses), respectively, of the Partnership determined for each Fiscal Year in
accordance with the accounting method followed for federal income tax
purposes except that (i) in computing Profits and Losses, all depreciation
and cost recovery deductions shall be deemed equal to Depreciation, (ii) in
computing Profits and Losses, gains or losses shall be determined by
reference to Book Value rather than tax basis, (iii) any tax-exempt income
received by the Partnership shall be included as an item of gross income;
(iv) the amount of any adjustments to the Book Values of any assets of the
Partnership pursuant to Code Section 743 shall not be taken into account
except to the extent provided in the penultimate sentence of Treasury
Regulation Section 1.704-1(b)(2)(iv)(m)(2), (v) any expenditure of the
Partnership described in Code Section 705(a)(2)(B) (including any
expenditures treated as being described in Section 705(a)(2)(B) pursuant to
Treasury Regulations under Code Section 704(b)) shall be treated as a
deductible expense, (vi) the amount of items of income, gain, loss or
deduction specially allocated to any Partners pursuant to Section 7.2(f)
shall not be included in the computation and (vii) the amount of any
increases or decreases in the Book Value of any asset upon an adjustment to
the Book Values of the assets pursuant to Treasury Regulation Section 1.704-
1(b)(2)(iv)(f) shall be included in the computation as items of gain and loss
respectively.
(b) Whenever a proportionate part of the Profits or Losses is
allocated to a Partner, every item of income, gain, loss, deduction or credit
entering into the computation of such Profits or Losses or arising from the
transactions with respect to which such Profits or Losses were realized shall
be credited or charged, as the case may be, to such Partner in the same
proportion; provided, however, that "recapture income", if any, shall be
allocated to the Partners who were allocated the corresponding depreciation
deductions.
(c) If any Partner transfers all or any part of its Interest
during any Fiscal Year or its Interest is increased or decreased, Profits and
Losses attributable to such Interest for such Fiscal Year shall be
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apportioned between the transferor and transferee or computed as to such
Partners, as the case may be, ratably on a daily basis, provided in all
events that any apportionment described above shall be permissible under the
Code and applicable regulations thereunder.
(d) For all purposes, including federal, state and local income
tax purposes, Profits shall be allocated each year among all the Partners as
follows:
(i) First, pro rata among all the Partners in proportion
to the amounts allocated and previously allocated pursuant to Section
7.2(e)(viii) hereof until the amount allocated and previously
allocated pursuant to this Section 7.2(d)(i) equals the amount
allocated and previously allocated pursuant to Section 7.2(e)(viii)
hereof;
(ii) Second, to the Partners so that the cumulative
amounts allocated to each of them pursuant to this Section 7.2(d)(ii)
equals the cumulative amount distributed to each of them for the
current period and all prior periods pursuant to Section 8.1(b)(1)
hereof (including amounts distributed on a sale or other disposition
of all or substantially all of the Partnership Assets pursuant to the
accrued and unpaid distribution clause of Section 10.3(5)).
(iii) Third, to the Partners in proportion to the amounts
distributable and previously distributed pursuant to Section
8.1(b)(2) hereof (excluding amounts attributable to Capital
Contributions but including amounts (x) that would be distributable
pursuant to Section 8.1(b)(2) hereof as a result of the application
of Section 10.3(6) upon a sale or other disposition of all or
substantially all of the Partnership Assets, or (y) that would have
been distributable if the Partnership had received and distributed
the full amount of cash attributable to the income being allocated)
until the amount allocated and previously allocated pursuant to this
Section 7.2(d)(iii) (and not reversed by Section 7.2(e)(vii) hereof)
equals such distributed or distributable amounts;
(iv) Fourth, to the Partners in proportion to the amounts
distributable and previously distributed pursuant to Section
8.1(b)(3) hereof (excluding amounts attributable to Capital
Contributions but including amounts (x) that would be distributable
pursuant to Section 8.1(b)(3) as a result of the application of
Section 10.3(6) upon a sale or other disposition of all or
substantially all of the Partnership Assets, or (y) that would have
been distributable if the Partnership had received and distributed
the full amount of cash attributable to the income being allocated)
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until the amount allocated and previously allocated pursuant to this
Section 7.2(d)(iv) (and not reversed by Section 7.2(e)(vi) hereof)
equals such distributed or distributable amounts;
(v) Fifth, to the Partners in proportion to the amounts
distributable and previously distributed pursuant to Section
8.1(b)(4) hereof (excluding amounts attributable to Capital
Contributions but including amounts (x) that would have been
distributable pursuant to Section 8.1(b)(4) as a result of the
application of Section 10.3(6) upon a sale or other disposition of
all or substantially all of the Partnership Assets, or (y) that would
have been distributable if the Partnership had received and
distributed the full amount of cash attributable to the income being
allocated) until the amount allocated and previously allocated
pursuant to this Section 7.2(d)(v) (and not reversed by Section
7.2(e)(v) hereof) equals such distributed or distributable amounts;
(vi) Sixth, to the Partners in proportion to the amounts
distributable and previously distributed pursuant to Section
8.1(b)(5) hereof (excluding amounts attributable to Capital
Contributions but including amounts (x) that would be distributable
pursuant to Section 8.1(b)(5) as a result of the application of
Section 10.3(6) upon a sale or other disposition of all or
substantially all of the Partnership Assets, or (y) that would have
been distributable if the Partnership had received and distributed
the full amount of cash attributable to the income being allocated)
until the amount allocated and previously allocated pursuant to this
Section 7.2(d)(vi) (and not reversed by Section 7.2(e)(iv) hereof)
equals such distributed or distributable amounts;
(vii) Seventh, to the Partners in proportion to the
amounts distributable and previously distributed pursuant to Section
8.1(b)(6) hereof (including amounts (x) that would be distributable
pursuant to Section 8.1(b)(6) as a result of the application of
Section 10.3(6) upon a sale or other disposition of all or
substantially all of the Partnership Assets, or (y) that would have
been distributable if the Partnership had received and distributed
the full amount of cash attributable to the income being allocated)
until the amount allocated and previously allocated pursuant to this
Section 7.2(d)(vii) (and not reversed by Section 7.2(e)(iii) hereof)
equals such distributed or distributable amounts;
(viii) Thereafter, (A) with respect to periods during which
BGP is the Administering General Partner, (I) seventeen and one-half
percent (17 1/2%) pro rata to the Class D Partners, (II) seven and
one-half percent (7 1/2%) to the Class E Limited Partners (in
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proportion to their respective Class E Percentage Interests) and
(III) seventy-five percent (75%) to the Partners other than the Class
A Preferred Limited Partners and Class E Limited Partners (pro rata
in proportion to their Partnership Percentage Interests, or (B) with
respect to periods during which BGP is not the Administering General
Partner, (I) seventeen and one-half percent (17 1/2%) to the Class E
Limited Partners and (II) the remainder to the Partners other than
the Class A Preferred Limited Partners and Class E Limited Partners
(pro rata in proportion to their Partnership Percentage Interests).
(e) For all purposes, including federal, state and local income
tax purposes, Losses shall be allocated each year among all the Partners as
follows:
(i) First, pro rata to the Class D Partners in
proportion to and to the extent of their positive Capital Account
balances;
(ii) Second, to the Partners in proportion to and to the
extent of the excess of (A) the respective aggregate amount allocated
to them pursuant to Section 7.2(d)(viii) hereof over (B) the
respective amounts previously allocated to them pursuant to this
Section 7.2(e)(ii);
(iii) Third, to the Partners in proportion to and to the
extent of the excess of (A) the respective aggregate amount allocated
to them pursuant to Section 7.2(d)(vii) hereof over (B) the
respective amounts previously allocated to them pursuant to this
Section 7.2(e)(iii);
(iv) Fourth, to the Partners in proportion to and to the
extent of the excess of (A) the respective aggregate amount allocated
to them pursuant to Section 7.2(d)(vi) hereof over (B) the respective
amounts previously allocated to them pursuant to this Section
7.2(e)(iv);
(v) Fifth, to the Partners in proportion and to the
extent of the excess of (A) the respective aggregate amount allocated
to them pursuant to Section 7.2(d)(v) hereof over (B) the respective
amounts previously allocated to them pursuant to this Section
7.2(e)(v);
(vi) Sixth, to the Partners in proportion to and to the
extent of the excess of (A) the respective aggregate amount allocated
to them pursuant to Section 7.2(d)(iv) hereof over (B) the respective
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amounts previously allocated to them pursuant to this Section
7.2(e)(vi);
(vii) Seventh, to the Partners in proportion to and to the
extent of the excess of (A) the respective aggregate amount allocated
to them pursuant to Section 7.2(d)(iii) hereof over (B) the
respective amounts previously allocated pursuant to this Section
7.2(e)(vii); and
(viii) Thereafter, pro rata among all the Partners in
proportion to their Partnership Percentage Interests.
(f) Notwithstanding Sections 7.2(d) and (e) hereof,
(i) For federal income tax purposes but not for purposes
of crediting or charging Capital Accounts, depreciation or gain or
loss realized by the Partnership with respect to any property that
was contributed to the Partnership (including any dividend or other
income realized by the Partnership with respect to Berkshire's
contribution to the Partnership of the BRI common stock and operating
partnership units) or that was held by the Partnership at a time when
the Book Value of the Partnership Assets was adjusted pursuant to the
third sentence of Section 7.1(b) shall, in accordance with the
"traditional method" under Section 704(c) of the Code and Treasury
Regulation Sections 1.704-1(b)(2)(iv)(d) and (f) and 1.704-3(b), be
allocated among the Partners in a manner which takes into account the
differences between the adjusted basis for federal income tax
purposes to the Partnership of its interest in such property and the
fair market value of such interest at the time of its contribution or
revaluation.
(ii) If there is a net decrease in the Minimum Gain of
the Partnership during a taxable year (including any Minimum Gain
attributable to Partner-Funded Debt), each Partner at the end of such
year shall be allocated, prior to any other allocations required
under this Article 7, items of gross income for such year (and, if
necessary, for subsequent years) in the amount and proportions
described in Treasury Regulation Sections 1.704-2(g) and 1.704-
2(i)(4).
(iii) Notwithstanding the allocations provided for in
Sections 7.2(d), (e) and (f) no allocation of an item of loss or
deduction shall be made to a Partner to the extent such allocation
would cause or increase a deficit balance in such Partner's Capital
Account as of the end of the taxable year to which such allocation
relates. If any Partner receives an adjustment, allocation or dis-
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tribution that causes or increases such a deficit balance, taking
into account the rules of Treasury Regulation Sections 1.704-
1(b)(2)(ii)(d)(4), (5) and (6), such Partner shall be allocated
(after taking into account any allocations made pursuant to Section
7.2(g)(ii)) items of income and gain in an amount and manner to
eliminate the Partner's Capital Account deficit attributable to such
adjustment, allocation or distribution as quickly as possible. For
purposes of this Section 7.2(g)(iii), there shall be excluded from a
Partner's deficit Capital Account balance at the end of a taxable
year of the Partnership (a) such Partner's share, determined in
accordance with Section 704(b) of the Code and Treasury Regulation
Section 1.704-2(g) of Minimum Gain (provided that in the case of
Minimum Gain attributable to Partner-Funded Debt, such Minimum Gain
shall be allocated to the Partner or Partners to whom such debt is
attributable pursuant to Treasury Regulation Section 1.704-2(i)) and
(b) the amount, if any, that such Partner is obligated to restore to
the Partnership under Treasury Regulation Section 1.704-
1(b)(2)(ii)(c).
(iv) Notwithstanding the allocations provided for in
subsection (i) of this Section 7.2(g) and Sections 7.2(d), (e) and
(f), if there is a net increase in Minimum Gain of the Partnership
during a taxable year of the Partnership that is attributable to
Partner-Funded Debt then first Depreciation, to the extent the
increase in such Minimum Gain is allocable to depreciable property,
and then a proportionate part of other deductions and expenditures
described in Section 705(a)(2)(B) of the Code, shall be allocated to
the lending or guaranteeing Partner (and to joint lenders or
guarantors in proportion to their relative obligations), provided
that the total amount of deductions so allocated for any year shall
not exceed the increase in Minimum Gain attributable to such Partner-
Funded Debt in such year.
(v) Subject to the provisions of Section 7.2(f)(iv),
above, all Non-recourse Deductions of the Partnership for any year
shall be allocated to the Class A, Class B and Class D Partners in
the same manner and proportion as their relative shares of Profits
and Losses for such year, and the Partnership shall allocate "excess
non-recourse liabilities" (as determined under Treasury Regulation
Section 1.752-3(a)(3)) in the same ratio.
(vi) Any special allocation under Sections 7.2(f)(ii)
through (v) shall be taken into account (to the extent appropriate)
in computing subsequent allocations of Profits and Losses of any item
thereof pursuant to this Article 7 so that the net amount of any
items so allocated and the Profits, Losses and all items thereof
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allocated to each Partner pursuant to this Article 7 shall, to the
extent permissible under Sections 704(b) of the Code and the Treasury
Regulations promulgated thereunder, be equal to the net amount that
would have been allocated to each Partner pursuant to this Article 7
if such special allocation had not occurred.
ARTICLE 8.
APPLICATIONS AND DISTRIBUTIONS
OF AVAILABLE CASH
8.1 Applications and Distributions.
(a) Distributions of Available Cash (subject to all restrictions
contained in the definition of such term) for each quarter shall be made to
the Partners by the Administering General Partner on behalf of the
Partnership in accordance with Section 8.1(b) within 60 days after the end of
such quarter of each Fiscal Year.
(b) Available Cash shall be distributed to the Partners in the
following order of priority (and the calculations described in the following
clauses shall be made as of the date of each distribution, on a cumulative
basis), subject to the other terms of this Article 8 and the terms of Section
6.3:
(1) First, to the Class A Preferred Limited Partners,
pro rata in accordance with their respective Class A Preferred
Percentage Interests, until each of the Class A Preferred Limited
Partners has received a cumulative, compounded quarterly to the
extent not paid on a quarterly basis, return of 7.5% per annum on the
amount of such Class A Preferred Limited Partner's Capital
Contribution taking into account the amount and timing of all prior
distributions under this Section 8.1(b)(1) (any shortfall in the full
payment of such return, from time to time, being referred to in this
Agreement as an unpaid and accrued distribution in respect of the
Class A Preferred Units).
(2) Second, to holders of Class C Preferred Units (pro
rata in proportion to the amount of any accrued and unpaid return
owing with respect to the Class C Preferred Units held by each such
Partner) until each of such Partners has received, taking into
account the amount and timing of all prior distributions under this
Section 8.1(b)(2) and of all prior Capital Contributions made
pursuant to Sections 6.1 and 6.2 (to the extent made in respect of
Class C Preferred Units) by such Partner, a Rate of Return on the
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aggregate Capital Contributions made by it in respect of the Class C
Preferred Units equal to twelve percent (12%).
(3) Third, to the holders of Class B Units and Class D
Units on a pari passu basis (pro rata in proportion to the amount of
any accrued and unpaid return owing with respect to the Class B Units
and Class D Units held by each such Partner) until each such Partner
has received, taking into account the amount and timing of all prior
distributions under this Section 8.1(b)(3) and of all prior Capital
Contributions made in respect of such Class B Units or Class D Units,
as applicable, pursuant to Section 6.1 by such Partner, a Rate of
Return on the aggregate Capital Contributions made in respect of the
Class B Units and Class D Units equal to twelve percent (12%).
(4) Fourth, to all of the Partners other than the Class
A Preferred Limited Partners and the Class E Limited Partners (pro
rata in proportion to their relative Capital Contributions) until
each Partner other than the Class A Preferred Limited Partners and
the Class E Limited Partners has received, taking into account the
amount and timing of all prior distributions under this Section
8.1(b)(4) and under Sections 8.1(b)(2) and 8.1(b)(3) and of all prior
Capital Contributions made by such Partner, a Rate of Return on the
aggregate Capital Contributions made in respect of the Partnership
Units held by such Partner equal to fifteen percent (15%).
(5) Fifth, (i) 80% to all of the Partners other than the
Class A Preferred Limited Partners and the Class E Limited Partners
(pro rata in proportion to their relative Capital Contributions) and
(ii) with respect to periods during which BGP is the Administering
General Partner, fourteen percent (14%) to the Class D Partners (pro
rata in proportion to their relative Class D Percentage Interests),
and (iii) 6% to the Class E Limited Partners as IMP (pro rata in
proportion to their respective Class E Percentage Interests) until
each Partner other than the Class A Preferred Limited Partners and
the Class E Limited Partners has received, taking into account the
amount and timing of all prior distributions under this Sections
8.1(b)(5) and under Sections 8.1(b)(2), 8.1(b)(3) and 8.1(b)(4) and
the amount and timing of all prior Capital Contributions, a Rate of
Return on the aggregate Capital Contributions made in respect of the
Partnership Units held by such Partner equal to twenty percent (20%).
(6) Sixth, (i) with respect to periods during which BGP
is the Administering General Partner, seventy percent (70%) to the
Class D Partners (pro rata in proportion to their relative Class D
Percentage Interests) and (ii) thirty percent (30%) to the Class E
Limited Partners as IMP (in proportion to their respective Class E
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Percentage Interests) until the Class D Partners, if applicable, and
the Class E Limited Partners have received under this Section
8.1(b)(6) together with the amounts previously received under Section
8.1(b)(5)(ii) or 8.1(b)(5)(iii), (but only to the extent amounts
previously received under Section 8.1(b)(5)(ii) or 8.1(b)(5)(iii) are
received after each Partner other than the Class A Preferred Limited
Partners and the Class E Limited Partners has received a Rate of
Return on the aggregate Capital Contributions made by such Partner in
respect of the Partnership Units held by such Partner equal to
seventeen and one half percent (17 1/2%)) as applicable, an amount
equal to twenty-five percent (25%) of the Second Tier Differential.
(7) Seventh, (i) with respect to periods during which
BGP is the Administering General Partner, seventeen and one-half
percent (17 1/2%) of the remainder to the Class D Partners (pro rata
in proportion to their relative Class D Percentage Interests),
(ii) seven and one-half percent (7 1/2%) of the remainder to the
Class E Limited Partners as IMP (pro rata in proportion to their
respective Class E Percentage Interests) and (iii) seventy-five
percent (75%) of the remainder to the Partners other than the Class A
Preferred Limited Partners and the Class E Limited Partners (pro rata
in proportion to their relative Capital Contributions).
With respect to periods during which BGP is not the
Administering General Partner, amounts otherwise distributable to the holders
of the Class D Units pursuant to Sections 8.1(b)(5)(ii), (6)(i) and (7)(i)
shall be distributable under Sections 8.1(b)(5)(i), (6)(ii) and (7)(iii),
respectively, unless the General Partners (other than BGP) desire to admit a
new Administering General Partner, in which case the General Partners may
jointly determine to distribute part or all of such amounts instead to such
new Administering General Partner or otherwise as such other General Partners
shall determine.
(c) The Partnership shall endeavor to distribute in each Fiscal
Year (and, to the extent required, the immediately following Fiscal Year)
Available Cash (strictly in accordance with the priorities set forth in
Section 8.1(b)) in an amount at least sufficient (taking into account all
other distributions) for the Investor Group Partners' (and if such Investor
Group Partner is a pass-through entity for tax purposes, the shareholders,
members or partners comprising such Investor Group Partner) payment of
federal, state and local income taxes arising in respect of each Investor
Group Partner's share (or the share of the shareholders, members or partners
comprising such Investor Group Partner) of the income of the Partnership for
such Fiscal Year, assuming the highest combined effective tax rate applicable
to an individual resident in Massachusetts (but the foregoing shall not be
grounds for an Additional Capital Call), provided, however, that in the case
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of phantom income for any member of the Berkshire Group, such distribution
shall be made in proportion to the Partnership Percentage Interests of the
Investor Group Partners provided, however, that no distributions may be made
pursuant to this clause (c) at any time when distributions to be paid under
Section 8.1(b)(1) are accrued and unpaid and provided further that such
distributions shall offset amounts otherwise distributable to partners
currently or in the future.
8.2 Liquidation. In the event of the sale or other disposition
of all or substantially all of the Partnership Assets, the Partnership shall
be dissolved and the proceeds of such sale or other disposition shall be
distributed to the Partners in liquidation as provided in Article 10, except
that to the extent that the Partnership receives a purchase money note or
notes in exchange for all or a portion of such assets, the Partnership shall
continue until such purchase money notes or notes have been paid in full.
ARTICLE 9.
TRANSFER OF COMPANY INTERESTS
9.1 Limitations on Assignments of Interests by Partners.
(a) Except as provided in this Article 9, no Partner shall
Transfer (as hereinafter defined) all or any portion of its Interest or
permit such a Transfer or contract to do so, without the consent of each of
the General Partners (which consent may be withheld in such General Partner's
sole discretion for any reason or no reason) and in strict compliance with
the provisions of this Article 9. Notwithstanding the foregoing, but subject
to Section 9.9, (i) each member of the Whitehall Group, the Blackstone Group
or the Berkshire Group may, at any time, and without the prior consent of the
General Partners, Transfer all or any portion of its Interest to a Person
qualifying as an Affiliate under clause (i) of its definition hereof of such
transferring Partner and (ii) each member of the Berkshire Group and each
Class A Preferred Limited Partner and Class B Limited Partner may at any
time, and without the prior consent of the General Partners, and solely for
estate planning purposes, Transfer all or any portion of its Interest to one
or more family members of the Berkshire Principals, or to trusts established
for such family members or, as applicable, to family members of or trusts
established for the families of such Class A Preferred Limited Partners or
Class B Limited Partners. In addition each Class A Preferred Limited Partner
and Class B Limited Partner may transfer its Class A Preferred Units or Class
B Units to one or more Affiliates of such Class A Preferred Limited Partner
or Class B Limited Partner satisfying the requirements of clause (i) of the
definition of "Affiliate". As used herein "Transfer" of an Interest means,
with respect to any Partner, any transfer, sale, pledge, hypothecation,
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encumbrance, assignment or other disposition of any portion of the Interest
of such Partner or the proceeds thereof (whether voluntarily, involuntarily,
by operation of law or otherwise, other than a pledge permitted under Section
9.1(b)). Any purported Transfer in violation of this Article 9 shall be
void ab initio, and shall not bind the Partnership, and the Partners making
such purported transfer, sale or assignment shall indemnify and hold the
Partnership and the other Partners harmless from and against any federal,
state or local income taxes, or transfer taxes, including without limitation,
transfer gains taxes, arising as a result of, or caused directly or
indirectly by, such purported Transfer. The giving of any consent to a
Transfer in any one or more instances shall not limit or waive the need for
such consent in any other or subsequent instances. Notwithstanding the
foregoing, a Class A Preferred Limited Partner or a Class B Limited Partner
may (after giving the Partnership and the Class C Partners and Class D
Partners the right to purchase such Partnership Unit described in this
Section 9.1(a)) Transfer all, but not less than all, of its Class A Preferred
Units or Class B Units, respectively, to an "accredited investor" (as such
term is defined in Regulation D under the Securities Act) as long as
(i) prior to such Transfer, such Class A Preferred Limited Partner or Class B
Limited Partner offers to the Partnership and the Class C Partners and the
Class D Partners the right to purchase such Partnership Units in accordance
with the procedures described below in this Section 9.1, (ii) such transferee
agrees to be bound by all of the provisions of this Agreement, (iii) prior to
such Transfer outside legal counsel to the Partnership delivers (at the sole
expense of the transferring Partner except as provided below) an opinion to
the Partnership to the effect that such transfer does not require
registration under the Securities Act and does not cause the Partnership to
be a "publicly traded partnership" within the meaning of Section 7704 of the
Code (it being understood and agreed that (a) the Partnership shall spend up
to $50,000 in legal fees and expenses in any fiscal year in respect of any
such transfers, but that any legal fees or expenses in excess of such amount
shall be for the account of the transferring Partner or Partners; (b) that
the Partnership shall not be obligated to pay (and the transferring Partner
shall be obligated to pay) any and all fees and expenses incurred by such
transferring Partner including, without limitation, transfer and similar
taxes, and fees and expenses of legal counsel engaged by such transferring
Partners or the transferee and (c) the Partnership shall not charge the
transferring Partner with other fees and expenses incurred by the Partnership
in connection with such transfer), and (iv) such Transfer otherwise complies
with the provisions of Sections 9.5, 9.7, 9.8, 9.9, and this Section 9.1.
Prior to any Transfer of Class A Preferred Units or Class B Units pursuant to
this Section 9.1(a), a Partner desiring to transfer such Partnership Units (a
"Transferring Partner") shall first give written notice (a "Notice of Sale")
to the Partnership and the General Partners, which Notice of Sale shall state
the Transferring Partner's desire to make such Transfer, the number and Class
of Units held by such Transferring Partner (the "Offered Interest") and the
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price and such other terms on which the Transferring Partner proposes to
Transfer its Interest (collectively, the "Offer Terms"). Each Notice of Sale
shall constitute an irrevocable offer by the Transferring Partner to sell to
the Partnership and the General Partners the Offered Interest on the Offer
Terms. No Offer Terms in respect of an Offered Interest may include any form
of consideration other than cash (which may be paid at closing, in install-
ments or after any period of time (as set forth in the Offer Terms) or
indebtedness (secured, unsecured, guaranteed, supported by a letter of credit
or otherwise) (as set forth in the Offer Terms) of the Purchaser (as defined
below) of such Offered Interest.
The Partnership may elect to purchase (or cause an Affiliate
designated by the Partnership to purchase) the Offered Interest on the Offer
Terms by delivering to the Transferring Partner, with a copy to the
Partnership and the General Partners, within twenty-five (25) days following
the date the Notice of Sale is received by the Partnership and all of the
General Partners, notice of such election (a "Notice of Purchase"). The
decision of the Partnership to purchase an Offered Interest shall be a
Unanimous Decision.
In addition, if the Partnership does not elect to purchase
the Offered Interest on the Offer Terms the General Partners may, by
delivering a Notice of Purchase not more than five (5) days after the
expiration of the 25-day period specified above, elect to purchase (or cause
an Affiliate designed by them to purchase) stating (x) the maximum share of
the Offered Interest that such General Partner (or such designated Affiliate)
elects to purchase (the "Maximum Share") (which Maximum Share may be greater
than such General Partners's proportionate share of the Offered Interest
calculated in accordance with its Partnership Percentage Interest), (y) that
the election made by such Notice of Purchase is irrevocable and (z) that such
General Partner irrevocably commits to purchase any share of the Offered
Interest up to and including the Maximum Share specified in preceding clause
(x) on the Offer Terms. Each of the General Partners that delivers a Notice
of Purchase (each, a "Purchaser") shall be allocated the Maximum Share of the
Offered Interest set forth in such Purchaser's Notice of Purchase, unless
such allocation, together with the shares of the Offered Interest allocated
to the other Purchasers, exceeds one hundred percent (100%) of the Offered
Interest, in which case each Purchaser whose Maximum Share is less than such
Purchaser's proportionate share of the Offered Interest calculated in
accordance with its Percentage Interest shall receive its Maximum Share, and
the remaining share of the Offered Interest shall be allocated among the
remaining Purchasers ratably in accordance with their respective Percentage
Interests. A Notice of Purchase shall be deemed to be an irrevocable
commitment by the Purchaser to purchase from the Transferring Partner on the
Offer Terms the Maximum Share of the Offered Interest that such Purchaser has
elected to purchase pursuant to its Notice of Purchase.
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If in the aggregate the Purchasers do not commit to purchase
the entire Offered Interest within the time periods specified in Section
9.2(b), the Transferring Partner (i) shall be under no obligation to sell any
portion of the Offered Interest to any Purchaser, unless the Transferring
Partner so elects, and (ii) may, within a period of 6 months from and after
the later of (x) the date of the last Notice of Purchase delivered to the
Transferring Partner in accordance with Section 9.2(b) hereof and (y) the
date which is twenty five (25) days from the date of the Notice of Sale,
Transfer the entire Offered Interest to one or more Persons at a price equal
to or higher than the price included in the Offer Terms. If the
Transferring Partner shall not have consummated the Transfer of the Offered
Interest to any Person or Persons prior to the expiration of such six month
period then the provisions of this Section 9.2 shall again apply.
(b) Subject to compliance with the remaining provisions of this
Article 9 and notwithstanding anything to the contrary set forth in Section
9.1(a) above, each of the Investor Group Partners, Class A Preferred Limited
Partners and Class B Limited Partners may, from time to time and without any
consent or approval, pledge or otherwise grant a security interest in all or
part of such Partner's Interest to an Institutional Lender to secure a loan
made to such Partner or its Affiliates (a "Pledgor") by such Institutional
Lender (a "Pledgee"); provided, however, that with regard to any such pledges
made by a member of the Berkshire Group, any Class A Preferred Limited
Partner or any Class B Limited Partner, (i) such pledged Interest may not be
transferred to the Pledgee by foreclosure, assignment in lieu thereof or
other enforcement of such pledge, (ii) such Partner may pledge only its
economic interests in the Partnership and no other rights hereunder, (iii)
such pledges shall be securing a loan which is fully recourse to such Partner
and, in the case of a pledge by a member of the Berkshire Group, The
Berkshire Companies Limited Partnership (or its successor) or one or more of
the Berkshire Principals and (iv) Blackstone GP and WHGP shall have the right
to review and reasonably approve, the documents relating to such loan to
confirm the non-foreclosable nature of the pledge and the recourse nature of
the loan. Any right of the Pledgee in the Interest shall be expressly
subordinated to the rights (then existing or thereafter arising) of any
Partner in the Interest as a result of any claims for indemnification
pursuant to Section 4.3.
(c) Any direct or indirect transfer of interests in Berkshire or
BGP shall require the consent of all of the GPs to the extent such transfer
results in Berkshire or BGP no longer being controlled (directly or
indirectly) by a Berkshire Principal. Any direct or indirect transfer of
interests in Whitehall or WHGP shall require the consent of all of the GPs to
the extent such transfer results in Whitehall or WHGP no longer being
controlled (directly or indirectly) by or under common control with a member
of the Whitehall Group or GS Group. Any direct or indirect transfer of
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interests in Blackstone GP or Blackstone LP shall require the consent of all
of the GPs to the extent such transfer results in Blackstone GP or Blackstone
LP no longer being controlled (directly or indirectly) by or under common
control with Blackstone Real Estate Acquisitions III L.L.C.
9.2 Sale of All of the Properties Before the Fifth Anniversary
of the Closing Date at the Option of Berkshire.
(a) Notwithstanding any other provisions herein, at any time
during the period beginning on the date that is the second anniversary of the
Closing Date and ending on the day that is the date immediately before the
date that is the fifth anniversary of the Closing Date, the Berkshire Group,
may, by delivering written notice (a "Sales Notice") to WHGP and Blackstone
GP (the Berkshire Group, or such member thereof as shall deliver such Sales
Notice, being referred to as a "Triggering Party" and the recipients of such
Sales Notice each being referred to as a "Non-Triggering Party", and
collectively as the "Non-Triggering Parties"), require the Partnership (and
act on behalf of the Partnership with full right, power and authority) to
sell all or substantially all of the Properties in one or more transactions
to a Person not Affiliated with any member of the Berkshire Group (including
by merger of the Partnership), subject to the provisions of this Section 9.2.
Any such Sales Notice shall state the cash price (the "Total Price") at which
the Triggering Party desires to sell the Properties, free and clear of any
liens. Any sale of the Properties pursuant to this Section 9.2 may be
accomplished by a sale of the Partnership itself (including by merger of the
Partnership) or of all of the Partnership Assets, provided that such a
proposed transaction may provide for the members of the Berkshire Group to
receive consideration other than cash and for the other Partners to receive
at their election, either cash or such other consideration.
(b) Concurrently with the delivery of the Sales Notice referred
to in Section 9.2(a), the Triggering Party shall submit to the Non-Triggering
Parties an offer (the "Offer"), to sell (or cause the Partnership to sell)
the Properties to the Non-Triggering Parties (or their designees) for cash in
exchange for the Non-Triggering Parties (or their designees) paying to the
Partnership the Total Price, failing which the Triggering Party shall be
entitled to market the Properties, as more particularly set forth below in
this Section 9.2. The Offer shall also set forth any other material economic
terms of the purchase; provided that, any Offer may include a holdback for
breaches of representations or warranties (which may survive for claims made
within no more than one year from the transfer of the Properties) by the
Partnership (which in each case shall be as outlined by the Triggering Party
in the Offer) not to exceed 5% of the purchase price, which holdback amount
may be available for no more than the survival period of the representations
and warranties; provided, further, that the terms of the transaction shall
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not, in any event, provide for the personal liability of any Partner in the
event of the breach of such representations and warranties.
(c) Within thirty (30) days after receiving the Offer, each Non-
Triggering Party shall deliver a notice (a "Sales Response Notice") to the
Triggering Party, stating the election by such Non-Triggering Party of one of
the two following options:
(1) to purchase (or have its Affiliate purchase) for the
Total Price the Properties on or before the date (the "Applicable
Closing Date") specified in such Sales Response Notice (which date
shall be no later than sixty (60) days after the Sales Response
Notice is delivered) and in accordance with the terms set forth in
the Offer; concurrently with the delivery of a Sales Response Notice,
and as a condition to its effectiveness under this Section 9.2(c),
such Non-Triggering Party shall also deliver to the Partnership (for
the account of the Triggering Party) a down payment equal to the
product of (i) 5% of the Total Price and (ii) the aggregate
Partnership Percentage Interest of the Triggering Party and each Non-
Triggering Party that does not elect to purchase the Properties
pursuant to this clause (c)), (provided that if more than one Non-
Triggering party makes such an election, each such non-Triggering
Partner shall pay a pro rata portion of such deposit based on its
respective Partnership Percentage Interest) which shall not be
refundable except if the Partnership defaults as a seller of the
Properties; or
(2) to agree to the sale of the Properties in accordance
with the terms of the Offer, subject to such changes therein as are
contemplated by the terms of this Section 9.2 provided below, in
which event, such Non-Triggering Party shall have no further rights
to purchase the Properties, except as may be expressly provided for
below in this Section 9.2.
If any Non-Triggering Party fails to elect, by written notice, one of the
above two options within said thirty (30)-day period, or fails to deliver the
down payment required as a condition of such election, then it shall be
conclusively presumed that such Non-Triggering Party elected option (2) above
(and such Non-Triggering Party hereby consents to such sale in such case).
In the event that both the Whitehall Group and the Blackstone Group, as Non-
Triggering Parties, make an election pursuant to Section 9.2(c)(1), they
shall each acquire 50% of each Property.
(d) Promptly after an election by a Non-Triggering Party
pursuant to Section 9.2(c)(1), the Partnership and such electing Non-
Triggering Party (or its Affiliate(s)) shall proceed with such purchase and
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sale, the closing for which shall be held on or before the Applicable Closing
Date, during normal business hours at the offices of counsel to the Non-
Triggering Party. The Non-Triggering Party shall be entitled to one
five (5) Business Day adjournment, whereupon time shall be of the essence
with respect to the Non-Triggering Party's obligation to close on the
purchase of the Properties in accordance with the terms of this
Section 9.2(d) on or before the Applicable Closing Date, and if the Non-
Triggering Party does not close in accordance with this paragraph, the
Triggering Party shall be entitled, as the sole and exclusive remedies of the
Triggering Party, to market and sell the Properties on behalf of the
Partnership in accordance with this Section 9.2 as if the Non-Triggering
Party made the election described in Section 9.2(c)(2) and the Triggering
Party and each Non-Triggering Party that did not elect to purchase the
Properties or that is not in default shall be entitled, as its sole and
exclusive remedy, to keep a portion of the downpayment described in Section
9.2(c)(1) above (pro rata based on its respective Partnership Interests)
(unless the failure to close is due to the default of the Partnership, in
which case the Triggering Party shall not be entitled to the foregoing
remedies). No defaulting Non-Triggering Party shall have any rights of first
offer under this Section 9.2 after such default in respect of any subsequent
offers.
(e) Upon an election (or deemed election) by each Non-Triggering
Party pursuant to Section 9.2(c)(2), the Triggering Party shall have the
right to cause the Partnership to market the Properties for a period (the
"Marketing Period") of one hundred and eighty (180) days commencing with the
earlier to occur of (i) the thirtieth (30th) day after the delivery of the
Offer to the Non-Triggering Parties or (ii) the notice by each Non-Triggering
Party to the Triggering Party of each Non-Triggering Party's election to
proceed under Section 9.2(c)(2). The Partners shall cooperate fully with the
efforts of the Triggering Party to market the Properties and shall use their
good faith efforts to cause the sale of the Properties on the terms set forth
in the Offer or on terms more favorable to the Partnership.
(f) Subject to the provisions of Section 9.2(l), if (i) during
the Marketing Period, the Partnership receives a third-party offer to
purchase the Properties for all cash (a "Third Party Offer") that the
Triggering Party desires to accept, (ii) the sale price provided for therein
(the "Third Party Offer Price") is equal to 100% or more of the Total Price,
(iii) the terms are otherwise no less favorable to the Partnership than those
set forth in the Offer and shall not provide for any additional or separate
consideration to the Triggering Party (or its Affiliates), or to Berkshire,
BGP, or any member of the Berkshire Group or any of their respective
Affiliates (whether through the payment of fees, salaries, consideration or
otherwise) then the Partnership shall sell the Properties in accordance with
the terms of such Third Party Offer (the Triggering Party being fully
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authorized and empowered to execute and deliver all necessary documents,
agreements and instruments on the Partnership's or the Non-Triggering
Parties' behalf and to make the representations and warranties on the
Partnership's (but not the Non-Triggering Parties') behalf that were outlined
in the Offer) and no Non-Triggering Party shall have any right to purchase
the Properties or to object to or otherwise interfere with such sale,
provided that the closing of such sale shall occur not later than the one
hundred eightieth (180th) day after the commencement of the Marketing Period.
In the event that the closing shall not occur within such one hundred eighty
(180)-day period, or the Partnership does not receive a Third Party Offer
that satisfies the conditions of this Section 9.2(f) during the Marketing
Period, then the Triggering Party shall have the right at any time thereafter
to further attempt to sell the Properties, subject to the rights of the Non-
Triggering Parties under Section 9.2(a), which shall be reinstated with
respect to any such further decision on the part of Triggering Party to sell
the Properties. Any purchase and sale or other agreement documenting such
Third Party Offer shall provide that the Non-Triggering Parties may exercise
their rights and the Partnership its obligations to the Non-Triggering
Parties set forth in the immediately previous sentence without penalty to the
Partnership.
(g) If a Non-Triggering Party, having elected to proceed under
Section 9.2(c)(1), defaults on its obligation to purchase the Properties as
required thereunder, then as set forth in clause (d) above the Triggering
Party and each Non-Triggering Party that does not elect to purchase the
Properties or that is not in default shall be entitled to retain, as liqui-
dated damages, its portion of the down payment received in contemplation of
such sale (as determined above), it being agreed that the amount represents a
fair and equitable estimate of the damages to be suffered by the Triggering
Party or the Partnership if a Non-Triggering Party were to so default and
that actual damages would be highly impracticable to determine. If the
Partnership defaults on its obligation to sell the Properties to a Non-
Triggering Party pursuant to such Non-Triggering Party's election to purchase
the Properties under Section 9.2(c)(1), then such Non-Triggering Party shall
be entitled to specific performance by the Partnership.
(h) Notwithstanding anything to the contrary, the Triggering
Party shall, subject to and in accordance with this Section 9.2, have full
right, power and authority (acting alone) to execute, deliver and perform,
for and in the name of the Partnership and, in the case of a sale of the
Partnership, of the Partners, and each Partner hereby agrees to execute,
deliver and perform, any and all documents, agreements and instruments, and
to take any other actions as may be required or desirable for the purpose of
transferring the Properties, to the maker of the Third Party Offer or a Non-
Triggering Party, as the case may be.
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(i) The following provisions shall apply to a purchase by a Non-
Triggering Party pursuant to the election in Section 9.2(c)(1):
(i) If such Non-Triggering Party is any of the
Whitehall Group, the Blackstone Group or both of such Groups, such
Non-Triggering Party may elect either (a) to purchase the Properties,
in which case, the price payable to the Partnership shall be the
Total Price (in the case of a purchase by such Non-Triggering Party
pursuant to Section 9.2(c)(1)) less the principal and accrued
interest on account of any third party debt that will be assumed by
such Non-Triggering Party or be paid at closing by such Non-
Triggering Party (or its designee) from its own funds or (b) to
purchase all of the Interests (other than the Class A Preferred Units
and Class B Units) not already owned by such Non-Triggering Party,
which Interests shall be sold free and clear of any liens or
encumbrances. Subject to subparagraph (iii) of this Section 9.2(i),
if such Non-Triggering Party elects to purchase the Interests (other
than the Class A Preferred Units and Class B Units) not already owned
by such Non-Triggering Party, such Non-Triggering Party shall pay to
the other Partners an amount in cash that the other Partners would
have received had the Properties been sold to a third party for the
Total Price (in the case of a purchase by a Non-Triggering Party
pursuant to Section 9.2(c)(1)) and the net proceeds (after deducting
all fees, costs and expenses incurred in connection with such
transaction) of such sale were distributed pursuant to Section 10.3
and any required deposits shall be calculated in respect of such
amount. In the event more than one Non-Triggering Party makes an
election under this clause (k), such Non-Triggering Partners shall
purchase, on a pro rata basis (based on their respective Partnership
Percentage Interests), the Interests not owned by them and to be
purchased pursuant to this Section 9.2(i)(i). In the event that two
Non-Triggering Partners elect to purchase the Partnership's assets
pursuant to this Section 9.2, such Non-Triggering Partners shall use
commercially reasonable efforts to permit the Class A Limited
Partners and the Class B Limited Partners to invest in such entity in
similar proportions, and subject to substantially the same terms and
conditions, as the investment of the Class A Limited Partners and the
Class B Limited Partners in the Partnership and in a manner that
permits such Partners to defer the recognition of any gain
attributable to their Interests.
(ii) All transfer costs (including transfer taxes) shall
be paid in accordance with customary practices in the relevant
jurisdiction (unless the Offer provided otherwise) and there shall be
an adjustment of the purchase price at closing to reflect a proration
of any accrued income and expenses, excluding non-cash items,
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provided that each of the Triggering Party and such Non-Triggering
Party shall bear its own attorneys' fees. Within forty-five (45)
days after the closing, such Non-Triggering Party shall direct the
independent accountants for the Partnership to complete an audit of
the Partners' proration and such independent accountants shall
deliver their audit report to the partners. If such audit report
shall adjust such proration, the party in whose favor such adjustment
is made shall promptly be paid by the other party the amount of such
adjustment.
(iii) On payment of the purchase price, such Non-
Triggering Party shall, with respect to each Partnership debt,
obligation and claim against the Partnership for which the
Partnership or any Partner (or any guarantor affiliated therewith or
which delivered the guaranty on behalf of such Person) is or may be
personally liable with respect to the Properties at the option of
such Non-Triggering Party either (i) obtain a release of the
Partnership and each such Partner (and any guarantor affiliated
therewith or which delivered the guaranty on behalf of such Person)
from all liability, direct or contingent, from holders of such debt,
obligation or claim or (ii) deliver to the Partnership and each such
Partner, an agreement in form and substance reasonably satisfactory
to the Partnership and each such Partner, which satisfaction may
require a creditworthy guarantor, to defend, indemnify and hold the
Partnership and each such Partner (and any guarantor affiliated
therewith or which delivered the guaranty on behalf of such Person)
harmless from any actions, including attorneys' fees and costs of
litigation, claims or loss arising from such debt, obligation or
claim. In no event shall such indemnity apply to liabilities
resulting from the breach by any Partner of its obligations under
this Agreement. This subparagraph (iii) shall not apply to any debt,
obligation or claim which is fully insured by public liability
insurer(s) reasonably acceptable to the Partnership and each Partner.
(j) Notwithstanding anything contained herein to the contrary,
the Berkshire Group may not, without the consent of each General Partner
other than BGP, sell all of the Properties of the Partnership in one or more
transactions pursuant to this Section 9.2 (i) to any member of the Berkshire
Group or any Affiliate thereof or (ii) unless the net proceeds from all sales
that are, at the time of the calculation pursuant to this clause (ii),
subject to binding agreements would result in a 12% per annum annually
compounded Rate of Return (taking into account the timing of the receipt of
the proceeds of such sale and the amount thereof and the timing and amount of
prior distributions from the Partnership pursuant to Section 8.1(b)) to each
of the Whitehall Group and the Blackstone Group in respect of all their
Capital Contributions prior to the date of the receipt of such sale proceeds
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(it being understood and agreed that the Berkshire Group may, at its
election, make payments to the Whitehall Group and the Blackstone Group in
amounts necessary to achieve such Rate of Return for all of the members of
the Whitehall Group and the Blackstone Group in respect of all such Capital
Contributions and, provided that as a result of any such payments and the
sale of the Properties contemplated hereby all of the members of the
Whitehall Group and the Blackstone Group achieve such Rate of Return in
respect of all of their Capital Contributions prior to such date, may
consummate such sales although the net proceeds of such sales alone would not
be sufficient to result in the achievement of such Rate of Return
thresholds).
9.3 Sale of All of the Properties Before the Fifth Anniversary
of the Closing Date at the Option of Two General Partners.
(a) Notwithstanding any other provisions herein, at any time
during the period beginning on the date that is forty-two (42) months after
the Closing Date and ending on the day that is immediately before the date
that is the fifth anniversary of the Closing Date, WHGP and Blackstone GP,
acting together, (acting as if such decision were a Majority Decision) may,
by delivering written notice (a "Majority Sales Notice") to any General
Partner that did not join in such decision, require the Partnership (and act
on behalf of the Partnership with full right, power and authority) to sell
all or substantially all the Properties in one or more bona fide transactions
to parties that are not Affiliates of any Majority Triggering Party and in
which no Majority Triggering Party has a continuing interest.
(b) Subject to the provisions of Section 9.3(c), if following
the delivery of a Majority Sales Notice, the Partnership receives a third-
party offer to purchase the Properties for all cash (a "Majority Third Party
Offer") that the General Partners delivering the Majority Sales Notice (the
"Majority Triggering Parties") desire to accept, then the Partnership shall
sell the Properties in accordance with the terms of such Majority Third Party
Offer (the Majority Triggering Parties being fully authorized and empowered
to execute and deliver all necessary documents, agreements and instruments on
the Partnership's behalf or on behalf of the Partners other than the Majority
Triggering Parties and to make the representations and warranties on the
Partnership's (but not such other Partners') behalf that were outlined in the
Majority Third Party Offer).
(c) Notwithstanding anything contained herein to the contrary,
if a sale of the Properties pursuant to this Section 9.3 closes during the
period beginning on the date that is forty-two (42) months after the Closing
Date and ending on the date that is fifty-four (54) months after the Closing
Date, then the Majority Triggering Parties shall ensure that in connection
with such sale, the members of the Berkshire Group and the Class B Limited
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Partners receive, in accordance with Section 10.3, an amount at least equal
to the excess of the aggregate amount of Capital Contributions made by the
members of the Berkshire Group or the Class B Limited Partners, as applicable
through the date of such sale over the amount of any distributions from the
Partnership previously received by such member of the Berkshire Group (or its
Affiliates or predecessors).
Any sale of the Properties pursuant to this Section 9.3 may be
accomplished by a sale of the Partnership itself (including by merger of the
Partnership) or of all of the Partnership Assets. Notwithstanding anything
to the contrary, the Majority Triggering Parties shall, subject to and in
accordance with this Section 9.3, have full right, power and authority to
execute, deliver and perform, for and in the name of the Partnership and, in
the case of a sale of the Partnership, of the Partners, and each Partner
hereby agrees to execute, deliver and perform, any and all documents,
agreements and instruments, and to take any other actions, as may be required
or desirable for the purpose of transferring the Properties to the purchaser
of the Partnership's assets or the Partnership under this Section 9.3.
Any sale of the Properties pursuant to this Section 9.3 (x) shall not
contain any representations by any Partner without the consent of such
Partner (but may contain representations by the Partnership), and (y) may
include a holdback for breaches of representations or warranties (which may
survive for claims made within no more than one year from the transfer of the
Properties) by the Partnership not to exceed 5% of the purchase price, which
holdback amount may be available for no more than the survival period of the
representations and warranties; provided, further, that the terms of the
transaction shall not, in any event, provide for the personal liability of
any Partner in the event of the breach of such representations and
warranties.
9.4 Sale of the Properties After the Fifth Anniversary.
Notwithstanding any other provisions herein, at any time after the date that
is the fifth anniversary of the Closing Date, each of the General Partners
shall be authorized unilaterally to cause a sale in which each General
Partner will have the option to receive consideration consisting of all cash
of (i) all or substantially all of the Properties or (ii) the Partnership in
one or more bona fide transactions to a Person in which none of the Whitehall
Group, the Blackstone Group or the Berkshire Group and no Affiliate of any of
the Whitehall Group, the Blackstone Group or the Berkshire Group has an
interest; provided, however, that BGP may not exercise such right until the
date that is three months following the fifth anniversary of the Closing
Date, unless during such three month period (i) the DK Employment Agreement
is terminated for reasons other than Cause or Company Cause and (ii) neither
WHGP nor Blackstone GP has already exercised its rights under this Section
9.4. In the event that one or more General Partners elect to cause the sale
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of the Properties pursuant to this Section 9.4 by giving written notice of
such election to any General Partner not joining in such election, no other
General Partner may subsequently make an election pursuant to this Section
9.4 until the date that is 180 days after the date such electing General
Partner or General Partners deliver such notice of election.
Any sale of the Properties pursuant to this Section 9.4 may be
accomplished by a sale of the Partnership itself (including by merger of the
Partnership) or of all of the Partnership Assets. Notwithstanding anything
to the contrary, the General Partners shall, subject to and in accordance
with this Section 9.4, have full right, power and authority to execute,
deliver and perform, for and in the name of the Partnership and, in the case
of a sale of the Partnership, of the Partners, and each Partner hereby agrees
to execute, deliver and perform, any and all documents, agreements and
instruments, and to take any other actions as may be required or desirable
for the purpose of transferring the Properties, to the purchaser of the
Partnership's assets or the Partnership under this Section 9.4.
Any sale of the Properties pursuant to this Section 9.4 (x) shall not
contain any representations by any Partner without the consent of such
Partner (but may contain representations by the Partnership) and (y) may
include a holdback for breaches of representations or warranties (which may
survive for claims made within no more than one year from the transfer of the
Properties) by the Partnership not to exceed 5% of the purchase price, which
holdback amount may be available for no more than the survival period of the
representations and warranties; provided, further, that the terms of the
transaction shall not, in any event, provide for the personal liability of
any Partner in the event of the breach of such representations and
warranties.
9.5 Assignment Binding on Partnership. No Transfer of all or
any part of the Interest of a Partner permitted to be made under this
Agreement shall be binding upon the Partnership unless and until a duplicate
original of such assignment or instrument of transfer, duly executed and
acknowledged by the assignor or transferor, has been delivered to the
Partnership, and such instrument evidences (i) the written acceptance by the
assignee of all of the terms and provisions of this Agreement, (ii) the
assignee's representation that such assignment was made in accordance with
all applicable laws and regulations and (iii) the consent to the Transfer of
the Interest required pursuant to Section 9.1, if any. In addition, a Person
to whom a Transfer may be made pursuant to this Article 9, other than
pursuant to Section 9.1(a), may also be required, in the reasonable
discretion of any of the General Partners, and as a condition precedent to
its becoming a transferee to make certain representations, warranties and
covenants to evidence compliance with U.S. federal and state securities laws
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including, but not limited to, representations as to its net worth,
sophistication and investment intent.
9.6 Bankruptcy of a Limited Partner. The Partnership shall not
be dissolved or terminated by reason of the Bankruptcy, removal, withdrawal,
dissolution or admission of any Limited Partner.
9.7 Substituted Partners.
(a) Partners who assign all their Interests pursuant to an
assignment or assignments permitted under this Agreement shall cease to be
Partners of the Partnership except that unless and until a Substituted
Partner is admitted in its stead, the assigning Partner shall not cease to be
a Partner of the Partnership under the Act and shall retain the rights and
powers of a member under the Act and hereunder, provided that such assigning
Partner may, prior to the admission of a Substituted Partner, assign its
economic interest in its Interest, to the extent otherwise permitted under
Article 9. Any Person who is an assignee of any portion of the Interest of a
Partner and who has satisfied the requirements of Article 9 shall become a
Substituted Partner only when (i) the Administering General Partner has
entered such assignee as a Partner on the books and records of the
Partnership, which the Administering General Partner is hereby directed to do
upon satisfaction of such requirements, and (ii) such assignee shall have
paid all reasonable legal fees and filing costs in connection with the
substitution as a Partner except as otherwise provided in Section 9.1(a).
(b) Any Person who is an assignee of any of the Interest of a
Partner but who does not become a Substituted Partner and desires to make a
further assignment of any such Interest, shall be subject to all the
provisions of this Article 9 to the same extent and in the same manner as any
Partner desiring to make an assignment of its Interest.
9.8 Acceptance of Prior Acts. Any person who becomes a Partner,
by becoming a Partner, accepts, ratifies and agrees to be bound by all
actions duly taken pursuant to the terms and provisions of this Agreement by
the Partnership prior to the date it became a Partner and, without limiting
the generality of the foregoing, specifically ratifies and approves all
agreements and other instruments as may have been executed and delivered on
behalf of the Partnership prior to said date and which are in force and
effect on said date.
9.9 Additional Limitations. Notwithstanding anything contained
in this Agreement, no Transfer of an Interest shall be made, and any General
Partner shall have the right to prohibit and may refuse to accept any
Transfer, unless (i) registration is not required under the Securities Act of
1933, as amended, in respect of such Transfer; (ii) such Transfer does not
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violate any applicable federal or state securities, real estate syndication,
or comparable laws; (iii) except as otherwise provided in Section 9.2, 9.3 or
9.4 such Transfer will not be subject to, or such Transfer, when aggregated
with prior Transfers in accordance with applicable law will not result in the
imposition of, any state, city or local transfer taxes, including, without
limitation, any transfer gains taxes, unless such assignor pays such taxes;
and (iv) such Transfer will not cause the Partnership to be treated as a
"publicly-traded partnership" within the meaning of Section 7704 of the Code.
Any General Partner may elect prior to any Transfer to require an opinion of
counsel with respect to any of the foregoing matters.
9.10 Purchase of the Berkshire Group's Interest upon the
Termination of Douglas Krupp's Employment Under the DK Employment Agreement.
(a) In the event that Douglas Krupp is terminated as chief
executive officer of the Partnership as a result of a Performance
Termination, the Berkshire Group shall have the right (but not the
obligation), exercisable at any time within 60 days after such termination,
to require the Partnership to acquire its Interest (including the DK IMP) for
a price equal to the Fair Market Value (as such term is defined below) of its
Interest (including the DK IMP) on the date such right is exercised.
(b) In the event that Douglas Krupp (i) is terminated as chief
executive officer of the Partnership for Company Cause, or for Cause at any
time, or (ii) resigns or otherwise terminates the DK Employment Agreement on
or prior to the fifth anniversary of the Closing Date, the Partnership shall
have the right (but not the obligation), exercisable at any time within 60
days after such termination or resignation, to purchase the Interest of the
Berkshire Group for a price equal to the greater of (x) the Fair Market Value
of the Berkshire Group's Interest (excluding the DK IMP which shall be
forfeited upon the occurrence of any of the events described in clause (i)
and (ii) above) on the date such right is exercised or (y) the amount equal
to the aggregate amount of Capital Contributions made by the Berkshire Group
prior to the date of such termination or resignation less any prior
distributions made to the Berkshire Group.
(c) In the event Douglas Krupp is terminated as chief executive
officer of the Partnership prior to the fifth anniversary of the Closing Date
for any reason other than for Company Cause, Cause, a Performance Termination
or Douglas Krupp's death or disability, the Partnership shall purchase the
Interest of the Berkshire Group for a cash price equal to the greater of (i)
the Fair Market Value of the Berkshire Group's Interest (including the DK
IMP) at the date of such termination or (ii) the sum of (x) an amount equal
to a 12% Rate of Return on the amount of the Berkshire Group's Capital
Contributions made prior to the date of such termination, for the five year
period ending with fifth anniversary of the Closing Date (taking into account
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the amount and timing of prior distributions to the Berkshire Group and
discounting back such amount to the date of payment utilizing as the discount
rate the then current Treasury rate for Treasury obligations with a maturity
equal to or approximating the term between the date of such termination and
the fifth anniversary of the Closing Date) plus (y) an amount in cash equal
to $10 million (in full payment of the DK IMP).
(d) For purposes of this Section 9.10, "Fair Market Value" of
the Berkshire Group's Interest (either including or excluding the DK IMP as
specified above) will be the amount the Berkshire Group would have received
upon the full liquidation of the tangible assets then owned by the
Partnership at the fair market value of such assets (with all intangible
assets being valued at zero) and the distribution of the proceeds pursuant to
Section 10.3. "Fair Market Value" will be determined based upon what a
willing buyer, under no compulsion to buy, would pay a willing seller, under
no compulsion to sell. If all three General Partners cannot agree on a fair
market value after a 30-day resolution period, each of BGP, on the one hand,
and WHGP and Blackstone GP, on the other hand, shall select an independent,
disinterested appraiser who is a certified member of the Appraisal Institute
with at least ten (10) years' established experience in appraising properties
and interests of the same type and in the same geographic areas as the
Properties ("Appraiser") and have an appraisal prepared (the "Initial
Appraisals") within sixty (60) days after the expiration of the thirty (30)
day period described above. If the lower of the Initial Appraisals is not
more than ten percent (10%) less than the higher of the Initial Appraisals,
then the Initial Appraisals shall be averaged and such average shall be the
Fair Market Value for the Properties. If the lower of the Initial Appraisals
is more than ten percent (10%) less than the higher of the Initial
Appraisals, then within ten (10) days after the date on which the last
Initial Appraisal is delivered to the other party the two Appraisers shall
select a third Appraiser or, if the two Appraisers are unable to agree on a
third Appraiser within such time period, the third Appraiser shall be
designated by the American Arbitration Association's New York, New York,
office at the request of either party. The third Appraiser shall conduct a
third, independent appraisal (the "Third Appraisal") within twenty (20) days.
If the Third Appraisal is required, the Fair Market Value shall be the
appraised value of whichever Initial Appraisal is closest to the appraised
value of the Third Appraisal. Each such Initial Appraisal and Third
Appraisal shall be made as of the date of the termination of the DK
Employment Agreement. Each side will bear its own costs and expenses in the
arbitration. If the requisite General Partners (other than BGP) elect, at
any time before the arbitration panel is selected, to cause a sale of the
Properties, rather than having the fair market value determined by the
arbitration panel, the Berkshire Group will receive its share of the sale
proceeds (either including or excluding its share of any IMP as specified
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above) that instead of the amount it would have received based on the
arbitrated value.
9.11 Transfers by the Blackstone Group and the Whitehall Group.
Each of the Partners acknowledges and agrees that the Blackstone LP intends
to Transfer its Interests to one or more persons satisfying the condition of
clause (i) of the definition of Affiliate after the date hereof, and that no
consent of any Partner shall be required in connection therewith. Upon such
transfer such Affiliate(s) shall automatically become Substituted Partner(s)
without any further action and, upon Transfer by the Blackstone LP of all its
entire Interest, shall be deemed to have assumed all of Blackstone LP's
obligations hereunder with respect to such Interest so transferred and
Blackstone LP shall be released from any liabilities under or relating to
this agreement with respect to such Interests so transferred.
(b) Each of the Partners acknowledges and agrees that Whitehall
may Transfer its Interests to one or more persons satisfying the condition
of clause (i) of the definition of Affiliate after the date hereof, and that
no consent of any Partner shall be required in connection therewith. Upon
such Transfer such Affiliate(s) shall automatically become Substituted
Partner(s) without any further action and, upon Transfer by Whitehall of such
Interest, shall be deemed to have assumed all of Whitehall's obligations
hereunder with respect to such Interest so transferred and Whitehall shall be
released from any liabilities under or relating to this agreement with
respect to such Interests so transferred.
9.12 Purchase of the Class A Preferred Units and Class B Units.
(a) Each holder of Class A Preferred Units shall, from and after
the date that is the five years after the Closing Date, have the right, by
delivering written notice to the Partnership, to require the Partnership to
purchase all, but not less than all of its Class A Preferred Units for an
amount in cash equal to $12.25 per Class A Preferred Unit, plus an amount
equal to the accrued and unpaid distributions on such Class A Preferred Units
for all fiscal quarters ending on or prior to the Holder Purchase Date. Any
notice of redemption delivered pursuant to this Section 9.12(a), will be
mailed to the Partnership, by certified mail, postage prepaid, not less
than 180 days prior to the date upon which the holder designates such
purchase is to occur (the "Holder Purchase Date"). The Partnership shall pay
the holders of the Class A Preferred Units as to which such an election has
duly been made hereunder the full amount due under this Section 9.12(a) on
the Holder Purchase Date.
(b) The Partnership shall have the right, from and after the
earlier to occur of (i) the sixth anniversary of the Closing Date, (ii) the
consummation by the Partnership (or its successor) of an underwritten public
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offering of its equity securities, (iii) the time immediately prior to the
consummation of a merger, consolidation or other business combination (other
than (x) a merger, consolidation or other business combination with a General
Partner or an Affiliate of a General Partner or (y) a merger in which the
holders of Partnership Units prior to such merger, consolidation or other
business combination hold 51% or more of the partnership interests in the
surviving entity after the consummation of such merger, consolidation or
other business combination) involving, the Partnership or (iv) the sale of
all or substantially all of the assets of the Partnership (other than such a
sale to a General Partner or an Affiliate of a General Partner), to (1)
redeem all the Class A Preferred Units for a cash price equal to $12.25 per
Class A Preferred Unit, plus an amount equal to the accrued and unpaid
distributions on such Class A Preferred Units for all fiscal quarters ending
on or prior to the date of such redemption (it being understood and agreed
that no payment shall be made in respect of any other quarterly distribution
period), and (2) redeem all of the Class B Units held by any Partner for a
cash price equal to the fair market value of such Class B Units, as such fair
market value shall be reasonably determined by the General Partners (taking
into account appraisals that have been performed at the request of the
Partnership prior to the date of such determination, without imposing any
obligation on the Partnership to obtain any such appraisals). Any notice of
redemption delivered pursuant to this Section 9.12(b) will be mailed by the
Partnership, by certified mail, postage prepaid, not less than 10 nor more
than 60 days prior to the date upon which such redemption is to occur (the
"Partnership Redemption Date"), addressed to each holder of record of the
Partnership Units to be redeemed at such holder's address as it appears on
the records of the Partnership. No failure to give or defect in such notice
shall affect the validity of the proceedings for the redemption of any
Partnership Units. In addition to any information required by law, each such
notice shall state: (a) the Partnership Redemption Date, (b) the redemption
price, (c) the aggregate number of each class of Partnership Units to be to
be redeemed, and (d) the place or places where such Partnership Units to be
redeemed are to be surrendered for payment of the amount payable upon
redemption. Notwithstanding the foregoing, in the event of a public offering
of equity securities of the Partnership prior to the date that is five and
one half years after the Closing Date, the Partnership shall use its
commercially reasonable efforts to structure such offering in a manner that
would permit the holders of the Class A Preferred Units and Class B Units to
remain Partners in the Partnership; provided, however, if the lead
underwriters of such public offering advise the Partnership that such
structure would adversely affect the price to be obtained in such offering or
otherwise materially adversely affect the offering, the provisions of this
sentence shall not apply and instead the Partnership shall have the right to
redeem the Class A Preferred Units or Class B Units pursuant to this Section
9.12(b).
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(c) Except as provided above in clause (a) or clause (b), the
Partnership shall make no payment or allowance for unpaid distributions,
whether or not in arrears, on any Partnership Units purchased or called for
redemption or purchase pursuant to clause (a) or (b) of this Section 9.12.
On and after a Holder Purchase Date or a Partnership Redemption Date,
distributions will cease to accumulate on the Partnership Units for which the
holder purchase option has been exercised or Partnership Units called for
redemption, as applicable, unless the Partnership defaults in payment of the
full redemption price therefor. If any date fixed for redemption or purchase
of Partnership Units is not a Business Day, then payment of the redemption
price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the originally
scheduled redemption date. If payment of the redemption or purchase price is
improperly withheld or refused and not paid by the Partnership, distributions
on such Partnership Units will continue to accumulate from the originally
scheduled redemption date to the date of payment.
(d) In the event the Partnership defaults in its obligations to
purchase Class A Preferred Units under Section 9.12(a) for a period of more
than fifteen (15) days, the coupon rate on such Class A Preferred Units shall
increase to a rate per annum, compounded quarterly, to the extent not paid on
quarterly basis, equal to 12% during such period of default and the
Partnership shall reimburse the holder of any such Class A Preferred Units as
to which such a default has occurred for all reasonable out of pocket
expenses incurred by such holder in enforcing the collection of such
defaulted amounts.
(e) In the event that prior to the date that is five and one
half years after the Closing Date the Partnership proposes to make a
distribution which, after giving effect to such distribution, will result in
the Investor Group Partners having received cumulative distributions from the
Partnership pursuant to Section 8.1(b) or 8.1(c) equal to more than 50% of
their aggregate Capital Contributions, then (i) the Partnership shall, not
fewer than thirty (30) days prior to such scheduled distribution, provide
notice of such proposed distribution to the Class A Preferred Limited
Partners and provide to the Class A Preferred Limited Partners the
opportunity to accelerate their rights under this Section 9.12(a) to the date
of such proposed distribution (and each such Class A Preferred Limited
Partner shall have the right to exercise such right by delivering to the
Partnership, by hand delivery or nationally recognized overnight courier,
such election not less than five (5) business days prior to such proposed
distribution and (ii) the Partnership shall, on or prior to the date of such
proposed distribution purchase all such the Class A Preferred Units as to
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which such an election has been made at a price equal to the purchase price
specified in Section 9.12(a).
9.13 Subsequent Transactions.
(a) As a result of the closing of the Mergers under the BRI
Merger Agreement and the BRI OP Merger Agreement, immediately after the
Closing Date the Partnership shall be the sole owner (directly and/or
indirectly) of all of the ownership interests of BRI OP, and BRI OP shall be
the sole owner (directly and/or indirectly) of all of the Properties. The
Administering General Partner hereby acknowledges and agrees that, unless
there has been a change in law that would make the structure below not
effective in achieving its intended purpose, it shall cause the Partnership
to undertake the following actions to occur promptly following the closing of
the loan contemplated by the Freddie Mac Parameters (but in no event later
than January 15, 2000) in a manner consistent with its obligations under
Section 4.8 hereof, (collectively, the "Section 9.13 Structure"):
(1) with respect to the 17 properties listed on
Schedule 9.13(a)(1) attached:
(i) the Partnership shall form a limited
liability company under the laws of the State of Delaware
(the "Property LLC") with the Partnership as the sole member
in the Property LLC; and the Partnership shall elect that
the Property LLC be taxed as a partnership or a "disregarded
entity" under any applicable federal and state taxation
laws;
(ii) each Property listed on Schedule 9.13(a)(1)
attached hereto shall be transferred to the Property LLC
either (A) through an asset transfer with the entity which
directly owns such Property (each such entity, a "Property
Owning Entity") as the transferor, (B) by transfer of all of
the ownership interests in the Property Owning Entity for
such Property, or (C) by other means that minimize expenses
or taxes (including transfer taxes) without impairing the
tax benefits afforded by the Section 9.13 Structure;
(2) with respect to the 22 Properties listed on Schedule
9.13(a)(2):
(i) the Partnership shall acquire 100% of the
outstanding common shares of capital stock of one or more
newly formed REITs, and 100 individuals or entities to be
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selected jointly by the Blackstone GP and WHGP shall acquire
preferred shares of the stock of each REIT;
(ii) the REITs described in clause (i) shall
elect to be treated as real estate investment trusts (as
defined in Parts II and III of Subchapter M of Chapter 1 of
Subtitle A of the Code) and shall comply with any and all
requirements, restrictions and limitations imposed on real
estate investment trusts under the Code or any other
applicable laws or governmental rules or regulations;
(iii) the Partnership shall form one or more
Delaware limited partnerships whose partners shall consist
of the Partnership with a 1% general partnership interest
and one of the REITs described in clause (i) with a 99%
limited partnership interest;
(iv) each Property listed on Schedule 9.13(a)(2)
shall be transferred to a limited partnership described in
clause (iii) either (A) through an asset transfer with the
Property Owning Entity of such Property, as the transferor,
(B) by transfer of all of the ownership interests in the
Property Owning Entity of such Property or (C) by other
means that minimize expenses or taxes (including transfer
taxes), without impairing the tax benefits afforded by the
Section 9.13 structure;
(3) with respect to the 33 Properties listed on Schedule
9.13(a)(3):
(i) the Partnership shall acquire 100% of the
outstanding common shares of capital stock of a newly formed
REIT ("REIT 33"), and 100 individuals or entities to be
selected jointly by the Blackstone GP and the Whitehall GP
shall purchase 100 preferred shares of the stock of REIT 33;
(ii) REIT 33 shall elect to be treated as a real
estate investment trust (as defined in Parts II and III of
Subchapter M of Chapter 1 of Subtitle A of the Code) and
shall comply with any and all requirements, restrictions and
limitations imposed on real estate investment trusts under
the Code or any other applicable laws or governmental rules
or regulations; and
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(iii) the Partnership shall transfer to REIT 39 a
99% interest in BRI OP, and the REIT 33 shall become a 99%
limited partner in BRI OP.
(b) In the event that the Administering General Partner does not
cause the Partnership to undertake the actions set forth in Section 9.13(a)
to occur (unless there has been a change in law that would make the Section
9.13 Structure not effective in achieving its intended purpose) by January
15, 2000, the Blackstone GP and the Whitehall GP shall each be entitled,
without the consent of any other Partner, to cause such actions to occur at
any time after such date, and each of the Blackstone GP and the Whitehall GP
shall have the full right, power and authority (acting alone) to execute,
deliver and perform, for and in the name of the Partnership, any and all
documents, agreements and instruments, and to take any other actions, as may
be required or desirable in order to cause the actions set forth in Section
9.13(a) to occur.
(c) If in lieu of (i) implementing the structure set forth in
Section 9.13(a) (the "Section 9.13 Structure") or (ii) maintaining the
ownership structure of the Properties and BRI OP in effect immediately after
the closings under the BRI Merger Agreement and BRI OP Merger Agreement, any
General Partner proposes a change in the structure (a "Revised Section 9.13
Structure") of the ownership of any of the Properties or entities then
supporting one or more Guarantees contemplated by Section 4.8 or BRI OP
(other than in connection with a third party transaction otherwise authorized
under this Agreement), and such Revised Section 9.13 Structure, in the
opinion of each General Partner (in its sole discretion) does not (i)
generate increased Unrelated Business Taxable Income for the Partnership,
(ii) diminish or impair the economic and tax benefits received by the
Investor Group Partners under this Agreement and the Section 9.13 Structure,
or (iii) otherwise adversely affect the rights (including the governance
rights under Article 3 and the sale rights under Article 9) and remedies of
the Investor Group Partners under this Agreement and the Section 9.13
Structure, then the General Partners, subject to the other provisions of this
Agreement, including, without limitation, Section 4.8, shall cause the
Partnership to implement the Revised Section 9.13 Structure, in lieu of the
Section 9.13 Structure but otherwise in accordance with this Section 9.13.
The Blackstone GP and the Whitehall GP each agrees to use commercially
reasonable efforts to cooperate with BGP in developing a Revised Section 9.13
Structure which meets the requirements set forth in this Section 9.13(c) and
eliminates the necessity of (or reduces the amount of) the guarantees from
BGP or its Affiliates. Notwithstanding the foregoing provisions of this
Section 9.13(c), the Partnership shall not undertake, and no Partner shall
cause the Partnership to undertake, any restructuring involving any Revised
Section 9.13 Structure hereof unless either (i) an opinion of counsel
reasonably satisfactory to BGP is obtained to the effect that such
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restructuring would not increase the risk that any Limited Partner or BGP
would be required to recognize taxable income or (ii) the Partnership agrees
to fully indemnify BGP and any Limited Partner that is required to recognize
taxable income as a result of the consummation of such Revised Section 9.13
Structure.
(d) Any expenses incurred by the Partnership or the General
Partners in implementing the Section 9.13 Structure (or Revised Section 9.13
Structure, as applicable), including, without limitation attorneys and
accountants fees and disbursements, transfer taxes, recording costs, and the
formation costs of the REIT and the Property LLC, shall constitute expenses
of the Partnership.
ARTICLE 10.
DISSOLUTION OF THE PARTNERSHIP;
WINDING UP AND DISTRIBUTION OF ASSETS
10.1 Dissolution.
(a) The Partnership shall be dissolved and its affairs shall be
wound up upon the first to occur of the following:
(1) the dissolution or Bankruptcy of any General Partner
or the occurrence of any other event that terminates the continued
membership of a General Partner in the Partnership, unless the
business of the Partnership is continued by the consent of the
majority of the outstanding Partnership Interests ninety (90) days
following the occurrence of any such event;
(2) the sale or other disposition of all of the
Partnership Assets and receipt of the final payment of any
installment obligation received as a result of any such sale or
disposition;
(3) the written consent of all of the General Partners;
(4) any event which makes it unlawful for the
Partnership's business to be continued;
(5) the issuance of a decree by any court of competent
jurisdiction that the Partnership be dissolved and liquidated;
(6) December 31, 2049.
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(b) No Partner shall have the right to (i) withdraw or resign as
a Partner of the Partnership, (ii) redeem, or request redemption of, its
Interest or any part thereof, other than pursuant to Section 9.10(a), or
(iii) dissolve itself voluntarily.
10.2 Winding Up.
(a) In the event of the dissolution of the Partnership pursuant
to Section 10.1(a), the Majority-in-Interest may wind up the Partnership's
affairs.
(b) Upon dissolution of the Partnership and until the filing of
a certificate of cancellation as provided in the Act, two General Partners
(acting as if such action were a Majority Decision) or a liquidating trustee,
as the case may be, may, in the name of, and for and on behalf of, the
Partnership, prosecute and defend suits, whether civil, criminal or
administrative, gradually settle and close the Partnership's business,
dispose of and convey the Partnership's property, discharge or make
reasonable provision for the Partnership's liabilities, and distribute to the
Partners in accordance with Section 10.3 any remaining assets of the
Partnership, all without affecting the liability of Partners and without
imposing liability on any liquidating trustee.
(c) Upon the completion of winding up of the Partnership, two
General Partners (acting as if such action were a Majority Decision) or
liquidating trustee, as the case may be, shall file a certificate of
cancellation in the Office of the Secretary of State of Delaware as provided
in the Act.
10.3 Distribution of Assets. Upon the winding up of the
Partnership, the assets shall be distributed as follows:
(1) to the payment of expenses of the liquidation;
(2) to the payment of debts and liabilities of the
Partnership, in order of priority as provided by law, other than
debts and liabilities owed to Partners;
(3) to the setting up of any reserves that the two
General Partners or the liquidating trustee, as the case may be,
shall determine are reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Partnership or the
Partners;
(4) to the payment of debts and liabilities of the
Partnership owed to Partners;
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(5) to the Partners who are holders of Class A Preferred
Units, in proportion to the respective number of Class A Preferred
Units, in an amount not to exceed an amount per Class A Preferred
Unit equal to $12.25, plus an amount equal to the accrued and unpaid
distributions for each quarterly period ended prior to the date of
such redemption (it being understood and agreed that no payment shall
be made in respect of any other distribution period); and
(6) to the Partners other than holders of Class A
Preferred Units in accordance with Section 8.1(b).
10.4 Special Allocation. It is intended that, to the extent
possible, at the liquidation of the Partnership each Partner's Capital
Account balance will be equal to such Partner's Targeted Capital Account
Balance. Notwithstanding anything in Article 7, if the ending Capital
Account balance of any partner immediately prior to the distributions to be
made pursuant to Section 10.3 is more or less than such Partner's Targeted
Capital Account Balance, then Partnership Profit and Loss, including items of
income, gain, loss and deduction, shall be specially allocated among the
Partners for the year in which liquidating distributions are made pursuant to
Section 10.3 until each Partner's actual Capital Account balance, to the
extent possible, is equal to such Partner's Targeted Capital Account Balance.
The special allocation provision provided by this Section 10.4 shall be
applied in such a manner so as to cause the difference between each Partner's
Targeted Capital Account Balance and the actual balance in its Capital
Account (determined after this allocation, but immediately prior to the
distributions pursuant to this Article 10) to be the smallest dollar amount
possible.
ARTICLE 11.
AMENDMENTS
11.1 Amendments. Subject to Sections 3.7(b) and 3.7(c),
amendments may be made to this Agreement from time to time by the
Administering General Partner with the consent of each of the General
Partners and without the consent of any Limited Partner; provided, however,
that no such amendment shall without such Partner's consent reduce the
amounts distributable to any Partner (in a manner that is not pro rata with
respect to all Interests of a class of Interests), increase the obligations
or liabilities of any Partner hereunder, or otherwise impair the rights of
any Partner under this Agreement, other than an impairment of rights that is
pro rata with other Partners holding the same class of Interests. Without
the consent of the holders of a majority of the outstanding Class A Preferred
Units and Class B Units (excluding holders that are General Partners or
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Affiliates of General Partners), voting together as a single class, this
Agreement may not be amended to change materially the nature of the business
of the Partnership or to change this sentence. No amendment, modification,
supplement, discharge or waiver hereof or hereunder shall require the consent
of any Person not a party to this Agreement. Notwithstanding the foregoing,
(a) no consent of any Partner other than WHGP and Blackstone GP shall be
required for an amendment entered into to reflect any assignment made
pursuant to Section 9.10, (b) no amendment of the proviso clause of the
first sentence of this Section 11.1 shall be made without the consent of all
Partners, (c) no amendment of Section 3.7(b) or this clause (c) shall be made
without the consent of the holders of a majority of the outstanding Class A
Preferred Units (excluding holders that are General Partners or Affiliates of
General Partners), and (d) no amendment of Section 3.7(c) or this clause (d)
shall be made without the consent of the holders of a majority of the
outstanding Class B Units (excluding holders that are General Partners or
Affiliates of General Partners).
11.2 Additional Partners. If this Agreement shall be amended as
a result of adding or substituting a Partner, the amendment to this Agreement
shall be signed by the General Partners, by the Person to be added or
substituted and by the assigning Partner, if any. In making any amendments,
the Administering General Partner shall prepare and file for recordation such
documents and certificates as shall be required to be prepared and filed.
ARTICLE 12.
MISCELLANEOUS
12.1 Further Assurances. Each party to this Agreement agrees to
execute, acknowledge, deliver, file and record such further certificates,
amendments, instruments and documents, and to do all such other acts and
things, as may be required by law or as, in the reasonable judgment of any
General Partner, may be necessary or advisable to carry out the intent and
purpose of this Agreement.
12.2 Notices. Unless otherwise specified in this Agreement, all
notices, demands, elections, requests or other communications that any party
to this Agreement may desire or be required to give hereunder shall be in
writing and shall be given by hand by depositing the same in the United
States mail, first class postage prepaid, certified mail, return receipt
requested, or by a recognized overnight courier service providing
confirmation of delivery, to the addresses set forth in Sections 2.5 and 2.6,
as applicable, or at such other address as may be designated by the addressee
thereof (which in the case of the Partnership, shall be designated by the
Administering General Partner) upon written notice to all of the Partners.
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All notices given pursuant to this Section 12.2 shall be deemed to have been
given (i) if delivered by hand on the date of delivery or on the date
delivery was refused by the addressee or (ii) if delivered by United States
mail or by overnight courier, on the date of delivery as established by the
return receipt or courier service confirmation (or the date on which the
return receipt or courier service confirms that acceptance of delivery was
refused by the addressee).
12.3 Headings and Captions. All headings and captions contained
in this Agreement and the table of contents hereto are inserted for
convenience only and shall not be deemed a part of this Agreement.
12.4 Variance of Pronouns. All pronouns and all variations
thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person or entity may require.
12.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one Agreement.
12.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CON-
STRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD
TO CONFLICT OF LAW PROVISIONS THEREOF.
12.7 Consent to Jurisdiction. Each party hereto hereby
irrevocably consents and agrees, for the benefit of each party, that any
legal action, suit or proceeding against it with respect to its obligations,
liabilities or any other matter under or arising out of or in connection with
this Agreement and with respect to the enforcement, modification, vacation or
correction of an award rendered in an arbitration proceeding may be brought
in any state or federal court located in the Borough of Manhattan, The City
of New York (a "New York Court"), and hereby irrevocably accepts and submits
to the non-exclusive jurisdiction of each New York Court, as the case may be,
with respect to any such action, suit or proceeding. Each party hereto also
hereby irrevocably consents and agrees, for the benefit of each other party,
that any legal action, suit or proceeding against it shall be brought in any
New York Court, and hereby irrevocably accepts and submits to the exclusive
jurisdiction of each such New York Court with respect to any such action,
suit or proceeding. Each party hereto waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions,
suits or proceedings brought in any such New York Court and hereby further
waives and agrees not to plead or claim in any such New York Court that any
such action, suit or proceeding brought therein has been brought in an
inconvenient forum.
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12.8 Arbitration.
(a) Arbitration shall be the exclusive method for resolution of
any claims or disputes arising in connection with this Agreement, and the
determination of the arbitrators shall be final and binding (except to the
extent there exist grounds for vacation or an award under applicable
arbitration statutes) on the Partners. The parties agree that they will give
conclusive effect to the arbitrators' determination and award and that
judgment thereon may be entered in any court having jurisdiction. Each party
shall bear its own costs, in any arbitration.
(b) The number of arbitrators shall be three, each of whom shall
be disinterested in the dispute or controversy and shall be impartial with
respect to all parties hereto. The Whitehall Group the Blackstone Group, and
the Berkshire Group shall each appoint one arbitrator within ten (10)
business days of notice from a party that arbitration is requested.
Notwithstanding the foregoing, in the event one or more Class A Limited
Partners or Class B Limited Partners are claimants in such arbitration
proceedings, such Class A Limited Partners and/or Class B Limited Partners
shall collectively have the right to designate one arbitrator to such
arbitration panel, the Partnership (as if such decision were a Majority
Decision) or the General Partners involved in such proceeding, as
applicable, collectively shall appoint one arbitrator, and such two appointed
arbitrators shall appoint the third arbitrator. In the event the parties
fail to agree upon the arbitrators, the arbitrators (or such number thereof
as shall not have been agreed upon) shall be appointed under the commercial
arbitration rules of the American Arbitration Association.
(c) The place of arbitration shall be the Borough of Manhattan,
The City of New York. The arbitration shall be conducted in the English
language. The arbitrators shall give effect insofar as possible to the
desire of the parties hereto that the dispute or controversy be resolved in
accordance with good commercial practice. The arbitrators shall decide such
dispute in accordance with the law of the State of Delaware. The arbitrators
shall decide such dispute within thirty (30) days of selection of the
arbitrators. The arbitration shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association.
12.9 Partition. The Partners hereby agree that no Partner nor
any successor-in-interest to any Partner shall have the right 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, and each Partner, on behalf of himself, his successors,
representatives, heirs and assigns, hereby waives any such right.
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12.10 Invalidity. Every provision of this Agreement is intended
to be severable. The invalidity and unenforceability of any particular
provision of this Agreement in any jurisdiction shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects as
if such invalid or unenforceable provision were omitted.
12.11 Successors and Assigns. This Agreement shall be binding
upon the parties hereto and their respective successors, executors,
administrators, legal representatives, heirs and legal assigns and shall
inure to the benefit of the parties hereto and, except as otherwise provided
herein, their respective successors, executors, administrators, legal
representatives, heirs and legal assigns. No Person other than the parties
hereto and their respective successors, executors, administrators, legal
representatives, heirs and permitted assigns shall have any rights or claims
under this Agreement.
12.12 Entire Agreement. This Agreement supersedes all prior
agreements among the parties with respect to the subject matter hereof and
contains the entire Agreement among the parties with respect to such subject
matter.
12.13 Waivers. No waiver of any provision hereof by any party
hereto shall be deemed a waiver by any other party nor shall any such waiver
by any party be deemed a continuing waiver of any matter by such party.
12.14 No Brokers. Each of the Partners hereto warrants to each
other that, except as set forth in Section 2.9(b) (it being understood,
however, that BRI and BRIOP, in connection with the Merger, hired Lazard
Freres & Co LLC, Lehman Brothers Inc. and Prudential Securities Incorporated
as their financial advisors and paid fees to such parties), there are no
brokerage commissions or finders' fees (or any basis therefor) resulting from
any action taken by such Partner or any Person acting or purporting to act on
their behalf upon entering into this Agreement. Each Partner agrees to
indemnify and hold harmless each other Partner for all costs, damages or
other expenses arising out of any misrepresentation made in this Section
12.14.
12.15 Maintenance as a Separate Entity. The Partnership shall
maintain books and records and bank accounts separate from those of its
Affiliates; shall at all times hold itself out to the public as a legal
entity separate and distinct from any of its Affiliates (including in its
operating activities, in entering into any contract, in preparing its
financial statements, and on its stationery and any signs it posts), and
shall cause its Affiliates to do the same and to conduct business with it on
an arm's-length basis; shall not commingle its assets with assets of any of
its Affiliates; shall not guarantee any obligation of any of its Affiliates;
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shall cause its business to be carried on by the General Partners and shall
keep minutes of all meetings of the Partners.
12.16 Confidentiality. Each Partner agrees not to disclose or
permit the disclosure of any of the terms of this Agreement or of any other
confidential, non-public or proprietary information relating to this
Agreement (collectively, "Confidential Information"), provided that such
disclosure may be made (a) to any Person who is a member, partner, officer,
director or employee of such Partner or counsel to or accountants of such
Partner solely for their use and on a need-to-know basis, provided that such
Persons are notified of the Partners' confidentiality obligations hereunder,
(b) with the prior consent of the other Partners, (c) subject to the next
paragraph, pursuant to a subpoena or order issued by a court, arbitrator or
governmental body, agency or official, (d) to any lender providing financing
to the Partnership, (e) in connection with a purchase agreement under Section
9.2, to the sellers thereunder, (f) to a bona fide potential transferee of an
Interest who agrees in writing with the Partnership to be bound by the
provisions of this Section 12.16 or (g) as required by law or regulation.
In the event that a Partner shall receive a request to disclose any
Confidential Information under a subpoena or order, such Partner shall
(i) promptly notify the other General Partners thereof, (ii) consult with the
other General Partners on the advisability of taking steps to resist or
narrow such request and (iii) if disclosure is required or deemed advisable,
cooperate with any of the other General Partners in any attempt it may make
to obtain an order or other assurance that confidential treatment will be
accorded the Confidential Information that is disclosed.
No Partner shall issue any press release or other public
communication about the formation or existence of the Partnership without the
express written consent of BGP, WHGP and Blackstone GP.
12.17 No Third Party Beneficiaries. This Agreement is not
intended and shall not be construed as granting any rights, benefits or
privileges to any Person not a party to this Agreement. Without limiting the
generality of the foregoing, no creditor of the Partnership, or of any
Partner shall have any right whatsoever to require any Partner to contribute
capital to the Partnership.
12.18 Power of Attorney.
(a) Each of the Limited Partners (other than the Investor Group
Partners) does hereby irrevocably constitute and appoint each of WHGP,
Blackstone GP and, for so long as it is the Administering General Partner,
BGP with full power of substitution, as its true and lawful attorney, in its
name, place and stead, to execute, acknowledge, swear to, deliver, record and
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file, as appropriate and in accordance with this Agreement (i) all amendments
to the original Certificate required or permitted by law or the provisions of
this Agreement, (ii) all certificates and other instruments requiring
execution by the Partners or any of them and deemed necessary or advisable by
WHGP, Blackstone GP or BGP to qualify or continue the Partnership as a
Partnership wherein the Partners have limited liability in the jurisdictions
where the Partnership may be conducting its operations, (iii) all instruments
requiring execution by the Partners or any of them and that WHGP, Blackstone
GP or BGP deems appropriate to reflect a change or modification of this
Agreement or the Partnership in accordance with this Agreement, including,
without limitation, the substitution of assignees as Substituted Partners
pursuant to Section 9.6 (provided, however, that any such modification is
otherwise in accordance with this Agreement), and (iv) all conveyances and
other instruments deemed necessary or advisable by WHGP, Blackstone GP or BGP
to effect the dissolution and termination of the Partnership in accordance
with this Agreement. Nothing contained in this Section 12.18 shall empower
any General Partner to take any action requiring the consent of any other
General Partner hereunder unless such consent is first obtained.
(b) The powers of attorney granted pursuant to this Section
12.18 are coupled with an interest and shall be irrevocable and survive and
not be affected by the subsequent death, incapacity, disability, Bankruptcy
or dissolution of the grantor; may be exercised by any of the General
Partners either by signing separately as attorney-in-fact for each Partner or
by the General Partners acting as attorneys-in-fact for all of them; and
shall survive the delivery of an assignment by a Partner of the whole or any
fraction of its Interest, except that, where the whole of such Partner's
Interest has been assigned or diluted in accordance with this Agreement, the
power of attorney of the assignor shall survive the delivery of such
assignment for the sole purpose of enabling the General Partners to execute,
acknowledge, swear to, deliver, record and file any instrument necessary or
appropriate to effect such substitution. In the event of any conflict
between this Agreement and any document, instrument, conveyance or
certificate executed or filed by any General Partner pursuant to such power
of attorney, this Agreement shall control.
(c) Each Partner shall execute and deliver to any General
Partner, within five days after the receipt of such General Partner's request
therefor, such further designations, powers of attorney and other instruments
as such General Partner deems necessary or appropriate to carry out the
provisions of this Agreement.
(d) Notwithstanding the foregoing provisions of this Section
12.18, in the event that BGP has been removed as the Administering General
Partner or any General Partner has been removed or has resigned as a General
Partner pursuant to the terms of this Agreement or has voluntarily ceased to
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manage or administer the day-to-day business of the Partnership as
contemplated by Section 3.2, then, in either case, the power of attorney
granted to BGP or such General Partner, as applicable, pursuant to this
Section 12.18 shall immediately be revoked and terminated.
12.19 Construction of Documents. The parties hereto acknowledge
that they were represented by counsel in connection with the review,
negotiation and drafting of this Agreement and that this Agreement shall not
be subject to the principle of construing their meaning against the party
that drafted same.
12.20 Time of Essence. Time is of the essence in the performance
of each and every term of this Agreement.
12.21 Default by Partnership. In the event that on or prior to
the Closing Date, one or more of the Investor Group Partners defaults in its
obligations to make Capital Contributions hereunder, then (i) in the event
such default results in the Partnership defaulting in its obligations under
the BRI Merger Agreement and the Partnership's deposit thereunder being
retained by BRI, such defaulting Partner or Partners shall immediately pay in
cash to the non-defaulting Partners, as sole and liquidated damages under
this Agreement, the amount of any Capital Contributions previously made to
the Partnership by such non-defaulting Partners and (ii) the defaulting
Partner or Partners shall forfeit their respective Interests in the
Partnership and immediately be deemed to have withdrawn from the Partnership.
To the extent there is more than one defaulting Partner under this Section,
amounts to be paid by the defaulting Partners hereunder shall be paid by each
such defaulting Partner in relative proportion to their relative Partnership
Percentage Interests. Amounts due to any Partner under this Section and not
paid shall accrue interest and compound annually at a rate per annum (until
paid in full) equal to the lesser of (i) 20% or (ii) the maximum rate
permitted by law.
12.22 Subsidiary Joint Ventures. The Partnership agrees that it
will not, without the consent of the holders of a majority of the Class A
Preferred Units (excluding any Class A Preferred Units held by a General
Partner or an Affiliate of a General Partner), voting as a separate class,
transfer Properties of the Partnership having a total value of more than one-
third of the total value of all of the Properties of the Partnership to one
or more joint venture companies, partnerships or similar entities, if such
joint venture companies, partnerships, or similar entities issue equity
securities to a party other than the Partnership that rank prior to the Class
A Preferred Units with respect to distributions or receipt of proceeds upon
liquidation.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement of Limited Partnership as of the day and year first above written.
GENERAL PARTNERS:
WXI/BRH Gen-Par LLC
By: /s/ STEVEN FELDMAN
-----------------------
Name: Steven Feldman
Title: Vice President
BRE/Berkshire GP L.L.C.
By: /s/ KENNETH C. WHITNEY
-----------------------
Name: Kenneth C. Whitney
Title: Vice President
Aptco Gen-Par, L.L.C.
By: /s/ DOUGLAS KRUPP
-----------------------
Name: Douglas Krupp
Title: Authorized Signatory
LIMITED PARTNERS:
Whitehall Street Real Estate
Limited Partnership XI
By: WH Advisors, L.L.C. XI
By: /S/ STEVEN FELDMAN
-----------------------
Name: Steven Feldman
Title: Vice President
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BRE/Berkshire L.P. L.L.C.
By: /s/ KENNETH C. WHITNEY
----------------------
Name: Kenneth C. Whitney
Title: Vice President
Aptco Holdings, L.L.C.
By: /s/ DOUGLAS KRUPP
-----------------------
Name: Douglas Krupp
Title: Authorized Signatory
Stone Street Real Estate Fund 1998 L.P.
By: Stone Street Advantage Realty Corp.,
its General Partner
By: /s/ ALAN FAVA
-----------------------
Name: Alan Fava
Title: Vice President
Bridge Street Real Estate Fund 1998 L.P.
By: Stone Street Advantage Realty Corp.,
its General Partner
By: /s/ ALAN FAVA
-----------------------
Name: Alan Fava
Title: Vice President
Stone Street WXI/BRH Corp.
By: /s/ ALAN FAVA
-----------------------
Name: Alan Fava
Title: Vice President
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For the purposes of Section 4.4(c):
The Berkshire Companies Limited Partnership
By: /s/ DOUGLAS KRUPP
-----------------------
Name: Douglas Krupp
Title: Authorized Signatory
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EXHIBIT 9
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April 13, 1999
CONFIDENTIAL
Berkshire Realty Holdings, L.P.
c/o The Berkshire Group
One Beacon Street
Boston, Massachusetts 02108
Attn: Douglas S. Krupp, CEO
Re: Commitment Letter
Ladies and Gentlemen:
Affiliates of Douglas S. Krupp ("Krupp"), Blackstone Real Estate Acquisitions
III L.L.C. ("Blackstone") and Whitehall Street Real Estate Limited
Partnership XI ("Whitehall" and, collectively with Krupp and Blackstone
and/or their affiliates, the "Investors") have formed and intend to
capitalize Berkshire Realty Holdings, L.P., a Delaware limited partnership
("Holdings"), which will propose a transaction to the Board of Directors of a
publicly held Delaware corporation ("Bruin"), pursuant to which (i) Bruin
would merge with Holdings and all the outstanding Bruin capital stock (and
rights to acquire Bruin capital stock) being converted in the merger into the
right to receive cash equal to a price per share (and total purchase price)
not to exceed $12.25 per share (the "Bruin Merger") and (ii) immediately
prior to such merger, a subsidiary of Holdings would be merged into BRI OP
Limited Partnership, a Delaware limited partnership ("OP"), in a transaction
pursuant to which OP and OP's current general partner ("OP GP") would become
wholly owned by Holdings (the "OP Merger" and together with the Bruin Merger,
the "Transaction"). Currently, 79.16% of the partnership interests of OP are
directly or indirectly owned by Bruin. This letter is referred to herein as
the Commitment Letter.
Financing of $755 million, but in no event in excess of 75.5% of the
Transaction Value (as defined below) is being sought by you in connection
with the Transaction (the "Facility"). A portion of the proceeds of the
Facility would be made available to Holdings to finance a portion of the
consideration to be paid to Bruin stockholders and option/warrantholders in
the Bruin Merger and the cash option in the OP Merger. Additional
information regarding the Transaction is set forth in the partnership
agreement of Holdings among the Investors and the draft agreements for the
Bruin Merger and the OP Merger which you have furnished to us (the
"Partnership Agreement").
Based on our understanding of the Transaction as set forth above and in other
documents referred to above, and the other information which you have
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provided to us, each of Whitehall and Blackstone commits to provide, on a
several and not joint basis, 50% of the Facility on the terms and subject to
the conditions set forth herein (provided that Whitehall shall not be
obligated to fund its portion of the Facility unless Blackstone funds its
portion of the Facility, and Blackstone shall not be obligated to fund its
portion of the Facility unless Whitehall funds its portion of the Facility).
LENDERS: Whitehall and Blackstone, together with their
respective permitted participants and co-lenders
(each, a "Lender" and, collectively the "Lenders").
TRANSFERABILITY: Prior to closing, Borrower and Lenders will agree
upon the terms pursuant to which Lenders may
transfer their interest in the loan (it being
understood and agreed that Lenders may sell
participation interests in the loan, provided that
Whitehall retains the agent role).
BORROWER: OP and/or, at Lenders' election, certain other
property-owning OP subsidiaries.
GUARANTORS: Holdings and those OP subsidiaries owning the 58
properties identified on Schedule I hereto which are
not borrowers. In addition, Guarantors shall
include all other subsidiaries of OP for which no
third party consent for such guarantee is required
or as to which all required third party consents
have been obtained (as to special purpose entities,
OP shall arrange for charter amendments, as
necessary to permit granting of guarantees).
Borrower and Guarantors to use all commercially
reasonable efforts to obtain such consents. The
Investors (or special purpose entities holding the
Investors' interest in Holdings) shall be non-
recourse guarantors of the Loan, to be secured by an
assignment or pledge of their interests in Holdings
(see "Security" below).
AMOUNT: $755 million in the aggregate, but in no event in
excess of 75.5% of the Transaction Value, defined as
the aggregate of (i) the cash required to consummate
the Transaction, (ii) assumed debt of at least
$233,000,000, (iii) equity contributed or deemed
contributed by Investors and (iv) all fees and
expenses of Holdings and its subsidiaries relating
thereto. The amount borrowed under the Facility is
referred to as the Loan. Borrower may borrow less
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than the entire Loan at closing. In such event, the
collateral to secure the Loan will be reduced in
accordance with loan allocation amounts among the
properties (such allocated loan amounts shall be
agreed upon by the Lenders and Borrower before the
merger agreement is signed).
TERM: Twelve (12) months from initial funding.
USE OF PROCEEDS: Proceeds will be used to finance a portion of the
aggregate consideration to be paid by Holdings in
the Bruin Merger, as needed to fund the cash option
in the OP Merger, to refinance specified existing
indebtedness of OP and its subsidiaries, to repay
intercompany indebtedness owed to Bruin to enable
Bruin to finance the redemption of its outstanding
Series A Preferred Stock, and to fund certain fees
and expenses associated with the Transaction.
INTEREST:
Rate: Absent a default, the Loan will bear interest at the
rate of 3.75% above the reserve adjusted London
Interbank Offered Rate ("LIBOR Rate") for one month
interest periods; provided, however, that
notwithstanding the foregoing, the minimum interest
rate shall at all times be 8.65%.
Payment Dates: Interest will be payable monthly.
Other Terms: All interest will be calculated based on a 360-day
year and actual days elapsed. The financing
documentation will contain (a) customary LIBOR
breakage provisions and LIBOR borrowing mechanics,
(b) LIBOR Rate definitions and (c) customary
provisions for determination of interest in the
event that LIBOR is not available for any period.
Default Rate: From and after the occurrence of a default, the
interest rates applicable to the Loan will be
increased by 2% per annum over the interest rate
otherwise applicable and such interest and fees will
be payable on demand.
COMMITMENT FEE: 1.0% of the maximum amount of the Facility, payable
at the drawing of the Facility upon the closing of
the Transaction.
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STRUCTURING FEE: 0.25% of the maximum amount of the Facility, payable
at the same time as the commitment fee.
TAKEDOWN FEE: 0.50% of the amount borrowed, payable upon
borrowing.
REPAYMENT FEE: A repayment fee of 0.50% of the then outstanding
amount of the Facility, if any, shall be due on June
15, 2000.
PREPAYMENTS: Borrowers may voluntarily prepay all or any portion
of the Loan in minimum amounts of $1 million at any
time, upon at least 5 days' prior written notice.
All voluntary prepayments will be accompanied by
LIBOR breakage costs, if any.
SECURITY: First mortgage liens (recorded) and title insurance
on 58 properties identified on Schedule I hereto.
Pledge by Holdings of entire equity of OP GP. In
addition, the Investors (or special purpose entities
holding the Investors' interest in Holdings) will
guarantee the Loan (on a non-recourse basis) and
assign or pledge their interest in Holdings as
security for such guaranty. At Lenders' election, a
first priority perfected lien on and security
interest in all assets of Holdings, OP and the
subsidiaries of OP not covered by the preceding
sentences to the extent available without the
requirement to obtain any third party consent or as
to which all required third party consents are
obtained. Borrower and Guarantors to use all
commercially reasonable efforts to obtain such
consents. Lenders will have dominion over all cash
if requested by Whitehall and Blackstone, which
arrangement shall permit the release of cash to
Borrower and Guarantors absent a default; provided,
however, that to the extent that the holders of debt
in respect of the 24 properties identified on
Schedule II hereto shall have the right to and shall
prohibit such an arrangement, Lenders shall not be
entitled to same. The Loan will be cross-
collateralized and cross-defaulted in a manner
satisfactory to Lenders. The Parties will use
reasonable good faith efforts to minimize or avoid
mortgage recording taxes and title insurance
premiums on the 58 properties on Schedule I; it
being understood that there will be no mortgages or
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title insurance obtained with respect to the 24
properties on Schedule II.
PARTIAL RELEASES FROM Permitted in connection with third party sales and
MORTGAGE OR NEGATIVE certain partial refinancings provided that Lenders
COVENANT: receive at least minimum release prices based on
allocated loan amounts to be agreed upon by the
parties. Minimum release price is to be equal to
greater of the property's allocated loan amount or
100% of sale or refinancing proceeds capped at 110%
of the property's allocated loan amount. Borrower
and Lenders to agree on allocated loan amounts prior
to the execution of the merger agreement.
DOCUMENTATION: The documentation for the Financing will contain
representations and warranties, conditions precedent
described below, closing document deliveries and
similar customary conditions precedent, affirmative
and negative covenants (but no financial ratios,
maintenance or other similar financial condition
tests), indemnities, events of default and remedies,
in each case customarily found in documentation for
similar transactions. The OP and/or Holdings will
provide customary environmental indemnity to the
Lenders. This Commitment Letter does not contain
all the terms that will be included in the
documentation for the Financing.
CONDITIONS: The commitment of Lenders for the Facility is
conditioned upon satisfaction of all the following
(all to Lenders' satisfaction):
-- Relevant documents, such as all transaction
documents for the Bruin Merger and the OP
Merger and other material agreements to
which Borrower is a party, must be
acceptable to Lenders in all material
respects.
-- The Bruin Merger and the OP Merger each
shall have been consummated in compliance
with all applicable law and regulations.
-- The material terms of the Bruin Merger and
the OP Merger, including, without
limitation, the consideration offered and
the conditions precedent, shall not have
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been modified, amended or supplemented in
any respect and no provision contained
therein shall have been waived, without
Lenders' prior written consent.
-- All necessary governmental and material
third party waivers and consents shall have
been received.
-- Receipt of opinions of counsel from
Borrower's counsel (including local counsel
as requested) reasonably acceptable to
Lenders.
-- Receipt of customary mortgage title
insurance policies, existing land surveys,
evidence of insurance and addition of
Lenders as loss payees, and the like.
-- Absence of a default under the Financing.
-- Holdings shall have received the equity from
Blackstone and Whitehall contemplated by the
Summary of Terms (i.e., a minimum of $125
million from each), and not less than
5,416,000 shares of Bruin stock and/or OP
Units currently owned by Krupp and his
affiliates.
-- The Transaction shall have closed, and the
Loan shall have been drawn, no later than
December 31, 1999 (the "Commitment
Termination Date").
-- Definitive agreements for the Bruin Merger
and the OP Merger shall have been executed
by April 14, 1999, provided, however, that
if definitive agreements are not executed by
April 14, 1999 and Lenders do not extend
this Commitment Letter, this Commitment
Letter will terminate and neither Borrower
nor Lenders will be liable hereunder.
OTHER TERMS: The documentation for the Facility will require,
among other things, compliance with covenants
pertaining to the following (all in form and
substance satisfactory to Lenders):
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-- Financial reporting on a monthly basis. All
financial statements shall be prepared on a
consolidated and consolidating basis.
-- Compliance with all applicable law, decrees
and material agreements, or obtaining of
applicable consents and waivers.
-- Limitations on commercial transactions,
management agreements, service agreements
and borrowing transactions with officers,
directors, employees and affiliates.
-- Prohibition on new indebtedness, other than
the Facility, and other than refinancings of
existing indebtedness (i) in respect of the
24 properties listed on Schedule II,
provided the same are on terms not
materially more onerous to the Borrower than
the existing indebtedness being refinanced
and (ii) in respect of the 58 properties
identified on Schedule I, provided that
payment of the appropriate release price is
made.
-- Prohibitions on liens, mortgages and
security interests except those in existence
and identified, those incurred in connection
with permitted refinancings, and liens on
indebtedness permitted to be incurred for
the financing of permitted purchases of
properties which liens are limited to the
properties purchased, and which obligations
are solely those of the property owning
subsidiary.
-- Limitations on, or prohibitions of, cash
dividends, other distributions to equity
holders, payments in respect of subordinated
debt and redemption of common or preferred
stock. Such limitations and/or prohibitions
shall not preclude, in the absence of a
default under the Loan, distributions to
certain OP Unit Holders who convert their
interests to Class A (Preferred) Interests
or tax distributions, as contemplated by the
Holdings partnership agreement.
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-- Limitations on mergers, acquisitions, or
sale of a material portion of assets (other
than sales accompanied by payment of
specified release prices).
-- Prohibitions of a direct or indirect change
in control of Borrower or Holdings (other
than changes which increase the control of
Whitehall and Blackstone). The foregoing
shall not prohibit any change in ownership
within Whitehall or Blackstone.
-- Customary provisions regarding
responsibility for misappropriation of
funds.
-- Limitations on capital expenditures.
-- Agent's and Lenders' rights of inspection
and access to facilities, management and
auditors.
-- Payment of Lenders' costs and expenses in
documenting, closing and servicing the Loan
(including reasonable attorneys' fees and
costs, title insurance premiums and mortgage
recording taxes).
-- Escrow for real estate taxes.
-- Governing law: New York.
The commitment of Lenders hereunder is subject to the execution and delivery
of final legal documentation acceptable to Lenders and their counsel
incorporating, without limitation, the terms set forth in this Commitment
Letter and other terms satisfactory to the Lenders.
By signing this Commitment Letter, you acknowledge that this Commitment
Letter supersedes any and all discussions and understandings, written or
oral, between or among Lenders and any other person as to the Facility,
including any prior commitment letters for debt financing for the
Transaction. No amendments, waivers or modifications of this Commitment
Letter or any of its contents shall be effective unless expressly set forth
in writing and executed by you and Lenders.
This letter and the agreements contained herein are solely for the benefit of
Holdings and do not confer upon any other person or entity (including,
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without limitation, any partner in Holdings) any rights or remedies and may
not be enforced by any person or entity other than Holdings. As described
above, the commitments of Whitehall and Blackstone hereunder are several and
not joint and are subject to all of the terms of this Commitment Letter,
including, without limitation, the conditions to the obligations of the
Lenders hereunder.
This Commitment Letter is being provided to you on the condition that, except
as required by law or SEC Regs (as defined below), neither it nor its
contents will be disclosed publicly or privately except to those individuals
who are your advisors who have a need to know of them as a result of their
being specifically involved in the Bruin Merger and the OP Merger and the
Facility and then only on the condition that such matters may not, except as
required by law or regulations of the Securities and Exchange Commission
("SEC Regs"), be further disclosed and except that, following your acceptance
hereof, you may disclose this Commitment Letter to Bruin and its advisors.
No person, other than the parties signatory hereto, is entitled to rely upon
this Commitment Letter or any of its contents. No person shall, except as
required by law or SEC Regs, use the name of, or refer to Lenders or any of
their respective affiliates, in any correspondence, discussions, press
release, advertisement or disclosure made in connection with the Transaction
without the prior written consent of Lenders.
You agree to indemnify and hold harmless each Lender, and its affiliates, and
the directors, officers, employees, agents, attorneys and representatives of
any of them (each, an "Indemnified Person"), from and against all suits,
actions, proceedings, claims, damages, losses, liabilities and expenses
(including, but not limited to, reasonable attorneys' fees and disbursements
and other costs of investigation or defense, including those incurred upon
any appeal), which may be instituted or asserted against or incurred by any
such Indemnified Person in connection with, or arising out of, this
Commitment Letter, the Financing, the documentation related thereto, any
actions or failures to act in connection therewith, and any and all
environmental liabilities and legal costs and expenses arising out of or
incurred in connection with any disputes between or among any parties to any
of the foregoing, and any investigation, litigation, or proceeding related to
any such matters. Your obligation for such reimbursement may be assumed by
Borrower at closing. Notwithstanding the foregoing, no indemnitor shall be
liable for any indemnification to any Indemnified Person to the extent that
any such suit, action, proceeding, claim, damage, loss, liability or expense
results solely from that Indemnified Person's gross negligence or willful
misconduct, as finally determined by a court of competent jurisdiction.
Under no circumstances shall any Lender, or any of its affiliates be liable
to you or any other person for any punitive, exemplary, consequential or
indirect damages in connection with this Commitment Letter, the Facility or
the documentation related thereto, regardless of whether the commitment
herein is terminated or the Transaction or the Facility closes. For purposes
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of this paragraph, the term "affiliate" shall not include any affiliated
entity which is an Investor.
You and Lenders expressly waive any right to trial by jury of any claim,
demand, action or cause of action arising in connection with this Commitment
Letter, any transaction relating hereto, or any other instrument, document or
agreement executed or delivered in connection herewith, whether sounding in
contact, tort or otherwise. You and Lenders consent and agree that the state
or federal courts located in New York County, City of New York, New York,
shall have exclusive jurisdiction to hear and determine any claims or
disputes between or among any of the parties hereto pertaining to this
Commitment Letter or the Facility under consideration and any investigation,
litigation, or proceeding related to or arising out of any such matters,
provided, however, that you and Lenders acknowledge that any appeals from
those courts may have to be heard by a court located outside of such
jurisdiction. You and Lenders expressly submit and consent in advance to
such jurisdiction in any action or suit commenced in any such court, and
hereby waive any objection which either of them may have based upon lack of
personal jurisdiction, improper venue or inconvenient forum. The definitive
documentation for the Facility shall contain Borrower's and Guarantors'
agreement to the foregoing.
This Commitment Letter is governed by and shall be construed in accordance
with the law of the State of New York applicable to contracts made and
performed in that State.
Lenders shall have access to all relevant facilities, personnel and
accountants, and copies of all documents which Lenders may reasonably
request, including business plans, financial statements (historical and pro
forma), books, records, and other documents. Lenders agree to treat any
confidential information so received as they would their own confidential
information.
This Commitment Letter shall be of no force and effect unless and until this
Commitment Letter is executed and delivered to Lenders on or before 5:00 p.m.
New York City time on April 14, 1999, at both (i) 85 Broad Street, New
York, New York 10004 and (ii) 345 Park Avenue, 31st Floor, New York, New York
10154. Once effective, the commitment of Lenders to provide financing in
accordance with the terms of this Commitment Letter shall terminate if the
Bruin Board of Directors rejects Holdings's proposal relating to the
Transaction or if definitive agreements have not been executed by April 14,
1999 (in which case, none of the Holdings, the Investors or their respective
affiliates shall have any liability hereunder whether on account of fees,
reimbursement obligations or otherwise) or if the Loan does not close by the
Commitment Termination Date.
-10-
<PAGE>
<PAGE>
We look forward to continuing to work with you toward completing this
transaction.
Sincerely,
WHITEHALL STREET REAL ESTATE LIMITED
PARTNERSHIP XI
By: WH ADVISORS, L.L.C., XI,
its General Partner
By: /s/ STEVEN FELDMAN
---------------------------
Name: Steven Feldman
Title: Vice President
BLACKSTONE REAL ESTATE ACQUISITIONS III
By: /S/ KENNETH C. WHITNEY
---------------------------
Name: Kenneth C. Whitney
Title: Vice President
AGREED AND ACCEPTED THIS
13th DAY OF APRIL, 1999.
BERKSHIRE REALTY HOLDINGS, L.P.
By: /s/ DOUGLAS KRUPP
-------------------
-11-
EXHIBIT 10
----------
EXECUTION COPY
--------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BERKSHIRE REALTY HOLDINGS, L.P.,
BRI ACQUISITION, LLC
AND
BERKSHIRE REALTY COMPANY, INC.
DATED AS OF APRIL 13, 1999
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Effect of Merger on Certificate of Incorporation and By-laws 3
1.5 Directors and Officers . . . . . . . . . . . . . . . . . . . 3
1.6 Effect on Shares . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Merger Consideration . . . . . . . . . . . . . . . . . . . . 4
1.8 Transactions Relating to Seller Partnership . . . . . . . . 5
1.9 Exchange of Certificates; Pre-Closing Dividends:
Fractional Shares . . . . . . . . . . . . . . . . . . . . 5
1.10 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . 7
1.11 Alternative Structure of Merger . . . . . . . . . . . . . . 7
1.12 Further Assurances. . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . 8
2.1 Organization, Standing and Power of Seller . . . . . . . . . 9
2.2 Seller Subsidiaries . . . . . . . . . . . . . . . . . . . . 9
2.3 Capital Structure . . . . . . . . . . . . . . . . . . . . 10
2.4 Other Interests . . . . . . . . . . . . . . . . . . . . . 11
2.5 Authority; Noncontravention; Consents . . . . . . . . . . 12
2.6 SEC Documents; Financial Statements; Undisclosed
Liabilities . . . . . . . . . . . . . . . . . . . . . . . 13
2.7 Absence of Certain Changes or Events . . . . . . . . . . . 14
2.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 15
2.9 Properties . . . . . . . . . . . . . . . . . . . . . . . . 16
2.10 Environmental Matters . . . . . . . . . . . . . . . . . . 18
2.11 Related Party Transactions . . . . . . . . . . . . . . . . 20
2.12 Employee Benefits . . . . . . . . . . . . . . . . . . . . 20
2.13 Employee Matters . . . . . . . . . . . . . . . . . . . . . 22
2.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.15 No Payments to Employees, Officers or Directors . . . . . 25
2.16 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.17 Compliance With Laws . . . . . . . . . . . . . . . . . . . 25
2.18 Contracts; Debt Instruments . . . . . . . . . . . . . . . 26
2.19 Opinions of Financial Advisors . . . . . . . . . . . . . . 28
2.20 State Takeover Statutes . . . . . . . . . . . . . . . . . 28
2.21 Proxy Statement and Consent Solicitation Statement . . . . 29
2.22 Investment Company Act of 1940 . . . . . . . . . . . . . . 29
2.23 Definition of Knowledge of Seller . . . . . . . . . . . . 29
2.24 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 29
2.25 Board Recommendation . . . . . . . . . . . . . . . . . . . 30
2.26 Representations in Partnership Merger Agreement . . . . . 30
<PAGE>
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER . . . . . . . 30
3.1 Organization, Standing and Power of Parent and Buyer . . . 30
3.2 [Intentionally Omitted] . . . . . . . . . . . . . . . . . 31
3.3 Ownership of Parent and Buyer . . . . . . . . . . . . . . 31
3.4 Authority; Noncontravention; Consents . . . . . . . . . . 31
3.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 32
3.6 Undisclosed Liability . . . . . . . . . . . . . . . . . . 33
3.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.8 Compliance With Laws . . . . . . . . . . . . . . . . . . . 33
3.9 Contracts; Debt Instruments . . . . . . . . . . . . . . . 33
3.10 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.11 [Intentionally Omitted] . . . . . . . . . . . . . . . . . 34
3.12 Proxy Statement and Consent Solicitation Statement . . . . 34
3.13 Investment Company Act of 1940 . . . . . . . . . . . . . . 34
3.14 Parent and Buyer Not Interested Stockholders . . . . . . . 34
3.15 Definition of Knowledge . . . . . . . . . . . . . . . . . 34
3.16 [Intentionally Omitted] . . . . . . . . . . . . . . . . . 34
3.17 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . 34
3.18 Pro Forma Capitalization Table . . . . . . . . . . . . . . 35
3.19 Representations in Partnership Merger Agreement . . . . . 35
ARTICLE 4
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . .. . 35
4.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . 35
4.2 Conduct of Seller's Business Pending Merger . . . . . . . 37
4.3 Conduct of Parent's and Buyer's Business Pending Merger . 40
4.4 Other Actions . . . . . . . . . . . . . . . . . . . . . . 42
4.5 Partnership Merger Agreement . . . . . . . . . . . . . . . 42
4.6 Private Placement . . . . . . . . . . . . . . . . . . . . 42
4.7 Irrevocable Letter of Credit . . . . . . . . . . . . . . . 42
ARTICLE 5
ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . 43
5.1 Preparation of the Proxy Statement; Seller Stockholders
Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.2 Access to Information: Confidentiality . . . . . . . . . 45
5.3 Reasonable Best Efforts; Notification . . . . . . . . . . 46
5.4 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . 46
5.5 Public Announcements . . . . . . . . . . . . . . . . . . . 46
5.6 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . 47
5.7 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . 47
5.8 Indemnification . . . . . . . . . . . . . . . . . . . . . 47
5.9 Declaration of Dividends and Distributions . . . . . . . . 49
5.10 Resignations . . . . . . . . . . . . . . . . . . . . . . . 50
5.11 Outside Property Management Agreements . . . . . . . . . . 50
5.12 Stockholder Claims . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 6
CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.1 Conditions to Each Party's Obligation to Effect the Merger 51
6.2 Conditions to Obligations of Parent and Buyer . . . . . . 51
6.3 Conditions to Obligations of Seller . . . . . . . . . . . 53
<PAGE>
<PAGE>
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . 55
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 55
7.2 Certain Fees and Expenses . . . . . . . . . . . . . . . . 56
7.3 Effect of Termination . . . . . . . . . . . . . . . . . . 59
7.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . 59
7.5 Extension: Waiver . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 8
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 59
8.1 Nonsurvival of Representations and Warranties . . . . . . 59
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . 61
8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 61
8.5 Entire Agreement; No Third-Party Beneficiaries . . . . . . 61
8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . 62
8.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . 62
8.8 Enforcement . . . . . . . . . . . . . . . . . . . . . . . 62
8.9 Severability . . . . . . . . . . . . . . . . . . . . . . . 62
EXHIBITS
Exhibit A Financing Commitments
Exhibit B Pro Forma Capitalization Table of Parent and its
Subsidiaries
Exhibit C Form of Letter of Credit
Exhibit D Form of Tax Opinions
<PAGE>
<PAGE>
INDEX OF DEFINED TERMS
DEFINED TERM SECTION
Accrued Dividends . . . . . . . . . . . . . . . . . . . . . . . . 1.7(a)
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
Additional Filings . . . . . . . . . . . . . . . . . . . . . . . 5.1(a)
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.11
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
AICPA Statement . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(b)
Alternative Merger . . . . . . . . . . . . . . . . . . . . . . . . 1.11
Break-Up Expenses . . . . . . . . . . . . . . . . . . . . . . . . 7.2(a)
Break-Up Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2(a)
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Buyer Disclosure Letter . . . . . . . . . . . . . . . . . . . . Article 3
Buyer Material Adverse Effect . . . . . . . . . . . . . . . . . . 3.1(b)
Buyer Operating Partnership . . . . . . . . . . . . . . . . . . Recital E
Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 4.7(a)
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9(c)
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Change of Control Preference . . . . . . . . . . . . . . . . . . 1.7(a)
Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8(b)
Class A Preferred Units . . . . . . . . . . . . . . . . . . . . . . . 1.8
Class B Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2(a)
Closing Date . . . . . . . . . . . . . . . . . . . . . . 1.2(a), 1.2(b)
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12(a)
Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2(r)
Common Merger Consideration . . . . . . . . . . . . . . . . . . . 1.7(a)
Consent Solicitation Statement . . . . . . . . . . . . . . . . . 5.1(a)
Controlled Group Member . . . . . . . . . . . . . . . . . . . . . . 2.12
Development . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9(g)
Development Agreements . . . . . . . . . . . . . . . . . . . . . 4.2(i)
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
DLLCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . 1.10
Effective Time . . . . . . . . . . . . . . . . . . . . . . . 1.2(b), 1.3
Election Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11
Employee Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9(a)
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . 2.10
Environmental Liabilities and Costs . . . . . . . . . . . . . . . . 2.10
Equity Commitments . . . . . . . . . . . . . . . . . . . . . . . . 3.17
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7(a)
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . 4.7(a)
Financing Commitment . . . . . . . . . . . . . . . . . . . . . . . 3.17
Fee Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7(c)
Flow-Through Entity . . . . . . . . . . . . . . . . . . . . . . . 2.14(b)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . 2.5(b)
<PAGE>
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HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(b)
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . 2.10(a)
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 2.18(b)
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . 5.8(a)
Indemnifying Parties . . . . . . . . . . . . . . . . . . . . . . 5.8(b)
Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(d)
Knowledge of Buyer . . . . . . . . . . . . . . . . . . . . . . . . 3.15
Knowledge of Parent . . . . . . . . . . . . . . . . . . . . . . . . 3.15
Knowledge of Seller . . . . . . . . . . . . . . . . . . . . . . . . 2.23
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(b)
Lazard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16
Lehman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16
Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . 4.7(a)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
Liquidation Vote . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Material Contract . . . . . . . . . . . . . . . . . . . . . . . . 2.18(a)
Merger . . . . . . . . . . . . . . . . . . . . . . . . . Recital A, 1.11
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . 1.7(a)
1940 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.22
Option Consideration . . . . . . . . . . . . . . . . . . . . . . 1.7(b)
Ordinary Course Liabilities . . . . . . . . . . . . . . . . . . . 4.2(q)
Outside Property Management Agreements . . . . . . . . . . . . . 2.18(e)
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Parent Material Adverse Effect . . . . . . . . . . . . . . . . . 3.1(a)
Parent's Closing Notice . . . . . . . . . . . . . . . . . . . . . 1.2(d)
Partial Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9
Partial Period Dividend . . . . . . . . . . . . . . . . . . . . . . . 5.9
Partnership Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Partnership Merger Agreement . . . . . . . . . . . . . . . . . Recital E
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9(a)
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Preferred Merger Consideration . . . . . . . . . . . . . . . . . 1.7(a)
Property Restrictions . . . . . . . . . . . . . . . . . . . . . . 2.9(a)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(a)
Prudential . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16
REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14(b)
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(b)
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Seller Common Shares . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
Seller Contribution Agreements . . . . . . . . . . . . . . . . . 2.18(a)
Seller Disclosure Letter . . . . . . . . . . . . . . . . . . . Article 2
Seller Financial Statement Date . . . . . . . . . . . . . . . . . . . 2.7
Seller General Partner . . . . . . . . . . . . . . . . . . . . . . 2.25
Seller Material Adverse Change . . . . . . . . . . . . . . . . . . . 2.7
Seller Material Adverse Effect . . . . . . . . . . . . . . . . . . . 2.1
Seller OP Units . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Seller Options . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
Seller Partner Approval . . . . . . . . . . . . . . . . . . . . . 2.5(a)
Seller Partnership . . . . . . . . . . . . . . . . . . . . . . Recital E
<PAGE>
<PAGE>
Seller Partnership Agreement . . . . . . . . . . . . . . . . . . 2.3(e)
Seller Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 2.17
Seller Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
Seller Preferred Shares . . . . . . . . . . . . . . . . . . . . . 2.3(a)
Seller Properties . . . . . . . . . . . . . . . . . . . . . 2.9(a), 2.10
Seller SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Seller Shareholder Approval . . . . . . . . . . . . . . . . . . . 2.5(a)
Seller Shareholders Meeting . . . . . . . . . . . . . . . . . . . 5.1(c)
Seller Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Seller Unit Holder . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Seller's Closing Notice . . . . . . . . . . . . . . . . . . . . . 1.2(c)
Seller's Environmental Reports . . . . . . . . . . . . . . . . . . 2.10
Share Unit Account . . . . . . . . . . . . . . . . . . . . . . . 1.7(c)
Share Units . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7(c)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Superior Acquisition Proposal . . . . . . . . . . . . . . . . . . 4.1(d)
Surviving Company . . . . . . . . . . . . . . . . . . . . . . . 1.1, 1.11
Surviving Operating Partnership . . . . . . . . . . . . . . . . Recital E
Takeover Statute . . . . . . . . . . . . . . . . . . . . . . . . . 2.20
Tax(es) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14(a)
Tax Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14(a)
Tax Return(s) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14(a)
Tax Protection Agreements . . . . . . . . . . . . . . . . . . . . 2.18(i)
Third Party Provisions . . . . . . . . . . . . . . . . . . . . . . . 8.5
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.25
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6
Welfare Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
<PAGE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
April 13, 1999, is by and among Berkshire Realty Holdings, L.P., a
Delaware limited partnership ("Parent"), BRI Acquisition, LLC, a Delaware
limited liability company and subsidiary of Parent ("Buyer"), and
Berkshire Realty Company, Inc., a Delaware corporation ("Seller").
RECITALS:
A. The sole member of Buyer and the Board of Directors of
Seller deem it advisable and in the best interests of their respective
members and stockholders, subject to the conditions and other provisions
contained herein, that Buyer shall merge with and into Seller (the
"Merger").
B. Seller has received fairness opinions relating to the
transactions contemplated hereby as more fully described herein.
C. Buyer and Seller desire to make certain representations,
warranties and agreements in connection with the transactions
contemplated hereby.
D. Contemporaneously with the execution of this Agreement,
BRI Acquisition Sub, LP, a Delaware limited partnership ("Buyer Operating
Partnership"), and BRI OP Limited Partnership, a Delaware limited
partnership (the "Seller Partnership"), and Parent will enter into a
Merger Agreement (the "Partnership Merger Agreement") pursuant to which,
immediately prior to the Merger, Buyer Operating Partnership will be
merged with and into Seller Partnership with Seller Partnership as the
surviving entity ("Surviving Operating Partnership").
E. Immediately following the Merger, Parent may liquidate
Seller and, as a result of such liquidation, Parent would acquire all of
the assets, and assume all of the liabilities, of Seller.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein,
the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the terms and
conditions of this Agreement (including, without limitation, Section
1.11), and in accordance with Section 264 of the Delaware General
Corporation Law ("DGCL") and Section 18-209 of the Delaware Limited
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Liability Company Act ("DLLCA"), Buyer shall be merged with and into
Seller, with Seller as the surviving entity (the entity surviving the
Merger, the "Surviving Company").
1.2 Closing.
(a) Subject to Section 1.2(b), Seller's compliance with
Section 1.2(c) and the satisfaction (or waiver by the parties entitled to
the benefit thereof) of the conditions set forth in Article 6, the
closing of the Merger (the "Closing") will take place at 10:00 a.m.,
local time in Boston, Massachusetts on the date (the "Satisfaction Date")
which is the first business day to occur on or after the day which is the
later of (i) the 10th calendar day following satisfaction (or waiver by
the parties entitled to the benefit thereof) of the conditions set forth
in Article 6 (other than Sections 6.2(d), 6.2(g), 6.2(i), 6.3(d) and
6.3(g)) and (ii) October 15, 1999, at the offices of Hale and Dorr LLP,
60 State Street, Boston, Massachusetts 02109, unless another date or
place is agreed to in writing by the parties. The date on which the
Closing occurs shall be referred to herein as the "Closing Date."
(b) Notwithstanding the provisions of Section 1.2(a)
and subject to Parent's compliance with Section 4.7(b) hereof, Parent may
elect to extend the Closing Date to any business day on or prior to
December 29, 1999 by delivering written notice of such election to Seller
as contemplated under Section 1.2(d).
(c) On the first business day after the satisfaction
(or waiver by Parent and Buyer) of the conditions set forth in Sections
6.1 and 6.2 (other than Sections 6.2(d), 6.2(g) and 6.2(i)), Seller shall
deliver a written notice ("Seller's Closing Notice") to Parent and Buyer
which (i) sets forth the date that is the Satisfaction Date and (ii)
certifies, as of the date of such notice, the satisfaction (or waiver by
Parent and Buyer) of the conditions set forth in Sections 6.1 and 6.2
(other than Sections 6.2(d), 6.2(g) and 6.2(i)).
(d) At least three business days prior to the
Satisfaction Date (as indicated in Seller's Closing Notice), Parent shall
deliver a written notice to Seller ("Parent's Closing Notice") indicating
one of the following: (i) Parent's determination to exercise the election
contemplated by Section 1.2(b) and to extend the Closing Date to such
business day on or prior to December 29, 1999 as is set forth in such
notice, or (ii) Parent's determination not to exercise the election
contemplated by Section 1.2(b), in which case the Closing Date shall be
the Satisfaction Date.
(e) If the Closing Date is extended as contemplated by
Section 1.2(b), then for purposes of the conditions set forth in
Section 6.2 (other than Sections 6.2(g) and 6.2(i)), all references in
the lettered subsections thereof to the terms "Closing Date" and
"Effective Time" shall be deemed to mean the Satisfaction Date, and the
certificates and other documents to be delivered by the parties pursuant
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to such Sections shall be delivered on and as of the Satisfaction Date.
The parties hereto agree that other than with respect to the conditions
set forth in Section 6.2(g) and 6.2(i) (which conditions shall be
satisfied or waived by the parties entitled to the benefit thereof as of
the Closing Date), none of the conditions set forth in Section 6.2 shall
be required to be satisfied at any time after the Satisfaction Date.
Notwithstanding the foregoing, for purposes of determining whether Parent
or Buyer has the right to terminate this Agreement pursuant to Section
7.1(b), the conditions set forth in Section 6.2(b) shall, in all
circumstances, be evaluated as of the Closing Date.
(f) If the conditions set forth in Sections 6.1 and 6.2
are not satisfied (or waived by Parent and Buyer), or if the certificates
and other documents required to be delivered pursuant to Section 6.2 are
not delivered, in each case on and as of the Satisfaction Date (as
indicated in Seller's Closing Notice), then (i) the Satisfaction Date
shall be deemed not to have occurred, (ii) Seller's Closing Notice and
Parent's Closing Notice shall be void and of no further effect, (iii) the
Closing shall remain subject to Seller's further compliance with Section
1.2(c) hereof and the Closing shall occur as provided in Section 1.2(a)
and (iv) Parent shall have retained its right, subject to its compliance
with Section 1.2(b), to extend the Closing Date as contemplated
thereunder.
(g) If the Satisfaction Date occurs on or before
October 29, 1999 and the Closing Date is extended as contemplated by
Section 1.2(b) to a date that is after October 29, 1999, then
notwithstanding anything to the contrary contained in the first paragraph
of Section 5.9, Seller may declare a dividend not to exceed $.25 per
Seller Common Share for the dividend for the fourth quarter of 1999
(i.e., with a record date of November 1, 1999).
1.3 Effective Time. On the Closing Date, the Surviving Company
shall execute and file a certificate of merger (the "Certificate of
Merger"), executed in accordance with Delaware law, and shall make all
other filings and recordings required under Delaware law. The Merger
shall become effective at the time ("Effective Time") the Certificate of
Merger is filed with the Secretary of State of the State of Delaware, or
at such time as Buyer and Seller shall agree should be specified in the
Certificate of Merger (not to exceed thirty (30) days after the
Certificate of Merger is filed with the Secretary of State of the State
of Delaware). Unless otherwise agreed, the parties shall cause the
Effective Time to occur on the Closing Date.
1.4 Effect of Merger on Certificate of Incorporation and
By-laws. Subject to Section 1.11, the Restated Certificate of
Incorporation, as amended, of Seller and the By-laws of Seller, as in
effect immediately prior to the Effective Time, shall constitute the
Restated Certificate of Incorporation and By-laws, respectively, of the
Surviving Company, from and after the Effective Time, until further
amended in accordance with applicable Delaware law.
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1.5 Directors and Officers. Subject to Section 1.11, the
directors and officers of the Surviving Company shall be the Persons who
were the directors and officers, respectively, of Seller immediately
prior to the Effective Time. Such directors and officers shall continue
to serve for the balance of their unexpired terms or their earlier death,
resignation or removal.
1.6 Effect on Shares. The effect of the Merger on the shares
of Seller shall be as provided in this Article 1. Each membership
interest of Buyer outstanding immediately prior to the Merger shall be
converted, without any action on the part of the holder thereof, into one
share of the common stock of the Surviving Company.
1.7 Merger Consideration.
(a) Subject to Section 1.10 and Section 5.9 below, at
the Effective Time, by virtue of the Merger and without any action on the
part of Parent, Buyer, Seller or the holders of the following securities,
each Seller Common Share (as defined in Section 2.3(a)) issued and
outstanding immediately prior to the Effective Time (other than Seller
Common Shares held by Parent, Buyer, any wholly-owned subsidiary of
Parent or Buyer, or in the treasury of Seller, which shares, by virtue of
the Merger and without any action on the part of the holder thereof,
shall be canceled and shall cease to exist with no payment being made
with respect thereto, and other than Dissenting Shares (as defined in
Section 1.10)) shall be converted into the right to receive $12.25 in
cash (the "Common Merger Consideration"), without interest thereon, upon
surrender of the certificate formerly representing such share. In
addition, at the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Buyer, Seller or the holders of the
following securities, each Seller Preferred Share (as defined in
Section 2.3(a)) issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares) shall be converted into the right to
receive the "Change of Control Preference" in the amount of $28.75 per
Seller Preferred Share together with 115% of any Accrued Dividends per
Seller Preferred Share ("Change of Control Preference" and "Accrued
Dividends" each being defined in the Certificate of Designation of the
Seller Preferred Shares) (the "Preferred Merger Consideration"), without
interest thereon, upon surrender of the certificate formerly representing
such share. The Surviving Company shall have the right to, and shall,
take all steps necessary to ensure compliance, and shall comply, with all
withholding obligations with respect to any foreign stockholders of
Seller in connection with the payment of the Merger Consideration. The
Preferred Merger Consideration, together with the Common Merger
Consideration, is hereinafter referred to as the "Merger Consideration".
(b) Each outstanding Seller Option (as defined in
Section 2.3(b)) shall be subject to the terms of this Agreement. As of
the Effective Time, each outstanding Seller Option, whether or not then
vested or exercisable, shall have the expiration date thereof accelerated
to the Closing Date and shall be converted into the right to receive from
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the Surviving Company an amount of cash equal to the product of (i) the
number of Seller Common Shares subject to the Seller Option and (ii) the
excess, if any, of the Common Merger Consideration over the exercise
price per Seller Common Share of such option (the "Option
Consideration"). Prior to the Effective Time, Seller shall take all
steps necessary to give written notice to each holder of a Seller Option
that all Seller Options shall expire effective as of the Effective Time
and be converted into the right to receive the Option Consideration. The
Surviving Company shall cause the Paying Agent (as defined in
Section 1.9(a)) to pay each holder of Seller Options, promptly following
the Effective Time, the Option Consideration for all Seller Options held
by such holder. The Board of Directors of Seller or any committee
thereof responsible for the administration of Seller's stock option plans
shall take any and all action necessary to effectuate the matters
described in this Section 1.7(b) on or before the Effective Time. Any
amounts payable pursuant to this Section 1.7(b) shall be subject to any
required withholding of taxes and shall be paid without interest. Parent
agrees to provide the Surviving Company with sufficient funds to permit
the Surviving Company to satisfy its obligations under this
Section 1.7(b).
(c) The Seller has adopted a Directors Retainer Fee
Plan (the "Fee Plan") pursuant to which eligible directors may elect to
receive certain fees in cash or in Seller Common Shares or to defer
payment of such fees and credit such fees to an account (the "Share Unit
Account") consisting of units that are equivalent in value to Seller
Common Shares ("Share Units"). The Seller shall take all actions
necessary so that all Share Units outstanding immediately prior to the
Effective Time shall be canceled immediately prior to the Effective Time
in exchange for the right of each holder of Share Units to receive an
amount in cash equal to the product of (A) the number of Share Units in
such holder's Share Unit Account outstanding immediately prior to the
Effective Time and (B) the Common Merger Consideration to be delivered by
the Surviving Company immediately following the Effective Time. All
applicable withholding taxes attributable to the payments contemplated by
this Section 1.7(c) shall be deducted from the amounts payable under this
Section 1.7(c) and any amounts payable under this Section 1.7(c) shall be
payable without interest. Except as provided in this Section 1.7(c), the
Fee Plan shall terminate at the Effective Time.
1.8 Transactions Relating to Seller Partnership.
Contemporaneously with the execution of this Agreement, Parent and Buyer
shall cause Buyer Operating Partnership to enter into the Partnership
Merger Agreement with Seller Partnership pursuant to which, among other
things, (i) Buyer Operating Partnership will be merged with and into
Seller Partnership (the "Partnership Merger") with Seller Partnership
surviving as the Surviving Operating Partnership and (ii) each holder
("Seller Unit Holder") of units in the Seller Partnership ("Seller OP
Units") will be offered the option of receiving either (A) an amount per
Seller OP Unit equal to the Common Merger Consideration or (B) one
Class A Preferred Unit (as defined in the Partnership Merger Agreement)
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for each Seller OP Unit held by such holder or (C) one Class B Unit (as
defined in the Partnership Merger Agreement) for each Seller OP Unit held
by such holder. Seller hereby consents to the cancellation of the Seller
OP Units it owns immediately prior to the effective time of the
Partnership Merger in accordance with the provisions of the Partnership
Merger Agreement. Buyer hereby consents to the cancellation of its
general partnership interest in Buyer Operating Partnership owned
immediately prior to the effective time of the Partnership Merger in
accordance with the provisions of the Partnership Merger Agreement.
1.9 Exchange of Certificates; Pre-Closing Dividends: Fractional
Shares.
(a) Prior to the Effective Time, Buyer shall appoint a
paying agent reasonably acceptable to Seller to act as agent (the "Paying
Agent") for the payment of the Merger Consideration upon surrender of
certificates formerly representing issued and outstanding Seller Common
Shares or Seller Preferred Shares, as applicable, and payment in respect
of Seller Options and amounts owing under the Fee Plan.
(b) Parent and Buyer shall provide to the Paying Agent
on or before the Effective Time, for the benefit of the holders of Seller
Common Shares, Seller Preferred Shares, Seller Options and Share Units,
cash payable in exchange for the issued and outstanding Seller Common
Shares, cash payable in exchange for the issued and outstanding Seller
Preferred Shares, cash payable in respect of Seller Options and cash
payable in respect of Share Units.
(c) Promptly after the Effective Time, the Surviving
Company shall cause the Paying Agent to mail to each holder of record of
a certificate or certificates which immediately prior to the Effective
Time represented outstanding Seller Common Shares or Seller Preferred
Shares (the "Certificates") (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to
the Paying Agent and shall be in such form and have such other provisions
as Buyer may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor the
applicable Merger Consideration, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Seller
Common Shares or Seller Preferred Shares which is not registered in the
transfer records of Seller, payment may be made to a Person (as defined
in Section 2.2(a)) other than the Person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed
or otherwise be in proper form for transfer and the Person requesting
such payment either shall pay any transfer or other Taxes (as defined in
Section 2.14(a)) required by reason of such payment being made to a
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Person other than the registered holder of such Certificate or establish
to the satisfaction of the Surviving Company that such Tax or Taxes have
been paid or are not applicable. Until surrendered as contemplated by
this Section 1.9, each Certificate (other than Certificates representing
Dissenting Shares) shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the Merger
Consideration, without interest. No interest will be paid or will accrue
on the Merger Consideration upon the surrender of any Certificate.
(d) All Merger Consideration paid upon the surrender of
Certificates in accordance with the terms of this Section 1.9 shall be
deemed to have been paid in full satisfaction of all rights pertaining to
the Seller Common Shares or Seller Preferred Shares, as applicable,
formerly represented by such Certificates; provided, however, that Seller
shall transfer to the Paying Agent cash sufficient to pay any dividends
or make any other distributions with a record date on or prior to the
Effective Time which may have been declared or made by Seller on such
Seller Common Shares, including without limitation any dividends
permitted by the second paragraph of Section 5.9 hereof, or Seller
Preferred Shares, as applicable, in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid
at the Effective Time and have not been paid prior to such surrender, and
there shall be no further registration of transfers on the stock transfer
books of Seller of the Seller Common Shares and Seller Preferred Shares
which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Company for any reason, they shall be canceled and exchanged as provided
in this Section 1.9.
(e) None of Parent, Seller, Buyer, the Surviving
Company or the Paying Agent shall be liable to any Person in respect of
any Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any portion of
the Merger Consideration delivered to the Paying Agent pursuant to this
Agreement that remains unclaimed for 12 months after the Effective Time
shall be redelivered by the Paying Agent to the Surviving Company, upon
demand, and any holders of Certificates who have not theretofore complied
with Section 1.9(c) shall thereafter look only to the Surviving Company
for delivery of the Merger Consideration and any unpaid dividends,
subject to applicable escheat and other similar Laws (as defined in
Section 2.5(b)).
1.10 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Seller Common Shares and Seller Preferred
Shares outstanding immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger or consented thereto in
writing and who has demanded appraisal for such shares in accordance with
Section 262 of the DGCL ("Dissenting Shares") shall not be converted into
the right to receive the Merger Consideration as provided in Section 1.7,
unless and until such holder fails to perfect or withdraws or otherwise
loses his right to appraisal and payment under the DGCL. If, after the
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Effective Time, any such holder fails to perfect or withdraws or loses
his right to appraisal, such Dissenting Shares shall thereupon be treated
as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration, if any, to which such holder is
entitled, without interest thereon. Seller shall give Buyer prompt
notice of any demands received by Seller for appraisal of shares and,
prior to the Effective Time, Buyer shall have the right to participate in
all negotiations and proceedings with respect to such demands. Prior to
the Effective Time, Seller shall not, except with the prior written
consent of Buyer, make any payment with respect to, or settle or offer to
settle, any such demands.
1.11 Alternative Structure of Merger. While it is currently
contemplated that the Merger shall be effected through the merger of
Buyer with and into Seller, Parent shall have the option, in its sole
discretion and without requiring the further consent of Seller or
Seller's Board of Directors or stockholders, to cause the Merger to be
effected through an alternative transaction structure of Seller merging
into Parent, with Parent being the Surviving Company (the "Alternative
Merger"), in which case (i) each general partnership interest and limited
partnership interest of Parent issued and outstanding immediately prior
to the Effective Time shall be converted in the Merger into a
corresponding general partnership interest or limited partnership
interest, as the case may be, of the Surviving Company, (ii) the limited
partnership agreement of Parent shall be the limited partnership
agreement of the Surviving Company and (iii) the general partners and
officers of Parent shall be the general partners and officers of the
Surviving Company. Parent shall make such election by delivering to
Seller a notice (the "Election Notice") electing to effect the
Alternative Merger. The Election Notice shall be available for the
inspection of any stockholder of Seller upon request during normal
business hours. Any such election may be made only after the respective
approvals of the Merger and the Partnership Merger by the stockholders of
Seller and Seller Unit Holders and after satisfaction (or waiver by the
parties entitled to the benefits thereof) of all other conditions to the
consummation of the Merger set forth in Article 6. For purposes of this
Agreement, (i) all references to the term "Merger" shall be deemed to
include the Alternative Merger, except for such references contained in
the second sentence of Section 1.6 and in this Section 1.11, and (ii) all
references to the term "Surviving Company" shall be deemed to include
Parent in its capacity as the surviving entity in the Alternative Merger.
As part of the Proxy Statement and the Consent Solicitation Statement and
in the manner required by applicable law, Seller shall describe the
provisions of this Section 1.11. In the event the Alternative Merger is
effectuated, the parties agree that for Federal income tax purposes, the
Merger shall be treated as an asset acquisition by Parent, followed by a
liquidation of Seller.
1.12 Further Assurances. If, at any time after the Effective
Time, the Surviving Company shall determine or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
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necessary or desirable to vest, perfect or confirm of record or otherwise
in the Surviving Company the right, title or interest in, to or under any
of the rights, properties or assets of Seller acquired or to be acquired
by the Surviving Company as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the Surviving Company
shall be authorized to execute and deliver, in the name and on behalf of
each of Parent, Buyer and Seller or otherwise, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on
behalf of each of Parent, Buyer and Seller or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such
rights, properties or assets in the Surviving Company or otherwise to
carry out this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Parent and Buyer, except as
set forth in the letter of even date herewith signed by the President of
Seller and delivered to Buyer prior to the execution hereof (the "Seller
Disclosure Letter") (it being understood that the Seller Disclosure
Letter shall be arranged in sections corresponding to the sections
contained in this Article 2, and the disclosures in any section of the
Seller Disclosure Letter shall qualify all of the representations in the
corresponding section of this Article 2 and, in addition, other sections
in this Article 2 to the extent it is clear from a reading of the
disclosure that such disclosure is applicable to such other sections) as
follows:
2.1 Organization, Standing and Power of Seller. Seller is a
corporation duly organized and validly existing under the Laws of
Delaware. Seller has the requisite corporate power and authority to
carry on its business as now being conducted. Seller is duly qualified
or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure
to be so qualified or licensed, individually or in the aggregate, would
not have a Seller Material Adverse Effect. Seller has delivered to Buyer
complete and correct copies of Seller's Certificate of Incorporation and
By-laws, in each case, as amended to the date of this Agreement. As used
in this Agreement, "Seller Material Adverse Effect" shall mean a material
adverse effect on the business, properties, assets, financial condition,
or results of operations of Seller and its Subsidiaries, taken as a
whole, including the prevention of the ability of Seller, the Seller
General Partner (as defined below) or the Seller Partnership to
consummate any of the Transactions (as defined below).
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2.2 Seller Subsidiaries.
(a) Section 2.2 of the Seller Disclosure Letter sets
forth (i) each Subsidiary (as defined below) of Seller (the "Seller
Subsidiaries"), (ii) the ownership interest therein of Seller, (iii) if
not wholly owned by Seller, the identity and ownership interest of each
of the other owners of such Seller Subsidiary and (iv) each apartment
community owned by such Subsidiary. As used in this Agreement,
"Subsidiary" of any Person (as defined below) means any corporation,
partnership, limited liability company, joint venture, trust or other
legal entity of which such Person (either directly or through or together
with another Subsidiary of such Person) owns 50% or more of the capital
stock or other equity interests of such corporation, partnership, limited
liability company, joint venture or other legal entity, including,
without limitation, the Seller Partnership, but does not include
short-term money market investments and other participation interests in
short-term investments. As used herein, "Person" means an individual,
corporation, partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity.
(b) (i) All the outstanding shares of capital stock
owned by Seller of each Seller Subsidiary that is a corporation have been
validly issued and are (A) fully paid, nonassessable and free of any
preemptive rights, (B) owned by Seller or by another Seller Subsidiary
and (C) owned free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") or any other limitation or restriction (including
any contractual restriction on the right to vote or sell the same) other
than restrictions under applicable securities laws; and (ii) all equity
interests in each Seller Subsidiary that is a partnership, joint venture,
limited liability company or trust which are owned by Seller, by another
Seller Subsidiary or by Seller and another Seller Subsidiary are owned
free and clear of all Liens or any other limitation or restriction
(including any contractual restriction on the right to vote or sell the
same) other than restrictions under applicable securities laws. Each
Seller Subsidiary that is a corporation is duly incorporated and validly
existing under the Laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to carry on its business as now
being conducted, and each Seller Subsidiary that is a partnership,
limited liability company or trust is duly organized and validly existing
under the Laws of its jurisdiction of organization and has the requisite
power and authority to carry on its business as now being conducted.
Each Seller Subsidiary is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed, individually or in the
aggregate, would not have a Seller Material Adverse Effect. True and
correct copies of the certificate of incorporation, By-laws, organization
documents and partnership, joint venture and operating agreements of each
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Seller Subsidiary, and all amendments to the date of this Agreement, have
been made available or previously delivered to Buyer.
2.3 Capital Structure.
(a) The authorized shares of capital stock of Seller
consist of 60,000,000 shares of preferred stock, $0.01 par value per
share, of which 2,737,000 shares are issued and outstanding as of the
date hereof and are designated as Series 1997-A Convertible Preferred
Shares (the "Seller Preferred Shares"), and 140,000,000 shares of Common
Stock, $0.01 par value per share (the "Seller Common Shares"), of which
36,727,591 are issued and outstanding as of the date hereof. As of the
date hereof, (i) 3,300,000 Seller Common Shares have been reserved for
issuance under the Amended and Restated Stock Option Plan of Seller (the
"Seller Plan"), under which options in respect of 1,534,300 Seller Common
Shares have been granted and are outstanding as of the date hereof,
(ii) 9,982,255 Seller Common Shares are reserved for issuance upon
conversion of Seller OP Units, (iii) 5,680,917 Seller Common Shares are
reserved for issuance upon conversion of the Seller Preferred Shares and
(iv) no Seller Preferred Shares or Seller Common Shares are held in the
Seller's treasury.
(b) Set forth in Section 2.3 of the Seller Disclosure
Letter is a true and complete list of the following: (i) each qualified
or nonqualified option to purchase Seller Common Shares granted under the
Seller Plan or any other formal or informal arrangement ("Seller
Options"); (ii) each grant of Seller Common Shares to employees which are
subject to any risk of forfeiture; and (iii) all other warrants or other
rights to acquire stock, all limited stock appreciation rights, phantom
stock, dividend equivalents, performance units and performance shares
granted under the Seller Plan which are outstanding as of the date
hereof. On the date of this Agreement, except as set forth in this
Section 2.3 or Section 2.3 of the Seller Disclosure Letter, no shares of
capital stock of Seller were outstanding or reserved for issuance.
(c) All outstanding shares of capital stock of Seller
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are no bonds, debentures, notes or
other indebtedness of Seller having the right under applicable law or
Seller's Certificate of Incorporation or By-laws to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any
matters on which shareholders of Seller may vote.
(d) There are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Seller or any Seller Subsidiary is a
party or by which any such entity is bound, obligating Seller or any
Seller Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock, voting securities
or other ownership interests of Seller or any Seller Subsidiary or
obligating Seller or any Seller Subsidiary to issue, grant, extend or
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enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking (other than to Seller or a Seller
Subsidiary). There are no outstanding obligations of Seller or any
Seller Subsidiary to repurchase, redeem or otherwise acquire any shares
of stock of Seller or shares of stock or other ownership interests of any
Seller Subsidiary.
(e) As of the date hereof, 46,376,824 Seller OP Units
are validly issued and outstanding, fully paid and nonassessable except
to the extent provided by applicable law, of which 36,414,986 are owned
by Seller and 312,605 are owned by Berkshire Apartments, Inc. Section
2.3 of the Seller Disclosure Letter sets forth the name of each Seller
Unit Holder and the number of Seller OP Units owned by each such Seller
Unit Holder as of the date of this Agreement. The Seller OP Units are
subject to no restriction established by Seller or under applicable law
(other than restrictions on sale imposed by applicable securities laws)
except as set forth in the Amended and Restated Limited Partnership
Agreement of the Seller Partnership (the "Seller Partnership Agreement")
and Seller Contribution Agreements. Seller Partnership has not issued or
granted and is not a party to any outstanding commitments of any kind
relating to, or any presently effective agreements or understandings with
respect to, issuing interests in Seller Partnership or securities
convertible into interests in Seller Partnership.
(f) All dividends on Seller Common Shares and
distributions on Seller OP Units which have been declared prior to the
date of this Agreement have been paid in full (except for the dividend on
Seller Common Shares and distributions on Seller OP Units payable on
May 15, 1999).
2.4 Other Interests. Neither Seller nor any of its
Subsidiaries owns directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in the Seller
Subsidiaries and short-term investment securities). Neither Seller nor
any of the Seller Subsidiaries is in material breach of any provision of
any agreement, document or contract governing its rights in or to any
such interests owned or held by it. To the Knowledge of Seller (as
defined in Section 2.23), no other party to any such agreement, document
or contract is in material breach of any of its obligations under any
such agreement, document or contract, nor has Seller or any of Seller's
Subsidiaries received any notice of any such material breach.
2.5 Authority; Noncontravention; Consents.
(a) Seller has the requisite corporate power and
authority to enter into this Agreement and, subject to the adoption of
this Agreement by holders of (i) a majority of the outstanding Seller
Preferred Shares and (ii) a majority of the Seller Common Shares and
Seller Preferred Shares (voting on an as-converted basis), voting as a
single class, representing a majority of the issued and outstanding
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Seller Common Shares (after giving effect to a deemed conversion of the
Seller Preferred Shares) of the Seller (collectively, the "Seller
Shareholder Approval"), to consummate the transactions contemplated by
this Agreement to which Seller is a party. The execution and delivery of
this Agreement by Seller and the consummation by Seller of the
transactions contemplated by this Agreement to which Seller is a party
have been duly authorized by all necessary corporate action on the part
of Seller, except for and subject to the Seller Shareholder Approval and
approval by the holders of a majority of the limited partnership interest
in the Seller Partnership (the "Seller Partner Approval"). This
Agreement has been duly executed and delivered by Seller and constitutes
a valid and binding obligation of Seller, enforceable against Seller in
accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar Laws relating to
creditors' rights and general principles of equity. The respective
Boards of Directors of Seller and the Seller General Partner have duly
and validly approved, and taken all corporate or partnership action
required to be taken by them for the consummation of the Transactions,
including but not limited to all actions required to render inapplicable
to the Merger and this Agreement (and the transactions provided for
herein) the restrictions on "business combinations" (as defined in
Section 203(a)(1) of the DGCL) set forth in Section 203 of the DGCL.
(b) The execution and delivery of this Agreement by
Seller do not, and the consummation of the transactions contemplated by
this Agreement to which Seller is a party and compliance by Seller with
the provisions of this Agreement will not, require any consent, approval
or notice under, or conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a benefit under, or result in the creation of
any Lien upon any of the properties or assets of Seller or any Seller
Subsidiary under, (i) the Certificate of Incorporation or the Amended and
Restated By-laws of Seller or the comparable certificate of incorporation
or organizational documents or partnership or similar agreement (as the
case may be) of any Seller Subsidiary, each as amended or supplemented to
the date hereof, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, reciprocal easement agreement, lease, joint venture agreement,
development agreement, benefit plan or other agreement, instrument,
permit, concession, franchise or license applicable to Seller or any
Seller Subsidiary or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to
in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation (collectively, "Laws") applicable to Seller
or any Seller Subsidiary, or their respective properties or assets, other
than, in the case of clause (ii) (other than such items relating to the
incurrence of indebtedness) or (iii), any such conflicts, violations,
defaults, rights, loss or Liens that individually or in the aggregate
would not reasonably be expected to (x) have a Seller Material Adverse
Effect or (y) prevent or delay beyond December 31, 1999 the consummation
of the transactions contemplated by this Agreement. No consent,
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approval, order or authorization of, or registration, declaration or
filing with, any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), is
required by or with respect to Seller or any Seller Subsidiary in
connection with the execution and delivery of this Agreement by Seller or
the consummation by Seller of the transactions contemplated by this
Agreement, except for (i) the filing with the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange of the Proxy
Statement (as defined in Section 5.1(a)) and any filings required by the
Exchange Act (including Schedule 13E-3), (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of
Delaware, (iii) the filing of a certificate of merger with the Secretary
of State of the State of Delaware with respect to the Partnership Merger,
(iv) any filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (v) the filing of a
Form D with the SEC with respect to the transaction contemplated by the
Partnership Merger Agreement and (vi) such other consents, approvals,
orders, authorizations, registrations, declarations and filings (A) as
are set forth in Section 2.5 of the Seller Disclosure Letter, (B) as may
be required under (y) federal, state or local environmental Laws or
(z) the "blue sky" laws of various states, to the extent applicable or
(C) which, if not obtained or made, would not prevent or delay beyond
December 31, 1999 the consummation of any of the transactions
contemplated by this Agreement or otherwise prevent or delay beyond
December 31, 1999 Seller from performing its obligations under this
Agreement in any material respect or have, individually or in the
aggregate, a Seller Material Adverse Effect.
2.6 SEC Documents; Financial Statements; Undisclosed
Liabilities.
(a) Seller has filed all Seller SEC Documents (as
defined below) on a timely basis. Section 2.6 of the Seller Disclosure
Letter contains a complete list of all Seller SEC Documents filed by
Seller or Seller Partnership with the SEC since January 1, 1999 and on or
prior to the date of this Agreement. All of the Seller SEC Documents
(other than preliminary material), as of their respective filing dates,
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
each case, the rules and regulations promulgated thereunder applicable to
such Seller SEC Documents. None of the Seller SEC Documents at the time
of filing contained, or will contain at the time of filing if not yet
filed, any untrue statement of a material fact or omitted, or will omit
at the time of filing if not yet filed, to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except to the extent such statements have been
modified or superseded by later Seller SEC Documents filed and publicly
available. The consolidated financial statements of Seller included in
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the Seller SEC Documents complied (or, with respect to the Seller SEC
Documents that have not been filed on or before the date hereof, will
comply) as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared (or will be prepared) in accordance
with generally accepted accounting principles ("GAAP") (except, in the
case of unaudited statements, as permitted by the applicable rules and
regulations of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
presented (or will fairly present) in all material respects, in
accordance with the applicable requirements of GAAP and the applicable
rules and regulations of the SEC, the consolidated financial position of
Seller and its Subsidiaries, as of the dates thereof and the consolidated
results of operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit
adjustments). Seller has no Subsidiaries which are not consolidated for
accounting purposes.
(b) Except (i) for liabilities or obligations incurred
in the ordinary course of business, (ii) for liabilities or obligations
incurred in connection with the transactions contemplated by this
Agreement, or (iii) as disclosed in the Seller SEC Documents filed after
December 31, 1998 or in the Seller Disclosure Letter, Seller and its
Subsidiaries have no material liabilities or obligations (whether
absolute, accrued, contingent or otherwise). As used herein, "Seller SEC
Documents" shall mean all reports, schedules, forms, statements and other
documents required to be filed by the Seller with the SEC since
January 1, 1996; provided that with respect to all representations and
warranties of Seller contained in this Article 2 (except those contained
in Section 2.6(a)), references to Seller SEC Documents shall refer only
to those filings made prior to the date hereof.
2.7 Absence of Certain Changes or Events. Except as disclosed
in the Seller SEC Documents, since the date of the most recent audited
financial statements included in the Seller SEC Documents (the "Seller
Financial Statement Date"), Seller and its Subsidiaries have conducted
their business only in the ordinary course (taking into account prior
practices, including the acquisition of properties and issuance of
securities) and, except as disclosed in the Seller SEC Documents or the
Seller Disclosure Letter, there has not been (a) any Seller Material
Adverse Change (as defined below), (b) except for regular quarterly
distributions not in excess of $.25 per Seller Common Share or Seller OP
Unit and dividends on the Seller Preferred Shares in accordance with the
terms of Seller's Certificate of Incorporation, respectively (or as
necessary to maintain REIT status), in each case subject to rounding
adjustments as necessary and with customary record and payment dates, and
except as permitted by Section 5.9 of this Agreement, any authorization,
declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the
Seller Common Shares, the Seller OP Units or the Seller Preferred Shares,
(c) any split, combination or reclassification of the Seller Common
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Shares, the Seller OP Units or the Seller Preferred Shares or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for, or giving the right to
acquire by exchange or exercise, shares of stock of Seller or partnership
interests in Seller partnerships or any issuance of an ownership interest
in, any Seller Subsidiary, (d) any damage, destruction or loss, whether
or not covered by insurance, that has or would reasonably be likely to
have a Seller Material Adverse Effect, (e) any change in financial or tax
accounting methods, principles or practices by Seller or any Seller
Subsidiary materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in GAAP, (f) (x) any
granting by Seller or any of its Subsidiaries to any officer or other key
employee of Seller or any of its Subsidiaries of any increase in
compensation, except for normal increases in the ordinary course of
business consistent with past practice or as required under employment
agreements in effect as of December 31, 1998, (y) any granting by Seller
or any of its Subsidiaries to any such officer or key employee of any
increase in severance or termination pay, except as was required under
any employment, severance or termination agreements in effect as of
December 31, 1998 or (z) any entry by Seller or any of its Subsidiaries
into any employment, severance or termination agreement with any such
officer or key employee except in the ordinary course of business
consistent with past practice, (g) any acquisition or disposition of any
real property, or any commitment to do so, made by Seller or any of its
Subsidiaries or (h) any making or revocation of any material tax
election. As used in this Agreement, "Seller Material Adverse Change"
shall mean (i) any material adverse change in the business, properties,
assets, financial condition or results of operations of Seller and its
Subsidiaries, taken as a whole, or (ii) any other change that would
prevent or delay beyond December 31, 1999 the ability of Seller, the
Seller General Partner or the Seller Partnership from consummating any of
the Transactions.
2.8 Litigation. Except as disclosed in the Seller SEC
Documents, and other than personal injury and other routine tort
litigation arising from the ordinary course of operations of Seller and
its Subsidiaries (a) which are covered by adequate insurance or (b) for
which all material costs and liabilities arising therefrom are
reimbursable pursuant to common area maintenance or similar agreements,
as of the date hereof, there are no suits, actions or proceedings pending
(in which service of process has been received by an employee of Seller
or an Seller Subsidiary) or, to the Knowledge of Seller, threatened in
writing against or affecting Seller or any Seller Subsidiary that,
individually or in the aggregate, would reasonably be expected to
(i) have a Seller Material Adverse Effect or (ii) prevent or delay beyond
December 31, 1999 the consummation of any of the material transactions
contemplated by this Agreement, nor are there any judgments, decrees,
injunctions, rules or orders of any court or arbitrator or suits, actions
or proceedings pending or threatened in writing by any Governmental
Entity outstanding against Seller or any of its Subsidiaries with respect
to any of the Transactions. Notwithstanding the foregoing, (y) Section
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2.8 of the Seller Disclosure Letter sets forth, as of the date hereof,
each and every (i) uninsured claim with respect to which if determined
adversely would reasonably be expected to result in a dollar cost to
Seller or its Subsidiaries in excess of $100,000, (ii) equal employment
opportunity claim against Seller or a Seller Subsidiary with respect to
which if determined adversely would reasonably be expected to result in a
cost in excess of $100,000 and (iii) claim against Seller or a Seller
Subsidiary relating to sexual harassment and/or discrimination pending
or, to the Knowledge of Seller, threatened as of the date hereof with
respect to which if determined adversely would reasonably be expected to
result in a cost in excess of $100,000, in each case with a brief summary
of such claim or threatened claim and (z) no claim is pending or has been
made within the five-year period ending on the date of this Agreement
under any director's or officer's liability insurance policy maintained
at any time by Seller or by any of its Subsidiaries.
2.9 Properties.
(a) Seller or a Seller Subsidiary set forth in Section
2.2 of the Seller Disclosure Letter owns good and marketable fee simple
title to each of the real properties identified in Section 2.2 of the
Seller Disclosure Letter (collectively, the "Seller Properties" and each,
a "Seller Property"), which are all of the real properties owned by them
as of the date hereof. Except as set forth in the existing title reports
identified in clause (iii) below and except for any easements granted in
the ordinary course of business since the date of such title reports
which do not have a material adverse effect on the operation of any of
the Seller Properties, no other Person has any real property ownership
interest in any of the Seller Properties. The Seller Properties are not
subject to any rights of way, written agreements, Laws, ordinances and
regulations affecting building use or occupancy, or reservations of an
interest in title (collectively, "Property Restrictions") or Liens
(including Liens for Taxes), mortgages or deeds of trust, claims against
title, charges which are Liens, security interests or other encumbrances
on title (the "Encumbrances"), except for (i) Property Restrictions and
Encumbrances set forth in Section 2.9(a)(i) of the Seller Disclosure
Letter, (ii) Property Restrictions imposed or promulgated by law or any
governmental body or authority with respect to real property, including
zoning regulations, which, individually or in the aggregate, would not
have a Seller Material Adverse Effect, (iii) Property Restrictions and
Encumbrances disclosed on existing title reports or existing surveys (in
either case copies of which title reports and surveys have been delivered
to Sullivan & Cromwell or made available to Buyer's representatives at
the offices of Hale and Dorr LLP on or prior to February 18, 1999);
provided that such Encumbrances secure either indebtedness which is
described in the Seller Disclosure Letter or indebtedness which has been
discharged in full, and (iv) mechanics', carriers', workmen's,
repairmen's Liens and other Encumbrances and Property Restrictions, if
any, which, individually or in the aggregate, would not have a Seller
Material Adverse Effect. Section 2.9 of the Seller Disclosure Letter
lists each of the Seller Properties which is under development as of the
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date of this Agreement and describes the status of such development as of
the date hereof.
(b) Valid policies of title insurance have been issued
insuring Seller or the applicable Seller Subsidiary's fee simple title to
each of the Seller Properties owned by it in amounts at least equal to
the purchase price thereof paid by Seller or its Subsidiary subject only
to the matters disclosed above and in Section 2.9(b) of the Seller
Disclosure Letter. Such policies are, at the date hereof, in full force
and effect. No claim has been made against any such policy.
(c) Seller has not failed to obtain and maintain in
full force and effect a certificate, permit or license from any
governmental authority having jurisdiction over any of the Seller
Properties which failure, individually or in the aggregate, would have a
Seller Material Adverse Effect. There is no pending threat of
modification or cancellation of any of same which, individually or in the
aggregate, would have a Seller Material Adverse Effect. There is no
notice of any violation of any federal, state or municipal law,
ordinance, order, regulation or requirement issued by any governmental
authority which, individually or in the aggregate, would have a Seller
Material Adverse Effect. There has been no physical damage to any Seller
Properties which, individually or in the aggregate, would have a Seller
Material Adverse Effect for which there is no insurance in effect
covering the cost of the restoration.
(d) Neither Seller nor any of the Seller Subsidiaries
has received any notice with respect to any Seller Property to the effect
that any condemnation or rezoning proceedings are pending or threatened
which, individually or in the aggregate, would have a Seller Material
Adverse Effect. All work to be performed, payments to be made and
actions to be taken by Seller or the Seller Subsidiaries prior to the
date hereof pursuant to any agreement entered into with a governmental
body or authority in connection with a site approval, zoning
reclassification or other similar action (e.g., Local Improvement
District, Road Improvement District, Environmental Mitigation) material
to Seller and the Seller Subsidiaries taken as a whole have been
performed, paid or taken, as the case may be, and Seller has no Knowledge
of any planned or proposed work, payments or actions that may be required
after the date hereof pursuant to such agreements that are material to
Seller and the Seller Subsidiaries taken as a whole.
(e) Except as set forth in Section 2.9(e) of the Seller
Disclosure Letter, all of the Seller's Properties are self-managed.
(f) The rent roll for the Seller's Properties as of
February 1, 1999 has been previously delivered to Buyer and was complete
and correct in all material respects as of the date thereof.
(g) Except as set forth in Section 2.9(g) of the Seller
Disclosure Letter, no Seller Property is currently under development or
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subject to any agreement with respect to development, and neither Seller
nor any Seller Subsidiary shall enter into any such agreements between
the date hereof and the Effective Time without the prior written approval
of Buyer; provided, however, that "development" shall not include capital
improvements made in the ordinary course of business to existing Seller
Properties and repairs made to existing Seller Properties.
(h) No Governmental Entity having jurisdiction over any
Seller Property under development has denied or rejected any applications
by Seller for a certificate, permit or license with respect to such
Seller Property, which denial or rejection, individually or in the
aggregate, would have a Seller Material Adverse Effect.
(i) For purposes of this Section 2.9, all individual
items that are qualified by Seller Material Adverse Effect and do not
cause a representation set forth in this Section 2.9 to be untrue because
such items individually do not have a Seller Material Adverse Effect
shall be aggregated and the representations set forth in this Section 2.9
shall be deemed to be untrue if the aggregate of all of such individual
matters has a Seller Material Adverse Effect.
(j) All buildings, structures and other improvements
in, on or within the Seller Properties are in good operating condition
and repair, subject to continued repair and replacement in accordance
with past practice except for any failures to be in such condition and
repair that would not, individually or in the aggregate, have a Seller
Material Adverse Effect.
2.10 Environmental Matters.
(a) Except as disclosed in the Seller SEC Documents and
Seller's Environmental Reports (as defined below) previously made
available to Buyer, to Seller's knowledge, none of Seller, any of the
Seller Subsidiaries or any other Person has caused or permitted (i) the
presence of any hazardous substances, hazardous materials, toxic
substances or waste materials, pollutants, contaminants, and materials
regulated or defined or designated as hazardous, extremely or imminently
hazardous, dangerous, or toxic pursuant to any local, county, state,
territorial or federal governmental authority or with respect to which
such a governmental authority otherwise requires environmental
investigation, monitoring, reporting or remediation (collectively,
"Hazardous Materials") on any of the Seller Properties that is not in
compliance with, or that would result in any liability under, any
Environmental Law or (ii) any spills, releases, discharges or disposal of
Hazardous Materials to have occurred or be presently occurring on or from
the Seller Properties as a result of any construction on or operation and
use of the Seller Properties, which presence or occurrence would,
individually or in the aggregate, have a Seller Material Adverse Effect;
and in connection with the construction on or operation and use of the
Seller Properties, Seller and the Seller Subsidiaries have complied with
all applicable local, state and federal Environmental Laws, including all
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regulations, ordinances and administrative and judicial orders relating
to the generation, recycling, reuse, sale, storage, handling, transport
and disposal of any Hazardous Materials, except to the extent such
failure to comply, individually or in the aggregate, would not have a
Seller Material Adverse Effect. With respect to each Seller Property,
since the date of the most recent Seller's Environmental Report relating
to such Seller Property, except where the failure of any of the following
to be true individually or in the aggregate would not have a Seller
Material Adverse Effect, (i) the assets, properties, businesses and
operations of Seller and its Subsidiaries are and have been in compliance
with applicable Environmental Laws, (ii) Seller and its Subsidiaries have
obtained, currently maintain and, as currently operating, are in
compliance with all Seller Permits necessary under any Environmental Law
for the conduct of the business and operations of Seller and its
Subsidiaries in the manner now conducted, and there are no actions or
proceedings pending or threatened to revoke or materially modify such
Seller Permits, (iii) no Hazardous Materials have been used, stored,
manufactured, treated, processed or transported to or from any such
Seller Property except as necessary to the customary conduct of business
and in compliance with law and in a manner that does not result in
liability under Environmental Laws; (iv) there have been no spills,
releases, discharges or disposals of Hazardous Materials on or from such
Seller Property; and (v) Seller and Seller Subsidiaries have not received
any notice of potential responsibility, letter of inquiry or notice of
alleged liability from any Person regarding such Seller Property or the
business conducted thereon. For the purposes of this Paragraph 2.10
only, "Seller Properties" shall be deemed to include all property
formerly owned, operated or leased by Seller or Seller Subsidiaries;
solely, however, as to the period of time when such property was so
owned, operated or leased by Seller or the Seller Subsidiaries. Seller
has previously delivered or made available to Buyer complete copies of
all final versions of environmental investigations and testing or
analysis (other than those which have been superseded by more recent
investigations, testing or analyses) that are in the possession, custody
or control of any of Seller or any of the Seller Subsidiaries with
respect to the environmental condition of the Seller Properties, all of
which are listed in Section 2.10 of the Seller Disclosure Letter
("Seller's Environmental Reports").
(b) Except as set forth in Seller's Environmental
Reports, (i) there are no asbestos-containing materials, lead-based
paints, or radon at, in or part of any facility owned, operated or leased
by Seller or any of its Subsidiaries, the presence of which, individually
or in the aggregate, would reasonably be expected to result in Seller
incurring Environmental Liabilities and Costs aggregating $30 million or
more and (ii) there are no underground storage tanks owned, operated or
controlled by Seller or its Subsidiaries on any real property owned,
operated or leased by Seller, the presence of which, individually or in
the aggregate, would be reasonably expected to result in Seller incurring
Environmental Liabilities and Costs aggregating $30 million or more.
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(c) For purposes of this Agreement, the terms below
shall have the following meanings:
"Environmental Law" means any law (including, without
limitation, common law), regulation, ordinance, guideline, code, decree,
judgment, order, permit or authorization or other legally enforceable
requirement of any Governmental Entity relating to or imposing liability
with respect to worker or public safety or the indoor or outdoor
environment or natural resources, including, without limitation,
pollution, contamination, Hazardous Materials, cleanup, regulation and
protection of the air, natural resources, water or soils in the indoor or
outdoor environment; and
"Environmental Liabilities and Costs" means all losses,
liabilities, damages, fines, penalties, obligations, costs or expenses
(including, without limitation, fees, disbursements, expenses of legal
counsel, experts and engineers and the costs of investigation and cleanup
studies and to remove, treat or clean up Hazardous Materials) incurred,
assessed or levied pursuant to any Environmental Law.
2.11 Related Party Transactions. Set forth in Section 2.11 of
the Seller Disclosure Letter is a list of all arrangements, agreements
and contracts entered into by Seller or any of the Seller Subsidiaries
with any Person who is an officer, director or Affiliate (as defined
below) of Seller, or any entity of which any of the foregoing is an
Affiliate, except those of a type available to Seller employees
generally. Such documents, copies of all of which have previously been
delivered or made available to Buyer, are listed in Section 2.11 of the
Seller Disclosure Letter. As used in this Agreement, the term
"Affiliate" shall have the same meaning as such term is defined in Rule
405 promulgated under the Securities Act.
2.12 Employee Benefits. As used herein, the term "Employee
Plan" includes any pension, retirement, savings, disability, medical,
dental, health, life, death benefit, group insurance, profit sharing,
deferred compensation, stock option, bonus, incentive, vacation pay,
tuition reimbursement, severance pay, or other material employee benefit
plan, trust, employment agreement, contract, agreement, policy or
commitment (including, without limitation, any pension plan, as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended and the rules and regulations promulgated thereunder ("ERISA")
("Pension Plan"), and any welfare plan as defined in Section 3(1) of
ERISA ("Welfare Plan")), whether any of the foregoing is funded, insured
or self-funded, written or oral, (i) sponsored or maintained by Seller or
its Subsidiaries (each a "Controlled Group Member") and covering any
Controlled Group Member's active or former employees (or their
beneficiaries), (ii) to which any Controlled Group Member is a party or
by which any Controlled Group Member (or any of the rights, properties or
assets thereof) is bound or (iii) with respect to which any current
Controlled Group Member may otherwise have any material liability
(whether or not such Controlled Group Member still maintains such
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Employee Plan). Each Employee Plan is listed in Section 2.12 of the
Seller Disclosure Letter. With respect to the Employee Plans:
(a) Except as disclosed in Section 2.12 of the Seller
Disclosure Letter, no Controlled Group Member has any continuing
liability under any Welfare Plan which provides for continuing benefits
or coverage for any participant or any beneficiary of a participant after
such participant's termination of employment, except as may be required
by Section 4980B of the Internal Revenue Code of 1986, as amended (the
"Code"), or Section 601 (et seq.) of ERISA, or under any applicable state
law, and at the expense of the participant or the beneficiary of the
participant.
(b) Each Employee Plan complies in all material
respects with the applicable requirements of ERISA and any other
applicable law governing such Employee Plan, and each Employee Plan has
at all times been properly administered in all material respects in
accordance with all such requirements of law, and in accordance with its
terms and the terms of any applicable collective bargaining agreement to
the extent consistent with all such requirements of law. Each Pension
Plan which is intended to be qualified is qualified under Section 401(a)
of the Code, has received a favorable determination letter from the IRS
stating that such Plan meets the requirements of Section 401(a) of the
Code and that the trust associated with such Plan is tax exempt under
Section 501(a) of the Code and to the Knowledge of Seller no event has
occurred which would jeopardize the qualified status of any such plan or
the tax exempt status of any such trust under Sections 401(a) and
Section 501(a) of the Code, respectively, except in circumstances in
which, individually or in the aggregate, the failure to so qualify or be
tax exempt would not have a Seller Material Adverse Effect. No lawsuits,
claims (other than routine claims for benefits) or complaints to, or by,
any Person or Governmental Entity have been filed or are pending which,
individually or in the aggregate, would have a Seller Material Adverse
Effect and, to the Knowledge of Seller, there is no fact or contemplated
event which would be expected to give rise to any such lawsuit, claim
(other than routine claims for benefits) or complaint with respect to any
Employee Plan that would have a Seller Material Adverse Effect. Without
limiting the foregoing, except in the case of the following clauses (i)
through (vi) as would not individually or in the aggregate have a Seller
Material Adverse Effect, the following are true with respect to each
Employee Plan:
(i) all Controlled Group Members have filed or
caused to be filed every material return, report statement, notice,
declaration and other document required by any law or governmental
agency, federal, state and local (including, without limitation, the
Internal Revenue Service and the Department of Labor) with respect to
each such Employee Plan, each of such filings has been complete and
accurate in all material respects and no Controlled Group Member has
incurred any material liability in connection with such filings;
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(ii) all Controlled Group Members have
delivered or caused to be delivered to every participant, beneficiary and
other party entitled to such material, all material plan descriptions,
returns, reports, schedules, notices, statements and similar materials,
including, without limitation, summary plan descriptions and summary
annual reports, as are required under Title I of ERISA, the Code, or
both, and no Controlled Group Member has incurred any material liability
in connection with such deliveries;
(iii) all contributions and payments with
respect to Employee Plans that are required to be made by a Controlled
Group Member with respect to periods ending on or before the Closing Date
(including periods from the first day of the current plan or policy year
to the Closing Date) have been, or will be, made or accrued before the
Closing Date in accordance with the appropriate plan document, actuarial
report, collective bargaining agreements or insurance contracts or
arrangements or as otherwise required by ERISA or the Code;
(iv) with respect to each such Employee Plan,
to the extent applicable, Seller has delivered to or has made available
to Buyer true and complete copies of (A) plan documents, or any and all
other documents that establish the existence of the plan, trust,
arrangement, contract, policy or commitment and all amendments thereto,
(B) the most recent determination letter, if any, received from the
Internal Revenue Service, (C) the three most recent Form 5500 Annual
Reports (and all schedules and reports relating thereto) and actuarial
reports and (D) all related trust agreements, insurance contract or other
funding agreements that implement each such Employee Plan;
(v) no payment made or to be made to an
officer, director or employee pursuant to an Employee Plan either before,
on, or after consummation of the transactions contemplated by this
Agreement shall constitute an "excess parachute payment" within the
meaning of Section 280G of the Code; and
(vi) consummation of the transactions
contemplated by this Agreement shall not (A) give rise to a severance pay
obligation with respect to those employees who continue employment with
the Surviving Corporation or (B) enhance or trigger (including
acceleration of vesting, payment or funding) any benefits under any
Employee Plan.
(c) With respect to each Employee Plan, there has not
occurred, and no Person or entity is contractually bound to enter into,
any "prohibited transaction" within the meaning of Section 4975(c) of the
Code of Section 406 of ERISA, which transaction is not exempt under
Section 4975(d) of the Code or Section 408 of ERISA which, individually
or in the aggregate, would have a Seller Material Adverse Effect.
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(d) No Controlled Group Member has maintained or been
obligated to contribute to any Employee Plan subject to Code Section 412
or Title IV of ERISA.
2.13 Employee Matters. Neither Seller nor any of the Seller
Subsidiaries is a party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding with a labor
union or other labor organization, nor has Seller or any of the Seller
Subsidiaries agreed that any unit of its employees is appropriate for
collective bargaining. No union or other labor organization has been
certified as bargaining representative for any of Seller's employees. To
the Knowledge of Seller, there are no organizational efforts with respect
to the formation of a collective bargaining unit presently being made or
threatened involving employees of Seller or any of the Seller
Subsidiaries.
2.14 Taxes.
(a) Each of Seller and the Seller Subsidiaries and any
consolidated, combined, unitary or aggregate group for tax purposes of
which Seller or any Seller Subsidiary is or has been a member has timely
filed all Tax Returns (as defined below) required to be filed by it
(after giving effect to any timely filed extension properly granted by a
Tax Authority (as defined below) having authority to do so) and has
timely paid (or Seller has timely paid on its behalf) all Taxes (as
defined below) shown on such Tax Returns as required to be paid by it
except (i) as set forth in Section 2.14 of the Seller Disclosure Letter,
(ii) Taxes that are being contested in good faith by appropriate
proceedings and for which Seller or the applicable Seller Subsidiary
shall have set aside on its books adequate reserves or (iii) where the
failure to file such Tax Returns or pay such Taxes would not have a
Seller Material Adverse Effect. Each such Tax Return is complete and
accurate except where any failure to be complete and accurate would not
have a Seller Material Adverse Effect. The most recent audited financial
statements contained in the Seller SEC Documents reflect an adequate
reserve for all Taxes payable by Seller and the Seller Subsidiaries for
all taxable periods and portions thereof through the date of such
financial statements except where any failure would not have a Seller
Material Adverse Effect. Since the Seller Financial Statement Date,
Seller has incurred no liability for Taxes under Sections 857(b), 857(f),
860(c) or 4981 of the Code, including without limitation any Tax arising
from a prohibited transaction described in Section 857(b)(6) of the Code,
and neither Seller nor any Seller Subsidiary has incurred any material
liability for Taxes other than in the ordinary course of business. No
event has occurred, and no condition or circumstance exists, which
presents a risk that any Tax described in the preceding sentence will be
imposed upon Seller or any Seller Subsidiary except where any failure
would not have a Seller Material Adverse Effect. No material
deficiencies for any Taxes have been proposed, asserted or assessed
against Seller or any Seller Subsidiary, and no requests for waivers of
the time to assess any such Taxes are pending and no extensions of time
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to assess any such Taxes are in effect. All Taxes required to be
withheld, collected and paid over to any Tax Authority by the Seller and
any Seller Subsidiary have been timely withheld, collected and paid over
to the proper Tax Authority except where failure to do so would not have
a Seller Material Adverse Effect. Except as set forth in Section 2.14 of
the Seller Disclosure Letter, there are no material pending actions or
proceedings by any Taxing Authority for assessment or collection of any
Tax. Complete copies of all federal, state and local income or franchise
Tax Returns that have been filed by Seller and each Seller Subsidiary for
all taxable years beginning on or after January 1, 1996, all extensions
filed with any Tax Authority that are currently in effect and all written
communications with a Taxing Authority relating thereto, have been or
will hereafter promptly be delivered to the Buyer and the representatives
of the Buyer. No claim has been made by a Taxing Authority in a
jurisdiction where Seller or any Seller Subsidiary does not file Tax
Returns that it is or may be subject to taxation by the jurisdiction
except where the failure to file such Tax Return would not have a Seller
Material Adverse Effect. Neither the Seller nor any Seller Subsidiary
holds any material asset (A) the disposition of which would be subject to
rules similar to Section 1374 of the Code as a result of an election
under Internal Revenue Service Notice 88-19, or (B) that is subject to a
consent filed pursuant to Section 341(f) of the Code and the regulations
thereunder. Except as set forth in Section 2.14 of the Seller Disclosure
Letter, neither the Seller, nor any Seller Subsidiary is obligated to
make after the Closing any payment that would not be deductible pursuant
to Section 162(m) of the Code except where the lack of such deduction
would not have a Seller Material Adverse Effect. Except as set forth in
Section 2.14 of the Seller Disclosure Letter, neither Seller nor any
Seller Subsidiary is party to, nor has any liability under (including
liability with respect to any predecessor entity), any indemnification,
allocation or sharing agreement with respect to Taxes. As used in this
Agreement, "Tax" or "Taxes" shall include all federal, state, local and
foreign income, property, sales, use, occupancy, transfer, recording,
withholding, franchise, employment, excise and other taxes, tariffs or
governmental charges of any nature whatsoever, together with penalties,
interest or additions to tax with respect thereto. As used in this
Agreement, "Tax Return" or "Tax Returns" shall include all original and
amended returns and reports (including elections, claims, declarations,
disclosures, schedules, estimates, computations and information returns)
required to be supplied to a Tax Authority in any jurisdiction. As used
in this Agreement, "Tax Authority" shall mean the Internal Revenue
Service and any other domestic or foreign bureau, department, entity,
agency or other Governmental Entity responsible for the administration of
any Tax.
(b) Seller (i) for all taxable years commencing with
its initial taxable year through December 31, 1998 has been properly
subject to taxation as a real estate investment trust (a "REIT") within
the meaning of Section 856 of the Code and has qualified as a REIT for
such years, (ii) has operated since December 31, 1998, and will continue
to operate to the Closing, in such a manner as to qualify as a REIT for
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the taxable year beginning January 1, 1999 determined as if the taxable
year of the REIT ended as of the Closing and (iii) has not taken or
omitted to take any action which would reasonably be expected to result
in a challenge to its status as a REIT, and no such challenge is pending
or to Seller's Knowledge threatened. Each Seller Subsidiary which is a
partnership, joint venture or limited liability company (i) has been
since its formation and continues to be treated for federal income tax
purposes as a partnership or disregarded as a separate entity, as the
case may be, and has not been treated for federal income tax purposes as
a corporation or an association taxable as a corporation and (ii) has not
since the later of its formation or the acquisition by Seller of a direct
or indirect interest therein owned any assets (including, without
limitation, securities) that would cause Seller to violate
Section 856(c)(4) of the Code. The nature of the assets of the Seller
and the Seller Subsidiaries is such that the sale of all of the assets
owned by them would not cause the Seller to be disqualified as a REIT
under Code Section 856(c)(2) or 856(c)(3) or otherwise. The Seller has
not elected and will not elect to pay Tax on any capital gain recognized
on or after January 1, 1999. Each Seller Subsidiary which is a
corporation has been since its formation a qualified REIT subsidiary
under Section 856(i) of the Code. Seller Partnership is not a publicly
traded partnership within the meaning of Section 7704 of the Code, and
the interests in the Seller Partnership are not considered to be
(i) traded on an established securities market or (ii) readily tradable
on a secondary market or the substantial equivalent thereof under either
Internal Revenue Service Notice 88-75 or Treasury Regulations
Section 1.7704-1. In the case of a partner of Seller Partnership that is
a Flow-Through Entity (as defined below), no Person owning an interest in
such Flow-Through Entity (directly or through another Flow-Through
Entity) is treated as a partner of the Seller Partnership under either
Internal Revenue Service Notice 88-75 or Treasury Regulation
Section 1.7704-1(h)(3). For purposes of this Section 2.14(b),
"Flow-Through Entity" means an entity classified as a partnership, a
grantor trust or an S corporation for federal income tax purposes.
(c) For purposes of this Section 2.14, all individual
items that are qualified by Seller Material Adverse Effect and do not
cause a representation set forth in this Section 2.14 to be untrue
because such items individually do not have a Seller Material Adverse
Effect shall be aggregated and the representations set forth in this
Section 2.14 shall be deemed to be untrue if the aggregate of all of such
individual matters has a Seller Material Adverse Effect.
2.15 No Payments to Employees, Officers or Directors. Section
2.15 of the Seller Disclosure Letter contains a true and complete list of
all cash and non-cash payments, rights to property or other contract
rights which will become payable, accelerated or vested to or in each
employee, officer or director of Seller or any Seller Subsidiary as a
result of the Merger. There is no employment or severance contract, or
other agreement requiring payments or an increase in existing payments,
cancellation of indebtedness or other obligation to be made on a change
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of control or otherwise as a result of the consummation of any of the
transactions contemplated by this Agreement, with respect to any
employee, officer or director of Seller or any Seller Subsidiary.
2.16 Brokers. No broker, investment banker, financial advisor
or other Person, other than Lazard Freres & Co. LLC ("Lazard"), Lehman
Brothers Inc. ("Lehman") and Prudential Securities Incorporated
("Prudential"), the fees and expenses of which are as described in the
engagement letters dated May 22, 1998, as amended on July 27, 1998,
May 26, 1998, and December 17, 1998, respectively, and, in the case of
Prudential, as further amended on April 13, 1999, true and correct copies
of which have previously been given to Buyer, is entitled to any
broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of Seller or any Seller
Subsidiary.
2.17 Compliance With Laws. Except as set forth on Section 2.17
of the Seller Disclosure Letter, (i) neither Seller nor any of the Seller
Subsidiaries has violated or failed to comply with any statute, law,
ordinance, regulation, rule, judgment, decree or order of any
Governmental Entity applicable to its business, properties or operations,
except to the extent that such violation or failure has not had or would
not reasonably be expected to have a Seller Material Adverse Effect;
(ii) Seller and its Subsidiaries have, and are in compliance with, all
permits, licenses, certificates, franchises, registrations, variances,
exemptions, orders and approvals of all Governmental Entities which are
material to the operation of their businesses, taken as a whole ("Seller
Permits"), except where the failure to comply has not had or would not
reasonably be expected to have a Seller Material Adverse Effect; and
(iii) no investigation by any Governmental Entity with respect to the
Seller or the Seller Subsidiaries is pending or, to the knowledge of the
Seller, threatened, other than investigations which, individually or in
the aggregate, would not reasonably be expected to have a Seller Material
Adverse Effect.
2.18 Contracts; Debt Instruments.
(a) Except as disclosed in the Seller SEC Documents,
there is no contract or agreement that purports to limit in any material
respect the geographic location in which Seller or any Seller Subsidiary
may conduct its business. Neither Seller nor any Seller Subsidiary
(i) is in violation of or in default under any material loan or credit
agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other material contract, agreement, arrangement
or understanding, to which it is a party or by which it or any of its
properties or assets is bound (each, a "Material Contract"), nor (ii) to
the Knowledge of Seller does such a violation or default exist, except to
the extent that such violation or default referred to in clauses (i) or
(ii), individually or in the aggregate, would not have a Seller Material
Adverse Effect. Each Material Contract which has not been filed as an
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Exhibit to any of the Seller SEC Documents has been previously delivered
to Sullivan & Cromwell or made available to Buyer's representatives at
the offices of Hale and Dorr LLP on or prior to February 18, 1999, and a
list of all Material Contracts that have not been so filed is set forth
in Section 2.18(a) of the Seller Disclosure Letter. Seller has
previously delivered to Sullivan & Cromwell or made available to Buyer's
representatives at the offices of Hale and Dorr LLP on or prior to
February 18, 1999, all contracts and other agreements relating to the
contribution of assets to Seller Partnership in exchange for Seller
OP Units (the "Seller Contribution Agreements"). Except as set forth in
Section 2.18(a) of the Seller Disclosure Letter, neither Seller nor any
of its Subsidiaries is in default in any respect in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any Material Contract to which it is a party
where such default, individually or in the aggregate, would reasonably be
expected to have a Seller Material Adverse Effect.
(b) Section 2.18(b) of the Seller Disclosure Letter
sets forth a list as of the date hereof of each loan or credit agreement,
note, bond, mortgage, indenture and any other agreement and instrument
pursuant to which any Indebtedness (as defined below) of Seller or any of
Seller Subsidiaries, other than Indebtedness payable to Seller or a
Seller Subsidiary, is outstanding or may be incurred in an amount in
excess of $50,000, together with the amount outstanding thereunder as of
the date hereof. For purposes of this Section 2.18, "Indebtedness" shall
mean (i) indebtedness for borrowed money, whether secured or unsecured,
(ii) obligations under conditional sale or other title retention
agreements relating to property purchased by such Person,
(iii) capitalized lease obligations, (iv) obligations under interest rate
cap, swap, collar or similar transaction or currency hedging transactions
(valued at the termination value thereof) and (v) guarantees of any such
indebtedness of any other Person.
(c) To the extent not set forth in response to the
requirements of Section 2.18(b), Section 2.18 of the Seller Disclosure
Letter sets forth as of the date hereof each interest rate cap, interest
rate collar, interest rate swap, currency hedging transaction, and any
other agreement relating to a similar transaction, in each case involving
$50,000 or more, to which Seller or any Seller Subsidiary is a party or
an obligor with respect thereto.
(d) Neither Seller nor any of the Seller Subsidiaries
is a party to any agreement relating to the management of any of the
Seller Properties by any Person other than Seller Partnership.
(e) Neither Seller nor any of the Seller Subsidiaries
is a party to any agreement pursuant to which Seller or any Seller
Subsidiary manages any real properties other than Seller Properties,
except for the agreements described in Section 2.18 of the Seller
Disclosure Letter (the "Outside Property Management Agreements"). The
Outside Property Management Agreements constitute legal, valid, binding
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and enforceable obligations of Seller and, to Seller's Knowledge, of each
other party thereto, and there exists no default of Seller or, to
Seller's Knowledge, any other party thereto, except for any defaults that
would not reasonably be expected to have a Seller Material Adverse
Effect.
(f) Section 2.18 of the Seller Disclosure Letter lists
all agreements entered into by Seller or any of the Seller Subsidiaries
relating to the development or construction of, or additions or
expansions to, any Seller Properties which are currently in effect and
under which Seller or any of the Seller Subsidiaries currently has, or
expects to incur, any obligation in excess of $1,000,000 per Seller
Property or $10,000,000 in the aggregate. True and correct copies of
such agreements have previously been delivered or made available to
Buyer.
(g) Section 2.18(g) of the Seller Disclosure Letter
lists all agreements entered into by Seller or any of the Seller
Subsidiaries providing for the sale or exchange of, or option to sell or
exchange, any Seller Properties or the purchase of or exchange, or option
to purchase or exchange, any real estate which are currently in effect.
(h) Neither Seller nor any Seller Subsidiary has any
continuing contractual liability (i) for indemnification or otherwise
under any agreement relating to the sale of real estate previously owned,
whether directly or indirectly, by Seller or any Seller
Subsidiary,(ii) to pay any additional purchase price for any of the
Seller Properties, or (iii) to make any reprorations or adjustments to
prorations involving an amount in excess of $100,000 that may previously
have been made with respect to any property currently or formerly owned
by Seller.
(i) Neither Seller nor any Seller Subsidiary has
entered into or is subject, directly or indirectly, to any "Tax
Protection Agreements." As used herein, a Tax Protection Agreement is an
agreement, oral or written, (A) that has as one of its purposes to permit
a Person to take the position that such Person could defer federal
taxable income that otherwise might have been recognized upon a transfer
of property to Seller Partnership or any other Seller Subsidiary that is
treated as a partnership for federal income tax purposes, and (B) that
(i) prohibits or restricts in any manner the disposition of any assets of
Seller or any Seller Subsidiary, (ii) requires that Seller or any Seller
Subsidiary maintain, or put in place, or replace, indebtedness, secured
by one or more of the Seller Properties, or (iii) requires that Seller or
any Seller Subsidiary offer to any Person at any time the opportunity to
guarantee or otherwise assume, directly or indirectly, the risk of loss
for federal income tax purposes for indebtedness or other liabilities of
Seller or any Seller Subsidiary.
(j) Except as set forth in Section 2.18(j) of Seller
Disclosure Letter and except for obligations to provide funds to the
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Seller Partnership or to Seller Subsidiaries owned entirely by Seller
and/or Seller Partnership, there are no material outstanding contractual
obligations of Seller or its Subsidiaries to provide any funds to, or
make investments in, any other Person.
(k) Except as set forth in Section 2.18(k) of the
Seller Disclosure Letter and Section 2.18(i), neither Seller nor any of
the Seller Subsidiaries is party to any agreement which would restrict
any of them from prepaying any of their Indebtedness without penalty or
premium at any time or which requires any of them to maintain any amount
of Indebtedness with respect to any of the Seller Properties.
2.19 Opinions of Financial Advisors. Seller has received the
opinions of Lazard, Lehman and Prudential, each dated April 13, 1999, a
signed copy of each of which is being provided to Buyer concurrently with
the execution and delivery of this Agreement, with respect to the
fairness of the cash consideration to be received by the holders (other
than Parent and its Subsidiaries) of Seller Common Shares and Seller OP
Units in connection with the Merger and the Partnership Merger.
2.20 State Takeover Statutes. Seller has taken all action
necessary to exempt the transactions contemplated by this Agreement,
including without limitation the Merger and the Alternative Merger, among
Parent, Buyer and Seller and their respective Affiliates from the
operation of any "fair price," "moratorium," "control share acquisition"
or any other anti-takeover statute or similar statute other than
Section 203 of the DGCL enacted under the state or federal Laws of the
United States or similar statute or regulation (a "Takeover Statute").
Assuming the accuracy of the representation and warranty of Parent and
Buyer set forth in Section 3.14, the action of the Board of Directors of
the Seller in approving the Merger and this Agreement (and the
transactions provided for herein) is sufficient to render inapplicable to
the Merger and this Agreement (and the transactions provided for herein,
including without limitation the Alternative Merger) the restrictions on
"business combinations" (as defined in Section 203 of the DGCL) set forth
in Section 203 of the DGCL.
2.21 Proxy Statement and Consent Solicitation Statement. The
information relating to Seller and the Seller Subsidiaries included in
the Proxy Statement (as defined in Section 5.1(a)) and the Consent
Solicitation Statement (as defined in Section 5.1(a)) will not, as of the
date of mailing of the Proxy Statement and the Consent Solicitation
Statement, respectively, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
2.22 Investment Company Act of 1940. Neither Seller nor any of
Seller Subsidiaries is, or at the Effective Time will be, required to be
registered under the Investment Company Act of 1940, as amended (the
"1940 Act").
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2.23 Definition of Knowledge of Seller. As used in this
Agreement, the phrase "Knowledge of Seller" (or words of similar import)
means the knowledge of those individuals identified in Section 2.23 of
the Seller Disclosure Letter.
2.24 Insurance. Seller and Seller Subsidiaries maintain
insurance coverage for Seller and Seller Subsidiaries and their
respective properties and assets of a type and in amounts typical of
similar companies engaged in the respective businesses in which Seller
and Seller Subsidiaries are engaged. All such insurance policies (a) are
in full force and effect, and with respect to all policies neither of
Seller nor any Seller Subsidiary is delinquent in the payment of any
premiums thereon, and no notice of cancellation or termination has been
received with respect to any such policy, and (b) are sufficient for
compliance with all requirements of law and of all agreements to which
Seller or the Seller Subsidiaries are a party or otherwise bound and are
valid, outstanding, collectible, and enforceable policies, subject to any
exception in the case of either clause (a) or (b), as would not, alone or
in the aggregate, be reasonably expected to have a Seller Material
Adverse Effect or prevent or materially delay the ability of Seller to
consummate the transactions contemplated by this Agreement. Neither
Seller nor any Seller Subsidiary has received written notice within the
last 12 months from any insurance company or board of fire underwriters
of any defects or inadequacies that would materially adversely affect the
insurability of, or cause any material increase in the premiums for,
insurance covering either Seller or any Seller Subsidiary or any of their
respective properties or assets that have not been cured or repaired to
the satisfaction of the party issuing the notice, except as would not
have a Seller Material Adverse Effect.
2.25 Board Recommendation. The Board of Directors of Seller,
at a meeting duly called and held on April 13, 1999, based upon the
recommendations of a special committee of the Board of Directors of the
Seller consisting of four directors unaffiliated with Parent or Buyer,
unanimously adopted resolutions adopting this Agreement and approving the
transactions contemplated hereby, including the Merger and the
Alternative Merger. The Board of Directors of the general partner of the
Seller Partnership (the "Seller General Partner"), at a meeting duly
called and held on April 13, 1999, unanimously adopted resolutions
adopting the Partnership Merger Agreement and approving the transactions
contemplated thereby, including, without limitation, the Partnership
Merger (such transactions, together with the transactions contemplated by
this Agreement, including, without limitation, the Merger and the
Alternative Merger, are hereinafter collectively referred to as the
"Transactions"). The Board of Directors of the Seller recommended that
Seller's stockholders adopt this Agreement and approve the Merger and the
Alternative Merger and the Board of Directors of the Seller General
Partner recommended that the Seller Unit Holders adopt the
Partnership Merger Agreement and approve the Partnership Merger. Such
recommendations shall not be withdrawn, modified or amended, other than
as expressly permitted under Section 4.1.
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2.26 Representations in Partnership Merger Agreement. The
representations and warranties of the Seller General Partner and the
Seller Partnership set forth in the Partnership Merger Agreement are true
and correct.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer, jointly and severally, represent and warrant
to Seller, except as set forth in the letter of even date herewith signed
by a general partner of Parent and the sole member of Buyer and delivered
to Seller prior to the execution hereof (the "Buyer Disclosure Letter")
(it being understood that the Buyer Disclosure Letter shall be arranged
in sections corresponding to the sections contained in this Article 3,
and the disclosures in any section of the Buyer Disclosure Letter shall
qualify all of the representations in the corresponding section of this
Article 3 and, in addition, other sections in this Article 3 to the
extent it is clear from a reading of the disclosure that such disclosure
is applicable to such other sections) as follows:
3.1 Organization, Standing and Power of Parent and Buyer.
(a) Parent is a limited partnership duly organized and
validly existing under the Laws of Delaware and has the requisite power
and authority to carry on its business as now being conducted. Parent is
duly qualified or licensed to do business as a foreign limited
partnership and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties
makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse
effect on the ability of Parent and Buyer to consummate the transactions
contemplated by this Agreement or the Partnership Merger Agreement
("Parent Material Adverse Effect"). Parent has delivered to Seller
complete and correct copies of its organizational documents (including
the partnership agreement of Parent) as amended or supplemented to the
date of this Agreement.
(b) Buyer is a limited liability company duly organized
and validly existing under the Laws of Delaware and has the requisite
power and authority to carry on its business as now being conducted.
Buyer is duly qualified or licensed to do business as a foreign limited
liability company and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties
makes such qualifications or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse
effect on the ability of Buyer to consummate the transactions
contemplated by this Agreement or the Partnership Merger Agreement (a
"Buyer Material Adverse Effect"). Buyer has delivered to Seller complete
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and correct copies of its organizational documents as amended or
supplemented to the date of this Agreement.
(c) Parent and Buyer are newly formed and, except for
activities incident to the acquisition of Seller, neither Parent nor
Buyer has (i) engaged in any business activities of any type or kind
whatsoever or (ii) acquired any property of any type or kind whatsoever.
3.2 [Intentionally Omitted].
3.3 Ownership of Parent and Buyer. All of Parent's partnership
interests are owned by affiliates of The Berkshire Companies Limited
Partnership, Whitehall Street Real Estate Limited Partnership XI and
Blackstone Real Estate Acquisitions III L.L.C. Buyer is a wholly owned
Subsidiary of Parent.
3.4 Authority; Noncontravention; Consents.
(a) Each of Parent and Buyer has the requisite power
and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement to which it is a party. The
execution and delivery of this Agreement by Parent and Buyer and the
consummation by Parent and Buyer of the transactions contemplated by this
Agreement to which Parent and/or Buyer is a party have been duly
authorized by all necessary partnership or limited liability company
action on the part of Parent and Buyer. This Agreement has been duly
executed and delivered by Parent and Buyer and constitutes a valid and
binding obligation of each of Parent and Buyer, enforceable against each
of Parent and Buyer in accordance with and subject to its terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar Laws
relating to creditors' rights and general principles of equity.
(b) The execution and delivery of this Agreement by
each of Parent and Buyer does not, and the consummation of the
transactions contemplated by this Agreement to which Parent and/or Buyer
is a party and compliance by each of Parent and Buyer with the provisions
of this Agreement will not, conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of any
material obligation or to loss of a material benefit under, or result in
the creation of any Lien upon any of the properties or assets of Parent
or any of its Subsidiaries under, (i) the organizational documents of
Parent or Buyer or the comparable certificate of incorporation or
organizational documents or partnership or similar agreement (as the case
may be) of any other Subsidiary of the Parent, each as amended or
supplemented to the date of this Agreement, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent or any of its Subsidiaries or
their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following
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sentence, any Laws applicable to Parent or any of its Subsidiaries or
their respective properties or assets, other than, in the case of clause
(ii) or (iii), any such conflicts, violations, defaults, rights, loss or
Liens that individually or in the aggregate would not reasonably be
expected to (x) have a Parent Material Adverse Effect or a Buyer Material
Adverse Effect or (y) prevent the consummation of the transactions
contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or any of
its Subsidiaries in connection with the execution and delivery of this
Agreement by Parent or Buyer or the consummation by Parent or Buyer of
any of the transactions contemplated by this Agreement, except for
(i) any filings required under the Exchange Act (including Schedule 13E-
3), (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, (iii) the filing of a certificate of
merger with the Secretary of State of the State of Delaware with respect
to the Partnership Merger, (iv) such filings as may be required in
connection with the payment of any Transfer Taxes (as defined in
Section 5.6), (v) any filings required under the HSR Act, (vi) the filing
of a Form D with the SEC with respect to the transaction contemplated by
the Partnership Merger Agreement and (vii) such other consents,
approvals, orders, authorizations, registrations, declarations and
filings (A) as may be required under federal, state or local
environmental Laws, (B) as may be required under the "blue sky" laws of
various states, to the extent applicable, or (C) which, if not obtained
or made, would not prevent or delay beyond December 31, 1999 the
consummation of any of the transactions contemplated by this Agreement or
otherwise prevent Parent or Buyer from performing its obligations under
this Agreement in any material respect or have, individually or in the
aggregate, a Parent Material Adverse Effect.
3.5 Litigation. As of the date of this Agreement, there is no
suit, action or proceeding pending (in which service of process has been
received by an employee of Parent or any of its Subsidiaries) or, to the
Knowledge of Parent (as defined in Section 3.15), threatened in writing
against or affecting Parent or any of its Subsidiaries that, individually
or in the aggregate, would reasonably be expected to prevent or delay
beyond December 31, 1999 the consummation of any of the material
transactions contemplated by this Agreement, nor, as of the date of this
Agreement, is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against Parent or any
of its Subsidiaries having, or which, insofar as reasonably can be
foreseen, in the future would have, any such effect.
3.6 Undisclosed Liability. Neither Parent nor Buyer has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a
consolidated balance sheet of Parent or Buyer or in the notes thereto and
which, individually or in the aggregate, would have a Parent Material
Adverse Effect or Buyer Material Adverse Effect.
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3.7 Brokers. No broker, investment banker, financial advisor
or other Person, other than Greenhill & Co., LLC, the fees and expenses
of which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the Merger based upon arrangements made by or on behalf of Parent or any
of its Subsidiaries.
3.8 Compliance With Laws. Neither Parent nor any of its
Subsidiaries has violated or failed to comply with any statute, law,
ordinance, regulation, rule, judgment, decree or order of any
Governmental Entity applicable to its business, properties or operations,
except to the extent that such violation or failure would not reasonably
be expected to have a Parent Material Adverse Effect or Buyer Material
Adverse Effect.
3.9 Contracts; Debt Instruments. Neither Parent nor any of its
Subsidiaries (i) has received a written notice that Parent or any of its
Subsidiaries is in violation of or in default under any material loan or
credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other material contract, agreement,
arrangement or understanding, to which it is a party or by which it or
any of its properties or assets is bound, nor (ii) to the Knowledge of
Buyer (as defined in Section 3.15) does such a violation or default
exist, except to the extent such violation or default referred to in
clauses (i) or (ii), individually or in the aggregate, would not have a
Parent Material Adverse Effect or a Buyer Material Adverse Effect.
3.10 Solvency. Immediately after giving effect to the
transactions contemplated by this Agreement, the Partnership Merger
Agreement and the Equity Commitments and the closing of any financing to
be obtained by the Parent, Buyer or Buyer Operating Partnership in order
to effect the transactions contemplated by this Agreement, the Surviving
Company and the Surviving Operating Partnership shall be able to pay
their respective debts as they become due and shall each own property
having a fair saleable value greater than the amounts required to pay its
debts (including a reasonable estimate of the amount of all contingent
liabilities). Immediately after giving effect to the transactions
contemplated by this Agreement, the Partnership Merger Agreement and the
Equity Commitments and the closing of any financing to be obtained by
Parent, Buyer or Buyer Operating Partnership in order to effect the
transactions contemplated by this Agreement and the Partnership Merger
Agreement, the Surviving Company and the Surviving Operating Partnership
shall have adequate capital to carry on their respective businesses. No
transfer of property is being made and no obligation is being incurred in
connection with the transactions contemplated by this Agreement and the
Partnership Merger Agreement and the closing of any financing to be
obtained by Parent, Buyer or Buyer Operating Partnership in order to
effect the transactions contemplated by this Agreement and the
Partnership Merger Agreement with the intent to hinder, delay or defraud
either present or future creditors of Parent, Buyer, Buyer Operating
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Partnership, the Surviving Company or the Surviving Operating
Partnership.
3.11 [Intentionally Omitted].
3.12 Proxy Statement and Consent Solicitation Statement. The
information provided by Parent or Buyer with respect to Parent and its
Subsidiaries for inclusion in the Proxy Statement and the Consent
Solicitation Statement will not, as of the date of mailing of the Proxy
Statement and the Consent Solicitation Statement, respectively, contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.13 Investment Company Act of 1940. Neither Parent nor any of
its Subsidiaries is, or at the Effective Time will be, required to be
registered under the 1940 Act.
3.14 Parent and Buyer Not Interested Stockholders. Neither
Parent nor Buyer is an "interested stockholder" of Seller within the
meaning of Section 203 of the DGCL.
3.15 Definition of Knowledge. As used in this Agreement, the
phrase "Knowledge of Parent" or "Knowledge of Buyer" (or words of similar
import) means the knowledge of those individuals identified in Section
3.15 of the Buyer Disclosure Letter.
3.16 [Intentionally Omitted].
3.17 Sufficient Funds. After giving effect to Parent's equity
commitments provided in the partnership agreement of Parent (the "Equity
Commitments"), and to borrowings under Parent's financing commitments
attached as Exhibit A (the "Financing Commitments"), the Surviving
Company and the Surviving Operating Partnership will have sufficient
funds available to:
(a) refinance or repay in cash all indebtedness for
borrowed money of Seller or any Seller Subsidiary that will become due as
a result of the transactions contemplated by this Agreement or the
Partnership Merger Agreement, plus unpaid interest accrued thereon, and
any prepayment, breakage or other costs associated with the repayment or
refinancing, as the case may be;
(b) pay all amounts required to be paid pursuant to
this Agreement and the Partnership Merger Agreement;
(c) pay all fees, costs and expenses incurred by Seller
and the Seller Partnership in connection with this Agreement, the
Partnership Merger Agreement and the transactions contemplated herein and
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therein assuming such fees, costs and expenses (other than severance
costs) are not in excess of $11 million; and
(d) pay all fees, costs and expenses incurred by
Parent, Buyer and Buyer Operating Partnership in connection with this
Agreement, the Partnership Merger Agreement and the other transactions
contemplated herein and therein.
3.18 Pro Forma Capitalization Table. Attached hereto as
Exhibit B is a true and correct pro forma capitalization table of Parent
and its Subsidiaries, giving effect to the Equity Commitments, the
Financing Commitments and consummation of the transactions contemplated
by this Agreement and the Partnership Merger Agreement.
3.19 Representations in Partnership Merger Agreement. The
representations and warranties of Parent and the Buyer Operating
Partnership set forth in the Partnership Merger Agreement are true and
correct.
ARTICLE 4
COVENANTS
4.1 Acquisition Proposals. During the period from the date
hereof and continuing through the Effective Time or the earlier
termination of this Agreement in accordance with its terms, Seller agrees
that:
(a) neither it nor any of the Seller Subsidiaries shall
initiate, solicit or knowingly encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, acquisition, tender offer,
exchange offer, consolidation, sale of assets or similar transaction
involving all or any significant portion of the assets or any equity
securities of, Seller or any of its Subsidiaries, other than the
transactions contemplated by this Agreement (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") or engage in
any negotiations concerning or provide any confidential information or
data to, or have any discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to
make or implement an Acquisition Proposal;
(b) it shall direct and use its best efforts to cause
its officers, directors, employees, agents or financial advisors not to
engage in any of the activities described in Section 4.1(a);
(c) it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing and
will take the necessary steps to inform the individuals or entities
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referred to in Section 4.1(b) of the obligations undertaken in this
Section 4.1; and
(d) it will notify Buyer promptly if Seller receives
any such inquiries or proposals, or any requests for such information, or
if any such negotiations or discussions are sought to be initiated or
continued with it;
provided, however, that nothing contained in this Agreement shall
prohibit the Board of Directors of Seller (and the officers, directors,
employees, agents and financial advisors of Seller acting at the
direction of the Board of Directors) from prior to the Seller
Shareholders Meeting (as defined below) furnishing information to or
entering into discussions or negotiations with, any Person that makes an
unsolicited Acquisition Proposal, if, and only to the extent that (A) the
Board of Directors of Seller determines in good faith that such action is
required for the Board of Directors to comply with its duties to
stockholders imposed by law and such proposal is a Superior Acquisition
Proposal (as defined below), (B) prior to furnishing such information to,
or entering into discussions or negotiations with, such Person, Seller
provides written notice to Buyer to the effect that it is furnishing
information to, or entering into discussions with, such Person and
(C) subject to any confidentiality agreement with such Person, Seller
keeps Buyer informed of the status (not the terms) of any such
discussions or negotiations (Seller agreeing that it will not enter into
any confidentiality agreement with any Person subsequent to the date
hereof which prohibits Seller from providing such information to Buyer);
and (ii) to the extent applicable, taking and disclosing to the Seller
stockholders a position contemplated by Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal; provided,
however, that the Board of Directors of Seller may not approve or
recommend an Acquisition Proposal, or withdraw or modify its approval or
recommendation of this Agreement and the Merger, unless such Acquisition
Proposal is a Superior Acquisition Proposal. Nothing in this Section 4.1
shall (x) permit Seller to terminate this Agreement (except as
specifically provided in Article 7 hereof), (y) permit Seller to enter
into an agreement with respect to an Acquisition Proposal during the term
of this Agreement (other than a confidentiality agreement in customary
form executed as provided above) or (z) affect any other obligation of
Seller under this Agreement; provided, however, that the Board of
Directors of Seller may approve and recommend a Superior Acquisition
Proposal and, in connection therewith, withdraw or modify its approval or
recommendation of this Agreement and the Merger. As used herein,
"Superior Acquisition Proposal" means a bona fide Acquisition Proposal
made by a third party which the Board of Directors of Seller (or a duly
constituted committee thereof charged with considering Acquisition
Proposals) determines in good faith (after consultation with its
financial advisor) to be more favorable to Seller's stockholders than the
Merger and which the Board of Directors of Seller (or any such committee)
determines is reasonably capable of being consummated.
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4.2 Conduct of Seller's Business Pending Merger. During the
period from the date hereof and continuing through the Effective Time,
except as consented to in writing by Buyer or as contemplated by this
Agreement, specifically including Section 1.7(b), and except as set forth
on Section 4.2 of the Seller Disclosure Letter, Seller shall, and shall
cause each of the Seller Subsidiaries to:
(a) conduct its business only in the usual, regular and
ordinary course and in substantially the same manner as heretofore
conducted and take all action necessary to continue to qualify as a REIT;
(b) use its reasonable efforts to (i) preserve intact
its business (corporate or otherwise) organizations and goodwill;
provided that Seller may cause Seller General Partner to be converted
into a Delaware limited liability company on or prior to the Closing Date
and take such actions to cause the conversions and liquidations
contemplated by Section 6.2(g) to occur, (ii) keep available the services
of its officers and key employees and (iii) keep intact the relationship
with its customers, tenants, suppliers and others having business
dealings with Seller and Seller's Subsidiaries;
(c) confer on a regular basis with one or more
representatives of Buyer to report operational matters of materiality
and, subject to Section 4.1, any proposals to engage in material
transactions;
(d) promptly notify Buyer of any material emergency or
other material adverse change in the condition (financial or otherwise),
business, properties, assets, liabilities or the normal course of its
businesses or in the operation of its properties, or of any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated);
(e) promptly deliver to Buyer true and correct copies
of any report, statement or schedule to be filed with the SEC subsequent
to the date of this Agreement and prior to the Closing Date;
(f) maintain its books and records in accordance with
GAAP consistently applied and not change in any material manner any of
its methods, principles or practices of accounting in effect at the
Seller Financial Statement Date, except as may be required by the SEC,
applicable law or GAAP;
(g) duly and timely file all material Tax Returns and
other documents required to be filed with federal, state, local and other
Tax Authorities, subject to timely extensions permitted by law, provided
Seller notifies Buyer that it is availing itself of such extensions and
provided such extensions do not adversely affect Seller's status as a
qualified REIT under the Code;
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(h) not make or rescind any material express or deemed
election relative to Taxes (unless required by law or necessary to
preserve Seller's status as a REIT or the status of any Seller Subsidiary
as a partnership for federal income tax purposes or as a qualified REIT
subsidiary under Section 856(i) of the Code, as the case may be);
(i) not acquire, enter into any option to acquire, or
exercise an option or contract to acquire, additional real property,
incur additional indebtedness except for working capital under its
revolving lines of credit, encumber assets or commence construction of,
or enter into any agreement or commitment to develop or construct, other
real estate projects, except with respect to the construction of the
multi-family residential projects described in the Seller SEC Documents
or the Seller Disclosure Letter as being under development in accordance
with the agreements in existence on the date of this Agreement and
previously furnished to Buyer (the "Development Agreements");
(j) not (except as contemplated by this Agreement)
amend its certificate of incorporation or By-laws, or the articles or
certificate of incorporation, bylaws, code of regulations, partnership
agreement, operating agreement or joint venture agreement or comparable
charter or organization document of any Seller Subsidiary;
(k) make no change in the number of its shares of
capital stock, membership interests or units of limited partnership
interest (as the case may be) issued and outstanding or reserved for
issuance, other than pursuant to (i) the exercise of options or other
rights disclosed in Section 2.3 of the Seller Disclosure Letter, (ii) the
conversion of Seller Preferred Shares, or (iii) the conversion or
redemption of Seller OP Units pursuant to the Seller Partnership
Agreement for Seller Common Shares or cash, at Seller's option;
(l) except as set forth in Section 4.2(l) of the Seller
Disclosure Letter, grant no options or other rights or commitments
relating to its shares of capital stock, membership interests or units of
limited partnership interest or any security convertible into its shares
of capital stock, membership interests or units of limited partnership
interest, or any security the value of which is measured by shares of
capital stock, or any security subordinated to the claim of its general
creditors and, except as contemplated by this Agreement, not amend or
waive any rights under any of the Seller Options;
(m) except as provided in Section 5.9 and in connection
with the use of Seller Common Shares to pay the exercise price or tax
withholding in connection with equity-based employee benefit plans by the
participants therein, not (i) authorize, declare, set aside or pay any
dividend or make any other distribution or payment with respect to any
Seller Common Shares, Seller Preferred Shares or Seller OP Units or
(ii) directly or indirectly redeem, purchase or otherwise acquire any
shares of capital stock, membership interests or units of partnership
interest or any option, warrant or right to acquire, or security
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convertible into, shares of capital stock, membership interests, or units
of partnership interest, except for (a) redemptions of Seller Common
Shares required under Article V of the Restated Certificate of
Incorporation of Seller in order to preserve the status of Seller as a
REIT under the Code or (b) conversions or redemptions of Seller OP Units,
whether or not outstanding on the date of this Agreement, for cash or
Seller Common Shares in accordance with the terms of the Seller
Partnership Agreement;
(n) not sell, lease, mortgage, subject to any material
Lien or otherwise dispose of any of the Seller Properties;
(o) not sell, lease, mortgage, subject to any material
Lien or otherwise dispose of any of its personal property or intangible
property, except sales of equipment which are not material to Seller and
its Subsidiaries taken as a whole which are made in the ordinary course
of business;
(p) not make any loans, advances or capital
contributions to, or investments in, any other Person, other than loans,
advances and capital contributions to Seller Subsidiaries in existence on
the date hereof;
(q) not pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) which are material to Seller and its
Subsidiaries taken as a whole, other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) furnished to Buyer or
incurred in the ordinary course of business consistent with past practice
(collectively, "Ordinary Course Liabilities"), nor fail to pay Ordinary
Course Liabilities as they come due consistent with past practice;
(r) except as provided in Section 4.2(i) above, not
enter into any commitment, contractual obligation or transaction (each, a
"Commitment") for the purchase of any real estate; provided that
expansion or improvements made in the ordinary course of business to
existing real property shall not be considered a purchase of real
property;
(s) not guarantee the indebtedness of another Person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing;
(t) not enter into any contractual obligation with any
officer, director or Affiliate of Seller;
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(u) not increase any compensation or enter into or
amend any employment, severance or other agreement with any of its
officers, directors or employees earning a base salary of more than
$100,000 per annum, other than as required by any contract or Employee
Plan or pursuant to waivers by employees of benefits under such
agreements;
(v) not adopt any new employee benefit plan or amend,
terminate or increase any existing plans or rights, not grant any
additional options, warrants, rights to acquire stock, stock appreciation
rights, phantom stock, dividend equivalents, performance units or
performance stock to any officer, employee or director, or accelerate
vesting with respect to any grant of Seller Common Shares to employees
which are subject to any risk of forfeiture, except for changes which are
required by law and changes which are not more favorable to participants
than provisions presently in effect;
(w) not change the ownership of any of its
Subsidiaries, except changes which arise as a result of the conversion of
Seller OP Units into Seller Common Shares or cash;
(x) not accept a promissory note in payment of the
exercise price payable under any option to purchase Seller Common Shares;
(y) not enter into or amend or otherwise modify or
waive any material rights under any agreement or arrangement for the
Persons that are executive officers or directors of Seller or any Seller
Subsidiary;
(z) not directly or indirectly or through a subsidiary,
merge or consolidate with, acquire all or substantially all of the assets
of, or acquire the beneficial ownership of a majority of the outstanding
capital stock or a majority of any other equity interest in, any Person;
(aa) perform all agreements required to be performed by
the Seller and its Subsidiaries (including the Seller General Partner and
the Seller Partnership) under the Partnership Merger Agreement;
(bb) not make or revoke any material tax election or
settle or compromise any material tax liability; and
(cc) not agree, commit or arrange to take any action
prohibited under this Section.
Notwithstanding anything in this Agreement to the contrary,
Seller shall have the right, in accordance (except with respect to
timing) with the applicable provisions of its Restated Certificate of
Incorporation, as amended, to submit to its stockholders a proposal to
liquidate the Seller (the "Liquidation Vote") and to make all required
filings with the SEC and take all such other necessary or appropriate
actions in connection therewith.
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4.3 Conduct of Parent's and Buyer's Business Pending Merger.
Prior to the Effective Time, except as (i) contemplated by this
Agreement, or (ii) consented to in writing by Seller, Parent shall, and
shall cause Buyer to:
(a) use its reasonable efforts to preserve intact its
business organizations and goodwill and keep available the services of
its officers and employees;
(b) promptly notify Seller of any material emergency or
other material change in the condition (financial or otherwise),
business, properties, assets, liabilities, prospects or the normal course
of its businesses or in the operation of its properties, or of any
material governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated);
(c) not amend its certificate of limited partnership or
limited partnership agreement, or the articles or certificate of
incorporation, bylaws, code of regulations, partnership agreement,
operating agreement or joint venture agreement or comparable charter or
organization document of any Subsidiary of the Parent; provided, however,
that any such amendment may be made (1) in connection with the financing
of Parent, Buyer and Buyer Operating Partnership in accordance with the
terms of the Equity Commitments and the Financing Commitments, so long as
any such amendment would not reasonably be expected to materially
adversely affect Seller's stockholders, the Seller Unit Holders, the
Merger or the transactions contemplated by the Partnership Merger
Agreement or (2) so long as such amendment would not, under Sections 3.7
or 11.1 of the limited partnership agreement of Parent, require the
consent of any holder of Class A Preferred Units or Class B Units if such
securities were issued and outstanding at the time of such amendment and
the holders of such securities were then limited partners of the
Partnership;
(d) not enter into any Commitment for the acquisition
of any interest in real property if the amount of such Commitment would
cause the aggregate amount of all such Commitments subsequent to the date
hereof to exceed $1,000,000 unless such Commitment has been approved by
Seller;
(e) not directly or indirectly, through a subsidiary or
otherwise, merge or consolidate with, or acquire all or substantially all
of the assets of, or the beneficial ownership of a majority of the
outstanding capital stock or other equity interests in any Person whose
securities are registered under the Exchange Act unless such transaction
has been approved by Seller;
(f) except as contemplated by this Agreement, not issue
any Buyer or Buyer Operating Partnership securities pursuant to a
Registration Statement filed with the SEC relating to the public offering
of any Buyer or Buyer Operating Partnership securities from the date
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hereof until the date of the Proxy Statement (as defined in
Section 5.1(a)) unless such issuance has been approved by Seller;
(g) use reasonable best efforts to do all necessary
things required to close the equity funding contemplated by the Equity
Commitments and the borrowings contemplated by the Financing Commitments
and to cause such equity funding and such borrowings to be made available
to Parent, Buyer and Buyer Operating Partnership as provided therein; and
(h) not agree, commit or arrange to take any action
prohibited under this Section.
4.4 Other Actions. Each of Seller on the one hand and Parent
and Buyer on the other hand shall not knowingly take, and shall use
commercially reasonable efforts to cause their Subsidiaries not to take,
any action that would result in (i) any of the representations and
warranties of such party (without giving effect to any "knowledge"
qualification) set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and
warranties (without giving effect to any "knowledge" qualification) that
are not so qualified becoming untrue in any material respect or
(iii) except as contemplated by Section 4.1, any of the conditions to the
Merger set forth in Article 6 not being satisfied.
4.5 Partnership Merger Agreement. Parent shall, and shall
cause its Subsidiaries to, perform all agreements required to be
performed by the Parent and its Subsidiaries (including the Buyer
Operating Partnership) under the Partnership Merger Agreement.
4.6 Private Placement. Parent shall take all actions necessary
for Parent to offer and sell interests in Parent to holders of Seller OP
Units in the manner contemplated by the Partnership Merger Agreement and
Section 5.1 hereof and as shall be required for the offering and sale of
such units of limited partnership interest to be exempt from the
registration requirements of the Securities Act pursuant to Rule 506 of
Regulation D.
4.7 Irrevocable Letter of Credit.
(a) Parent has delivered to American Stock Transfer and
Trust Company (the "Escrow Agent") $29,500,000 (the "Cash Collateral") in
cash to secure the obligation of Parent and Buyer to pay certain fees and
expenses pursuant to Section 7.2 and to be held in accordance with the
terms of an Escrow Agreement dated as of date hereof among the Escrow
Agent, Seller, Seller Partnership and Parent (the "Escrow Agreement").
At the election of Parent and if Seller has not given a notice to the
Escrow Agent directing the Escrow Agent to terminate Parent's right to
receive any part of the Cash Collateral, Parent may deliver to the Escrow
Agent an irrevocable letter of credit in the amount of the Cash
Collateral, substantially in the form attached hereto as Exhibit C, with
such changes as shall be reasonably satisfactory to Seller and from a
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bank reasonably satisfactory to Seller (the "Letter of Credit"). Upon
delivery of such Letter of Credit and if Seller has not given a notice to
the Escrow Agent directing the Escrow Agent to terminate Parent's right
to receive any part of the Cash Collateral, the full amount of the Cash
Collateral then held by the Escrow Agent shall be immediately returned to
Buyer. Seller shall, simultaneously with delivering any direction to the
Escrow Agent to terminate Parent's right to receive any part of the Cash
Collateral as provided in the Escrow Agreement or to make a draw under
the Letter of Credit, deliver to Parent and Buyer a certificate
confirming that Seller is entitled to make such direction pursuant to
Section 7.2 and, if such certification is false or Seller is not
otherwise entitled to make such direction pursuant to Section 7.2, Parent
and Buyer shall be entitled to all remedies available at law or in equity
(including recovery of any amounts improperly withdrawn or drawn);
provided, however, that Parent and Buyer shall notify the Seller within
30 days after receiving such certificate if they wish to assert that
Seller is not entitled to so direct the Escrow Agent and any failure to
provide such notice within such 30 day period shall irrevocably prohibit
Parent and Buyer from maintaining that Seller was not so entitled.
(b) If Parent elects to extend the Closing Date as
contemplated under Section 1.2(b), then on or prior to the Additional
Collateral Date (as defined below), Parent shall increase the Cash
Collateral by either delivering an additional $25,000,000 to the Escrow
Agent in cash to be held in accordance with the terms of the Escrow
Agreement or, if Parent has previously delivered a Letter of Credit to
the Escrow Agent as contemplated under Section 4.7(a), by amending such
Letter of Credit to increase the amount available thereunder by an
additional $25,000,000. As used herein, the term "Additional Collateral
Date" shall mean the first business day following the Satisfaction Date;
provided, however, that if the conditions set forth in Sections 6.1 and
6.2 (other than Sections 6.2(g) and 6.2(i)) are satisfied (or waived by
Parent and Buyer), and if the certificates and other documents required
to be delivered pursuant to Section 6.2 are delivered, in each case as of
the Satisfaction Date and at or prior to 9:30 a.m. on such date, then the
term "Additional Collateral Date" shall mean the Satisfaction Date.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Preparation of the Proxy Statement; Seller Stockholders
Meeting.
(a) The parties shall cooperate and promptly prepare
and Seller shall file with the SEC as soon as practicable a proxy
statement with respect to the meeting of the stockholders of Seller in
connection with the Merger (the "Proxy Statement"). The parties shall
cooperate and promptly prepare and the appropriate party shall file with
the SEC as soon as practicable any other filings required under the
Exchange Act ("Additional Filings"), including without limitation, a Rule
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13e-3 Transaction Statement on Schedule 13E-3 with respect to the Merger
to be filed jointly by Seller, Parent and Buyer, together with any
required amendments thereto. The parties shall cooperate and promptly
prepare a Consent Solicitation/Information Statement of Seller
Partnership and Parent for use in connection with the solicitation of
consents to the matters described in the definition of Seller Partner
Approval and the offering of units of limited partnership interest in
Parent (the "Consent Solicitation Statement"). Each of Seller, Seller
Partnership, Parent, Buyer and Buyer Operating Partnership agrees that
the information provided by it for inclusion in the Proxy Statement, the
Additional Filings, the Consent Solicitation Statement and each amendment
or supplement thereto, at the time of mailing thereof and at the time of
the meeting of stockholders of Seller and at the time of the taking of
consent in respect of the Seller Partner Approval, will not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent, Buyer and Buyer Operating Partnership shall, with
respect to the Seller Partner Approval and the offering of units of
limited partnership interest in Parent to holders of Seller OP Units,
comply with Regulation D of the Securities Act, as applicable. Seller
will use its reasonable best efforts, and Parent, Buyer and Buyer
Operating Partnership will cooperate with Seller to (i) file a
preliminary Proxy Statement with the SEC and (ii) cause the Proxy
Statement to be mailed to Seller's stockholders, in each case, as
promptly as practicable (including clearing the Proxy Statement with the
SEC). Seller will use its reasonable best efforts, and Parent, Buyer and
Buyer Operating Partnership will cooperate with Seller, to cause the
Consent Solicitation Statement to be mailed to the Seller Unit Holders as
promptly as practicable after the SEC has cleared the Proxy Statement.
Seller will notify Buyer promptly of the receipt of any comments from the
SEC and of any request by the SEC for amendments or supplements to the
Proxy Statement or the Additional Filings or for additional information
and will supply Buyer with copies of all correspondence between such
party or any of its representatives and the SEC, with respect to the
Proxy Statement or the Additional Filings. The parties shall cooperate
to cause the Proxy Statement, the Consent Solicitation Statement and any
Additional Filings to comply in all material respects with all applicable
requirements of law. Whenever any event occurs which is required to be
set forth in an amendment or supplement to the Proxy Statement, the
Additional Filings or the Consent Solicitation Statement, Seller on the
one hand, and Parent and Buyer on the other hand, shall promptly inform
the other of such occurrence and cooperate in filing with the SEC and/or
mailing to the stockholders of Seller or holders of Seller OP Units, as
applicable, such amendment or supplement to the Proxy Statement or the
Consent Solicitation Statement.
(b) It shall be a condition to the mailing of the Proxy
Statement and the Consent Solicitation Statement that if they so request,
Buyer and Buyer Operating Partnership shall have received a "comfort"
letter or an "agreed upon procedures" letter from PricewaterhouseCoopers
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LLP, independent public accountants for Seller and Seller Partnership, of
the kind contemplated by the Statement of Auditing Standards with respect
to Letters to Underwriters promulgated by the American Institute of
Certified Public Accountants (the "AICPA Statement"), dated as of the
date on which the Proxy Statement is to be mailed to the stockholders of
Seller, addressed to Parent, Buyer and Buyer Operating Partnership, in
form and substance reasonably satisfactory to Buyer and Buyer Operating
Partnership, concerning the procedures undertaken by
PricewaterhouseCoopers LLP with respect to the financial statements and
information of Seller, Seller Partnership and their Subsidiaries
contained in the Proxy Statement and the other matters contemplated by
the AICPA Statement and otherwise customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
(c) Seller will, as soon as practicable following the
date of this Agreement duly call, give notice of, convene and hold a
meeting of its stockholders, such meeting to be held no sooner than 20
business days nor later than 45 days following the date the Proxy
Statement is mailed to the stockholders of Seller (the "Seller
Shareholders Meeting") for the purpose of obtaining the Seller
Shareholder Approval. Seller shall be required to hold the Seller
Shareholders Meeting, regardless of whether the Board of Directors of
Seller has withdrawn, amended or modified its recommendation that its
stockholders adopt this Agreement and approve the Merger, unless this
Agreement has been terminated pursuant to the provisions of Section 7.1.
Seller will, through its Board of Directors, recommend that its
stockholders adopt this Agreement and approve the transactions
contemplated hereby, including the Merger and the Alternative Merger;
provided, that prior to the Seller Shareholders Meeting, such
recommendation may be withdrawn, modified or amended if Seller shall have
received a Superior Acquisition Proposal, but only to the extent
expressly permitted under Section 4.1.
(d) If on the date for the Seller Shareholders Meeting
established pursuant to Section 5.1(c) of this Agreement, Seller has not
received duly executed proxies which, when added to the number of votes
represented in person at the meeting by Persons who intend to vote to
adopt this Agreement, will constitute a sufficient number of votes to
adopt this Agreement (but less than a majority of the outstanding Seller
Common Shares (including the Seller Preferred Shares voting with the
Seller Common Shares on an as-converted basis) have indicated their
intention to vote against, or have submitted duly executed proxies voting
against, the adoption of this Agreement), then Seller shall recommend the
adjournment of its stockholders meeting until the date ten (10) days
after the originally scheduled date of the stockholders meeting.
5.2 Access to Information: Confidentiality. Subject to the
requirements of confidentiality agreements with third parties, each of
Seller, Parent and Buyer shall, and shall cause each of its Subsidiaries
to, afford to the other party and to the officers, employees,
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accountants, counsel, financial advisors and other representatives of
such other party, reasonable access during normal business hours prior to
the Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, each of
Seller, Parent and Buyer shall, and shall cause each of its Subsidiaries
to, furnish promptly to the other party all other information concerning
its business, properties and personnel as such other party may reasonably
request. Parent and Buyer shall have the right to conduct non-intrusive
environmental and engineering inspections at the Seller Properties;
provided that in no event shall Parent or Buyer have the right to conduct
so-called "Phase II" environmental tests. Notwithstanding anything in
this Section 5.2 to the contrary, all of Parent's and Buyer's activities
pursuant to this Section 5.2 must be conducted in a manner that does not
unreasonably interfere with the ongoing operations of Seller and Seller
Subsidiaries.
5.3 Reasonable Best Efforts; Notification.
(a) Subject to the terms and conditions herein
provided, Seller, Parent and Buyer shall: (i) use all reasonable best
efforts to cooperate with one another in (A) determining which filings
are required to be made prior to the Effective Time with, and which
consents, approvals, permits or authorizations are required to be
obtained prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states and foreign
jurisdictions and any third parties in connection with the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby, including without limitation any required filings
and consents under the HSR Act, and (B) timely making all such filings
and timely seeking all such consents, approvals, permits and
authorizations; (ii) use all reasonable best efforts (other than the
payment of money) to obtain in writing any consents required from third
parties to effectuate the Merger and avoid defaults or acceleration of
the rights of third parties under contracts with Seller or Seller
Subsidiaries as a result of the consummation of the Merger, such consents
to be in form reasonably satisfactory to Seller and Buyer; and (iii) use
all reasonable best efforts to take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions
contemplated by this Agreement. In furtherance thereof, Seller agrees to
vote in favor of the transactions contemplated by the Partnership Merger
Agreement in its capacity as a limited partner of the Seller Partnership,
and to cause the Seller General Partner to so vote in its capacity as a
general partner of the Seller Partnership. If at any time after the
Effective Time any further action is necessary or desirable to carry out
the purpose of this Agreement, Parent and the Surviving Company shall
take all such necessary action.
(b) Seller shall give prompt notice to Parent and
Buyer, and Parent and Buyer shall give prompt notice to Seller, (i) if
any representation or warranty made by it or them contained in this
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Agreement that is qualified as to materiality becomes untrue or
inaccurate in any respect or any such representation or warranty that is
not so qualified becomes untrue or inaccurate in any material respect or
(ii) of the failure by it or them to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
5.4 Tax Treatment. The Surviving Operating Partnership will
use the "traditional method" under Treasury Regulations
Section 1.704-3(b) for purposes of making allocations under
Section 704(c) of the Code with respect to the properties of or interests
in the Seller Partnership as of the Effective Time. The Surviving
Company shall prepare and file all Tax Returns of Seller and Seller
Subsidiaries due after the Effective Time.
5.5 Public Announcements. Parent, Buyer and Seller will
consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press release or other
written public statements with respect to the transactions contemplated
by this Agreement, and shall not issue any such press release or make any
such written public statement prior to such consultation, except as may
be required by applicable law, court process or by obligations pursuant
to any listing agreement with any national securities exchange. The
parties agree that the initial press release to be issued with respect to
the transactions contemplated by this Agreement will be in the form
agreed to by the parties hereto prior to the execution of this Agreement.
5.6 Transfer Taxes. Buyer and Seller shall cooperate in the
preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer,
sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees and any similar taxes
which become payable in connection with the transactions contemplated by
this Agreement (together with any related interests, penalties or
additions to tax, "Transfer Taxes"). From and after the Effective Time,
the Surviving Company shall, or shall cause the Surviving Operating
Partnership, as appropriate, to pay or cause to be paid, without
deduction or withholding from any amounts payable to the holders of
Seller Common Shares or Seller OP Units, all Transfer Taxes.
5.7 Benefit Plans. After the Effective Time, all employees of
Seller who are employed by the Surviving Company shall, at the option of
the Surviving Company, either continue to be eligible to participate in
an "employee benefit plan," as defined in Section 3(3) of ERISA, of
Seller which is, at the option of the Surviving Company, continued by the
Surviving Company, or alternatively shall be eligible to participate in
any "employee benefit plan," as defined in Section 3(3) of ERISA,
established, sponsored or maintained by the Surviving Company after the
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Effective Time. With respect to each such employee benefit plan not
formerly maintained by Seller, service with Seller or any Seller
Subsidiary (as applicable) shall be included for purposes of determining
eligibility to participate, vesting (if applicable) and entitlement to
benefits and all pre-existing condition exclusions shall be waived and
expenses incurred by any employee for deductibles and copayments in the
portion of the year prior to the date employee first becomes a
participant in such employee benefit plan shall be credited to the
benefit of such employee under such employee benefit plan for the year in
which the employee's participation commences.
5.8 Indemnification.
(a) From and after the Effective Time, the Surviving
Company shall provide exculpation and indemnification for each Person who
is now or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer, employee or director of Seller
or any Seller Subsidiary (the "Indemnified Parties") which is the same as
the exculpation and indemnification provided to the Indemnified Parties
by Seller and the Seller Subsidiaries immediately prior to the Effective
Time in their respective certificate of incorporation and Bylaws or other
organizational documents, as in effect on the date hereof; provided, that
such exculpation and indemnification covers actions on or prior to the
Effective Time, including, without limitation, all transactions
contemplated by this Agreement.
(b) In addition to the rights provided in
Section 5.8(a) above, in the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including without limitation, any action by or on behalf
of any or all security holders of Seller, Parent or Buyer, or any
Subsidiary of the Seller or Parent, or by or in the right of Seller,
Parent or Buyer, or any Subsidiary of the Seller or Parent, or any claim,
action, suit, proceeding or investigation (collectively, "Claims") in
which any Indemnified Party is, or is threatened to be, made a party
based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was an officer, employee or
director of Seller or any of the Seller Subsidiaries or any action or
omission or alleged action or omission by such Person in his capacity as
an officer, employee or director, or (ii) this Agreement or the
Partnership Merger Agreement or the transactions contemplated by this
Agreement or the Partnership Merger Agreement, whether in any case
asserted or arising before or after the Effective Time, Parent and the
Surviving Company (the "Indemnifying Parties") shall from and after the
Effective Time jointly and severally indemnify and hold harmless the
Indemnified Parties from and against any losses, claims, liabilities,
expenses (including reasonable attorneys' fees and expenses), judgments,
fines or amounts paid in settlement arising out of or relating to any
such Claims. Parent, the Surviving Company and the Indemnified Parties
hereby agree to use their reasonable best efforts to cooperate in the
defense of such Claims. In connection with any such Claim, the
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Indemnified Parties shall have the right to select and retain one
counsel, at the cost of the Indemnifying Parties, subject to the consent
of the Indemnifying Parties (which consent shall not be unreasonably
withheld or delayed). In addition, after the Effective Time, in the
event of any such threatened or actual Claim, the Indemnifying Parties
shall promptly pay and advance reasonable expenses and costs incurred by
each Indemnified Person as they become due and payable in advance of the
final disposition of the Claim to the fullest extent and in the manner
permitted by law. Notwithstanding the foregoing, the Indemnifying
Parties shall not be obligated to advance any expenses or costs prior to
receipt of an undertaking by or on behalf of the Indemnified Party, such
undertaking to be accepted without regard to the creditworthiness of the
Indemnified Party, to repay any expenses advanced if it shall ultimately
be determined that the Indemnified Party is not entitled to be
indemnified against such expense. Notwithstanding anything to the
contrary set forth in this Agreement, the Indemnifying Parties (i) shall
not be liable for any settlement effected without their prior written
consent (which consent shall not be unreasonably withheld or delayed),
and (ii) shall not have any obligation hereunder to any Indemnified Party
to the extent that a court of competent jurisdiction shall determine in a
final and non-appealable order that such indemnification is prohibited by
applicable law. In the event of a final and non-appealable determination
by a court that any payment of expenses is prohibited by applicable law,
the Indemnified Party shall promptly refund to the Indemnifying Parties
the amount of all such expenses theretofore advanced pursuant hereto.
Any Indemnified Party wishing to claim indemnification under this
Section 5.8, upon learning of any such Claim, shall promptly notify the
Indemnifying Parties of such Claim and the relevant facts and
circumstances with respect thereto; provided however, that the failure to
provide such notice shall not affect the obligations of the Indemnifying
Parties except to the extent such failure to notify materially prejudices
the Indemnifying Parties' ability to defend such Claim; and provided,
further, however, that no Indemnified Party shall be obligated to provide
any notification pursuant to this Section 5.8(b) prior to the Effective
Time.
(c) At or prior to the Effective Time, Buyer shall
purchase directors' and officers' liability insurance policy coverage for
Seller's and each Seller Subsidiaries' directors and officers for a
period of six years which will provide the directors and officers with
coverage on substantially similar terms as currently provided by Seller
and the Seller Subsidiaries to such directors and officers. At or prior
to the Effective Time, Seller shall have the right to reasonably review
and approve any such policy, which approval shall not be unreasonably
withheld.
(d) This Section 5.8 is intended for the irrevocable
benefit of, and to grant third party rights to, the Indemnified Parties
and their successors, assigns and heirs and shall be binding on all
successors and assigns of Parent and Buyer, including without limitation
the Surviving Company. Each of the Indemnified Parties shall be entitled
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to enforce the covenants contained in this Section 5.8 and Parent and
Buyer acknowledge and agree that each Indemnified Party would suffer
irreparable harm and that no adequate remedy at law exists for a breach
of such covenants and such Indemnified Party shall be entitled to
injunctive relief and specific performance in the event of any breach of
any provision in this Section 5.8.
(e) In the event that the Surviving Company or any of
its respective successors or assigns (i) consolidates with or merges into
any other Person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any Person, then, and
in each such case, the successors and assigns of such entity shall assume
the obligations set forth in this Section 5.8, which obligations are
expressly intended to be for the irrevocable benefit of, and shall be
enforceable by, each director and officer covered hereby.
Parent guarantees, unconditionally and absolutely, the
performance of Surviving Company's and Buyer's obligations under this
Section 5.8.
5.9 Declaration of Dividends and Distributions. From and after
the date of this Agreement, Seller shall not make any dividend or
distribution to its stockholders without the prior written consent of
Buyer; provided, however, the written consent of Buyer shall not be
required for the authorization and payment of quarterly distributions
(i) with respect to the Seller Common Shares, (a) for the dividend for
the second and third quarters of 1999 (i.e., $.25 per share with a record
date of May 1, 1999 and August 1, 1999) and (b) as permitted under
Section 1.2(g), and (ii) with respect to the Seller Preferred Shares for
the dividend for the second quarter of 1999 and for each quarterly
dividend thereafter in the amounts provided for in the Certificate of
Designation in respect of the Seller Preferred Shares. From and after
the date of this Agreement, Seller Partnership shall not make any
distribution to the holders of Seller OP Units except a distribution per
Seller OP Unit in the same amount as a dividend per Seller Common Share
permitted pursuant to this Section 5.9 (including without limitation
pursuant to the following paragraph), with the same record and payment
dates as such dividend on the Seller Common Shares. The foregoing
restrictions shall not apply, however, to the extent a distribution by
Seller is necessary for Seller to maintain REIT status or to prevent
Seller from having to pay federal income tax; provided that in the event
of such a distribution, the aggregate cash consideration payable to
holders of Seller Common Shares in the Merger shall be reduced by the
aggregate amount of such distribution, and the Common Merger
Consideration per share shall be reduced accordingly.
Notwithstanding the foregoing, if the Effective Time occurs on a date
after November 1, 1999, the Seller may declare or establish a record date
and set aside funds for payment of a dividend for the period commencing
November 1, 1999 and ending on the date on which the Effective Time
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occurs (the "Partial Period"). The amount of the dividend per Seller
Common Share for such Partial Period shall equal a fraction, (I) the
numerator of which equals (a) $.25, times (b) the number of days
comprising such Partial Period, and (II) the denominator of which is 90.
5.10 Resignations. On the Closing Date, Seller shall use its
best efforts to cause the directors and officers of Seller or any of the
Seller Subsidiaries to submit their resignations from such positions as
may be requested by Buyer, effective immediately after the Effective
Time; provided, however, that by resigning, such officers and directors
will not lose the benefit of any "change of control" provisions of any
employment agreement or other instruments to which they would otherwise
be entitled.
5.11 Outside Property Management Agreements. Seller will not,
and will not permit any of its Subsidiaries to, amend the Outside
Property Management Agreements. Seller will not, and will not permit any
of its Subsidiaries to, renew any Outside Property Management Agreement
except as approved by Buyer, which approval shall not be unreasonably
withheld or delayed.
5.12 Stockholder Claims. Seller shall not settle or compromise
for an amount in excess of $10,000,000 any claim relating to the
Transactions brought by any current, former or purported holder of any
securities of Seller or the Seller Partnership without the prior written
consent of Buyer, which consent will not be unreasonably withheld.
5.13 Cooperation with Proposed Financings and Asset Sales. At
the request of the Buyer, the Seller will, at the Buyer's expense,
reasonably cooperate with the Buyer in connection with the proposed
financing of the Transactions by the Parent and its Subsidiaries or
proposed post-closing sales of the Seller Properties, provided that such
requested actions do not unreasonably interfere with the ongoing
operations of Seller and Seller Subsidiaries.
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger.
The obligations of each party to effect the Merger and to consummate the
other transactions contemplated by this Agreement to occur on the Closing
Date shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) Stockholder Approvals. This Agreement shall have
been adopted by the Seller Shareholder Approval.
(b) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
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prohibition preventing the consummation of the Merger, the Partnership
Merger or any of the other transactions contemplated hereby shall be in
effect.
(c) HSR. All applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or otherwise
been terminated.
6.2 Conditions to Obligations of Parent and Buyer. The
obligations of Parent and Buyer to effect the Merger and to consummate
the other transactions contemplated to occur on the Closing Date are
further subject to the following conditions, any one or more of which may
be waived by Buyer:
(a) Representations and Warranties. The
representations and warranties of Seller set forth in this Agreement
shall be true and correct in all material respects (except for the
representations set forth in Section 2.3 or representations having a
materiality or Seller Material Adverse Effect qualification, which shall
be correct in all respects) as of the date of this Agreement and as of
the Closing Date, as though made on and as of the Closing Date, except to
the extent the representation or warranty is expressly limited by its
terms to another date, in which case such representation or warranty
shall be true and correct in all material respects (except for
representations having a materiality or Seller Material Adverse Effect
qualification, which shall be correct in all respects) only as of such
specific date, and Parent and Buyer shall have received a certificate
(which certificate may be qualified by Knowledge to the same extent as
the representations and warranties of Seller contained herein are so
qualified) signed on behalf of Seller by the chief executive officer or
the chief financial officer of Seller, in such capacity, to such effect.
(b) Performance of Obligations of Seller. Seller shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time,
and Parent and Buyer shall have received a certificate signed on behalf
of Seller by the chief executive officer or the chief operating officer
of Seller, in such capacity, to such effect.
(c) Material Adverse Change. Since the date of this
Agreement through and including the Satisfaction Date, (i) there shall
have been no Seller Material Adverse Change and (ii) Parent and Buyer
shall have received a certificate of the chief executive officer or chief
financial officer of Seller, in such capacity, certifying to such effect.
For purposes of this Section 6.2(c), it is understood and agreed that a
Seller Material Adverse Change shall be deemed to have occurred, without
regard to any certificate provided pursuant to clause (ii) of the first
sentence of this Section 6.2(c), if as a result of a "change of law"
after the date hereof there shall exist at the Effective Time a material
increase in the risk that the Seller would not qualify (at or prior to
the Effective Time) as a REIT. For this purpose, the term "change in
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law" shall mean any amendment to or change (including any announced
prospective change having a proposed effective date at or prior to the
Effective Time) in the federal tax laws of the United States, including
any statute, regulation or proposed regulation or any official
administrative pronouncement (consisting of the issuance or revocation of
any revenue ruling, revenue procedure, notice, private letter ruling or
technical advice memorandum) or any judicial decision interpreting such
federal tax laws (whether or not such pronouncement or decision is issued
to, or in connection with, a proceeding involving the Seller or a Seller
Subsidiary or is subject to review or appeal).
(d) Tax Opinions Relating to REIT Status of Seller And
Partnership Status of Seller Partnership. Parent and Buyer shall have
received an opinion of Hale and Dorr LLP, or other counsel to Seller
reasonably acceptable to Parent and Buyer, and of Baker & Hostetler LLP,
each dated as of the Effective Time, in the form attached hereto as
Exhibit D. Each of such opinions may be based on certificates in the
form of Section 6.2(d) of the Seller Disclosure Letter.
(e) Consents. All consents and waivers (including,
without limitation, waivers of rights of first refusal) from third
parties necessary in connection with the consummation of the transactions
contemplated by this Agreement (including the Merger) shall have been
obtained and not subsequently been revoked, as of the Satisfaction Date
other than such consents and waivers from third parties, which, if not
obtained, would not result, individually or in the aggregate, in a Buyer
Material Adverse Effect or a Seller Material Adverse Effect; provided,
however, that the failure to obtain any consent or waiver in connection
with any instrument, obligation or matter set forth in the Seller
Disclosure Letter shall not constitute a failure of the condition set
forth in this Section 6.2(e).
(f) [Intentionally omitted].
(g) Conversion of Corporate Subsidiaries. Seller shall
have, at or prior to the Effective Time, either converted each of its
direct or indirect corporate Subsidiaries into Delaware limited liability
companies or liquidated such subsidiaries into Seller; provided that this
condition shall not apply to corporations that are Subsidiaries of Seller
and that serve as general partners of limited partnerships if the
organizational documents of such corporations or limited partnerships
would, as of the date hereof, prevent such conversions or liquidations;
provided that no consequence of Seller's performance of this condition
will be taken into account in determining the satisfaction of any other
conditions to Parent's and Buyer's obligations to effect the Merger.
(h) Partnership Merger Conditions. All conditions set
forth in Sections 5.1(c), 5.1(d) and 5.3 of the Partnership Merger
Agreement shall have been waived or satisfied as of the Satisfaction Date
in accordance with the terms of the Partnership Merger Agreement.
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<PAGE>
(i) Partnership Merger. The Partnership Merger shall
have been consummated.
Notwithstanding anything to the contrary in this Agreement, none
of the initiation, threat or existence of any legal action of any kind
with respect to this Agreement or the Partnership Merger Agreement or any
transaction contemplated hereby or thereby, including without limitation
any action initiated, threatened or maintained by any stockholder of
Seller or any partner in the Seller Partnership, whether alleging rights
with respect to Dissenting Shares, claims under any Federal or state
securities law, contract or tort claims, claims for breach of fiduciary
duty or otherwise, will constitute a failure of the conditions set forth
in Section 6.2(a), 6.2(b), 6.2(c), 6.2(e), 6.2(h), 6.3(a), 6.3(b),
6.3(c), 6.3(e) or 6.3(f) (and no such action shall cause the chief
executive officer or chief financial officer of Seller or of Parent or
Buyer to be unable to deliver a certificate attesting to compliance with
such conditions) unless that action has resulted in the granting of
injunctive relief that prevents the consummation of the Merger and the
other transactions contemplated hereby or thereby, and such injunctive
relief has not been dissolved or vacated.
6.3 Conditions to Obligations of Seller. The obligation of
Seller to effect the Merger and to consummate the other transactions
contemplated to occur on the Closing Date is further subject to the
following conditions, any one or more of which may be waived by Seller:
(a) Representations and Warranties. The
representations and warranties of Parent and Buyer set forth in this
Agreement shall be true and correct in all material respects (except for
representations having a materiality or Parent Material Adverse Effect or
Buyer Material Adverse Effect qualification, which shall be correct in
all respects) as of the date of this Agreement and as of the Closing
Date, as though made on and as of the Closing Date, except to the extent
the representation or warranty is expressly limited by its terms to
another date, in which case such representation or warranty shall be true
and correct in all material respects (except for representations having a
materiality or Parent Material Adverse Effect or Buyer Material Adverse
Effect qualification, which shall be correct in all respects) only as of
such specific date, and Seller shall have received a certificate (which
certificate may be qualified by Knowledge to the same extent as the
representations and warranties of Parent and Buyer contained herein are
so qualified) signed on behalf of Parent and Buyer by the chief executive
officer or the chief financial officer of such party, in such capacity,
to such effect.
(b) Performance of Obligations of Buyer. Each of
Parent and Buyer shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or
prior to the Effective Time, and Seller shall have received a certificate
of Parent and Buyer signed on behalf of Buyer by the chief executive
<PAGE>
<PAGE>
officer or the chief financial officer of Parent and Buyer, in such
capacity, to such effect.
(c) Material Adverse Change. Since the date of this
Agreement, there shall have been no change in the business, financial
condition or results of operations of Parent and its Subsidiaries, taken
as a whole, or of Buyer and the Buyer Subsidiaries, taken as a whole,
that has had or would reasonably be expected to have a material adverse
effect on the ability of Parent, Buyer or Buyer Operating Partnership to
consummate the transactions contemplated by this Agreement and the
Partnership Merger Agreement, and Seller shall have received a
certificate of the chief executive officer or chief financial officer of
Parent and Buyer, in such capacity, certifying to such effect.
(d) Tax Opinion Relating to the Partnership Merger.
Seller shall have received an opinion dated the Closing Date from Paul,
Weiss, Rifkind, Wharton & Garrison, special counsel to the Buyer, based
upon such certificates and letters dated the Closing Date as are
acceptable to such special counsel, to the effect that, for federal
income tax purposes, Seller Unit Holders (other than persons that are not
United States persons within the meaning of Section 7701(a)(30) of the
Code) who elect to exchange all Seller OP Units held by them for Class A
Preferred Units or Class B Units in Parent pursuant to the Partnership
Merger shall recognize no income, gain or loss upon the exchange. For
purposes of such opinion, counsel may assume that each Seller Unit Holder
shall enter into a guarantee of indebtedness of Parent in accordance with
Section 4.8 of the partnership agreement of Parent in an amount equal to
such Seller Unit Holder's negative tax capital account and that such
guarantee shall be effective to cause the Seller Unit Holder to bear the
"economic risk of loss" (within the meaning of Treasury Regulation
Section 1.752-2) associated with the portion of the indebtedness so
guaranteed.
(e) Consents. All consents and waivers (including,
without limitation, waivers of rights of first refusal) from third
parties necessary in connection with the consummation of the transactions
contemplated hereby (including the Merger) shall have been obtained,
other than such consents and waivers from third parties, which, if not
obtained, would not result, individually or in the aggregate, in a Parent
Material Adverse Effect, a Buyer Material Adverse Effect or a Seller
Material Adverse Effect; provided, however, that the failure to obtain
any consent or waiver in connection with any instrument, obligation or
matter set forth in the Seller Disclosure Letter shall not constitute a
failure of the condition set forth in this Section 6.3(e).
(f) Partnership Merger. All conditions set forth in
Sections 5.1(c), 5.1(d) and 5.2 of the Partnership Merger Agreement shall
have been waived or satisfied in accordance with the terms of the
Partnership Merger Agreement.
<PAGE>
<PAGE>
(g) Solvency Opinion. Seller and the Seller
Partnership shall have received an opinion, by a reputable expert firm
selected by Parent and reasonably acceptable to the Seller, in a
customary form for transactions of this type as to the solvency and
adequate capitalization of the Seller and the Seller Partnership
immediately before and of the Surviving Company and the Surviving
Operating Partnership immediately after giving effect to the
Transactions, which opinion shall be reasonably satisfactory to the
Seller.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Seller
Shareholder Approvals are obtained:
(a) by mutual written consent duly authorized by Parent
and the Board of Directors of Seller;
(b) by Parent or Buyer, upon a breach of any
representation, warranty, covenant, obligation or agreement on the part
of Seller set forth in this Agreement, in any case such that the
conditions set forth in Section 6.2(a) or Section 6.2(b), as the case may
be, are not satisfied or would be incapable of being satisfied within 30
days after the giving of written notice to Seller;
(c) by Seller, upon a breach of any representation,
warranty, covenant obligation or agreement on the part of Parent or Buyer
set forth in this Agreement, in either case such that the conditions set
forth in Section 6.3(a) or Section 6.3(b), as the case may be, are not
satisfied or would be incapable of being satisfied within 30 days after
the giving of written notice to Parent or Buyer;
(d) by Parent, Buyer or Seller, if any judgment,
injunction, order, decree or action by any Governmental Entity of
competent authority preventing the consummation of the Merger shall have
become final and nonappealable (an "Injunction");
(e) by Parent, Buyer or Seller, if the Merger shall not
have been consummated on or before December 31, 1999; provided, however,
that a party may not terminate pursuant to this clause (e) if the
terminating party shall have breached in any material respect its
representations or warranties or its obligations under this Agreement in
any manner that shall have proximately contributed to the occurrence of
the failure referred to in this clause;
(f) by either Seller (unless Seller is in breach of its
obligations under Section 5.1) or Parent or Buyer if, upon a vote at a
duly held Seller Shareholders Meeting or any adjournment thereof, Seller
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<PAGE>
Shareholder Approvals shall not have been obtained as contemplated by
Section 5.1;
(g) by Seller, prior to the Seller Shareholders
Meeting, if the Board of Directors of Seller shall have withdrawn or
modified its approval or recommendation of the Merger or this Agreement
in connection with, or approved or recommended, a Superior Acquisition
Proposal; provided, however, that no termination shall be effective
pursuant to this Section 7.1(g) under circumstances in which a Break-Up
Fee (as defined in Section 7.2(a)) is payable pursuant to Section
7.2(a)(vi), unless within 15 days after such termination, such Break-Up
Fee is paid in full by the Seller and Seller Partnership in accordance
with Section 7.2(a)(vi);
(h) by Parent or Buyer if (i) prior to the Seller
Shareholders Meeting, the Board of Directors of Seller shall have
withdrawn or modified in any manner adverse to Buyer its approval or
recommendation of the Merger or this Agreement, or approved or
recommended any Acquisition Proposal; or (ii) Seller shall have entered
into a definitive agreement with respect to any Acquisition Proposal;
(i) by Seller, if Buyer has not closed the equity
funding contemplated by the Equity Commitments and the borrowings
contemplated by the Financing Commitments (x) on or prior to the
Satisfaction Date or (y) on or prior to December 29, 1999, if (1) Parent
elects to extend the Closing Date as contemplated by Section 1.2(b), (2)
the conditions set forth in Section 6.1(b) shall have been satisfied and
(3) Seller shall have delivered a written notice to Parent and Buyer
certifying its ability to satisfy the conditions set forth in Section
6.2(g);
(j) by either Seller or Parent or Buyer, if the
stockholders of Seller adopt the Liquidation Vote; or
(k) by Parent or Buyer, if an Acquisition Proposal that
is publicly announced shall have been commenced or communicated in
writing to Seller and contains a proposal as to price and (i) Seller
shall not have rejected such proposal within ten business days after the
date of the receipt thereof by Seller or after the date of its existence
first becomes publicly announced, if sooner, or (ii) Seller shall have
failed to confirm its recommendation described in Section 2.25 within ten
business days after being requested by Buyer to do so.
7.2 Certain Fees and Expenses.
(a) If this Agreement shall be terminated:
(i) pursuant to Section 7.1(b), and the breach
by Seller was willful, then Seller and Seller Partnership will pay Parent
an aggregate amount equal to the Break-Up Fee (defined below) plus the
lesser of $10,500,000 and the Break-Up Expenses (defined below),
<PAGE>
<PAGE>
(ii) pursuant to Section 7.1(b), and the breach
by Seller was not willful, then Seller and Seller Partnership will pay
Parent an aggregate amount equal to the lesser of $15,000,000 and the
Break-Up Expenses (provided that, in the case of a termination by Buyer
pursuant to Section 7.1(b) on the basis of a breach of the representation
in Section 2.10(b), Buyer shall not be entitled to such amount),
(iii) pursuant to Section 7.1(c), and the
breach by Parent or Buyer was willful, then Parent and Buyer will pay
Seller an aggregate amount equal to the Break-Up Fee plus the lesser of
$4,500,000 and the Break-Up Expenses,
(iv) pursuant to Section 7.1(c), and the breach
by Parent or Buyer was not willful, then Parent and Buyer will pay Seller
an aggregate amount equal to the lesser of $4,500,000 and the Break-Up
Expenses,
(v) pursuant to Section 7.1(f), then Seller and
Seller Partnership will pay Parent an aggregate amount equal to the
lesser of $15,000,000 and the Break-Up Expenses,
(vi) pursuant to Section 7.1(g), 7.1(h) or
7.1(k), then Seller and Seller Partnership will pay Parent an aggregate
amount equal to the Break-Up Fee plus the lesser of $10,500,000 and the
Break-Up Expenses,
(vii) pursuant to Section 7.1(i), then Parent
and Buyer will pay Seller an aggregate amount equal to the Break-Up Fee
plus the lesser of $4,500,000 and the Break-Up Expenses,
(viii) pursuant to Section 7.1(j), then Seller
and Seller Partnership will pay Parent an aggregate amount equal to the
lesser of $10,500,000 and the Break-Up Expenses; and
(ix) pursuant to Section 7.1(d), and the
subject of the Injunction (as defined in Section 7.1(d)) is a stockholder
claim that was the subject of a bona fide settlement proposal with
respect to which Buyer withheld its consent after Seller's request for
same pursuant to Section 5.12, then Parent and Buyer will pay Seller an
aggregate amount equal to the lesser of $4,500,000 and the Break-Up
Expenses.
Notwithstanding anything in this Agreement to the contrary, the
right of a party to receive payment of the Break-Up Fee, Break-Up
Expenses or other amounts in accordance with this Section 7.2(a) shall be
the exclusive remedy of such party for the loss suffered by such party as
a result of the failure of the Merger and the Partnership Merger to be
consummated, and no party shall have any other liability to any other
party after the payment of the Break-Up Fee, Break-Up Expenses or other
amounts (as applicable). The Break-Up Fee, Break-Up Expenses or other
amounts payable by Seller and Seller Partnership in accordance with this
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<PAGE>
Section 7.2(a) shall be paid by Seller and Seller Partnership to Buyer,
in immediately available funds within fifteen (15) days after the date
the event giving rise to the obligation to make such payment occurred.
Except as provided in Section 7.2(b), the Break-Up Fee, the Break-Up
Expenses or other amounts payable by Parent and Buyer to Seller in
accordance with this Section 7.2(a) shall be paid by Parent or Buyer to
Seller, in immediately available funds within fifteen (15) days after the
day the event giving rise to the obligation to make such payment
occurred. As used in this Agreement, "Break Up Fee" shall be an amount
equal to $25,000,000; provided that if the Cash Collateral has been
increased by $25,000,000, or the Letter of Credit has been amended to
increase the amount available thereunder by $25,000,000, each as provided
in Section 4.7(b), the Break-Up Fee payable to Seller shall be an amount
equal to $50,000,000. The "Break-Up Expenses" payable to Parent or
Seller, as the case may be, shall be an amount equal to the out-of-pocket
expenses of such party (and, in the case of Parent, including Buyer and
Parent's general partners and limited partners) incurred in connection
with this Agreement and the transactions contemplated hereby (including,
without limitation, all fees and expenses payable to financing sources or
hedging counterparties, attorneys', accountants' and investment bankers'
fees and expenses). Such Break-Up Expenses shall be reflected on
invoices or other means verifying the incurrence of such Break-Up
Expenses.
(b) If this Agreement shall be terminated by Seller
and, as provided in Section 7.2(a), Parent and Buyer are required to pay
to Seller a Break-Up Fee or Break-Up Expenses, then Seller shall be
entitled to direct the Escrow Agent (i) to terminate Parent's rights to
receive any part of the Cash Collateral or (ii) if the Letter of Credit
has been delivered to the Escrow Agent in substitution for the Cash
Collateral, to draw on the Letter of Credit in accordance with the terms
thereof. Except as described in the preceding sentence, in no other
circumstances shall Seller have any right to receive any part of the Cash
Collateral or to draw on the Letter of Credit. If this Agreement is
terminated in any circumstance other than as described in the first
sentence of this Section 7.2(b), Seller shall direct the Escrow Agent to
return the Cash Collateral or Letter of Credit, as applicable, to Parent
within one business day of any such termination. Notwithstanding
anything in this Agreement to the contrary, the right of Seller to
receive amounts with respect to which Parent's rights to receive any part
of the Cash Collateral is terminated or which are drawn on the Letter of
Credit in accordance with this Section 7.2(b) shall be the exclusive
remedy of Seller, and its stockholders, the Seller Partnership and the OP
Unitholders for any and all losses suffered as a result of the failure of
the Merger and the Partnership Merger to be consummated and upon payment
of such amounts neither Parent nor Buyer shall have any other liability
to Seller hereunder (including under Section 7.2(a)). Any amounts which
Seller has the right to receive pursuant to this Section 7.2(b) shall be
applied as set forth in the Escrow Agreement.
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<PAGE>
(c) Except as specifically provided in this
Section 7.2, each party shall bear its own expenses in connection with
this Agreement and the Transactions.
7.3 Effect of Termination. In the event of termination of this
Agreement by Seller, Buyer or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Buyer, or Seller, other
than in accordance with Section 7.2, this Section 7.3 and Article 8.
7.4 Amendment. This Agreement may be amended by Parent, Buyer
and Seller in writing by action of their respective Boards of Directors
at any time before or after any Seller Shareholder Approvals are obtained
and prior to the Effective Time; provided, however, that, after the
Seller Shareholder Approvals are obtained, no such amendment,
modification or supplement shall be made which by law requires the
further approval of stockholders without obtaining such further approval.
The parties agree to amend this Agreement in the manner provided in the
immediately preceding sentence to the extent required to continue the
status of Seller as a REIT.
7.5 Extension: Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of
the obligations or other acts of any other party, (b) waive any
inaccuracies in the representations and warranties of any other party
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.4, waive compliance
with any of the agreements or conditions of any other party contained in
this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement confirming the representations and
warranties in this Agreement shall survive the Effective Time. This
Section 8.1 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be
delivered personally, sent by overnight courier (providing proof of
delivery) to the parties or sent by telecopy (providing confirmation of
transmission) at the following addresses or telecopy numbers (or at such
<PAGE>
<PAGE>
other address or telecopy number for a party as shall be specified by
like notice):
(a) if to Parent or Buyer, to:
Berkshire Realty Holdings, L.P.
One Beacon Street
Suite 1500
Boston, Massachusetts 02108
Attention: Douglas S. Krupp
Fax: (617) 423-8916
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: James M. Dubin, Esq.
Michele R. Jenkinson, Esq.
Fax: (212) 757-3990
and
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: Anthony J. Colletta, Esq.
Fax: (212) 558-3588
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Gregory J. Ressa, Esq.
Brian M. Stadler, Esq.
Fax: (212) 455-2502
(b) if to Seller, to:
Berkshire Realty Company, Inc.
One Beacon Street
Suite 1550
Boston, Massachusetts 02108
Attention: President
Fax: (617) 646-2373
<PAGE>
<PAGE>
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
and Kenneth A. Hoxsie, Esq.
Fax: (617) 526-5000
and
Baker & Hostetler LLP
1900 East Ninth Street, Suite 3200
Cleveland, Ohio 44114
Attention: Robert A. Weible, Esq.
Fax: (216) 696-0740
All notices shall be deemed given only when actually received.
8.3 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in
any way the meaning or Interpretation of this Agreement. Whenever the
words "include," "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation."
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties.
8.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the Seller Disclosure Letter, the Buyer Disclosure Letter, the
Confidentiality Agreement dated September 16, 1998 between Greenhill &
Co., LLC and Lazard on behalf of Seller, the Partnership Merger Agreement
and the other agreements entered into in connection with the Merger
(a) constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, among the parties with respect
to the subject matter of this Agreement and (b) except as provided in
Section 5.8 (the "Third Party Provision") are not intended to confer upon
any Person other than the parties hereto any rights or remedies. The
Third Party Provision may be enforced by the beneficiaries thereof or on
behalf of the beneficiaries thereof by the directors of Seller who had
been members of the Board of Directors of Seller prior to the Effective
Time.
8.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICT OF LAWS THEREOF.
<PAGE>
<PAGE>
8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or
delegated, in whole or in part, by operation of law or otherwise by any
of the parties without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
8.8 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement
were not performed by Seller in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that Parent and Buyer
shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement by Seller and to enforce specifically the terms and
provisions of this Agreement in any federal court located in Delaware or
in Chancery Court in Delaware, this being in addition to any other remedy
to which they are entitled at law or in equity. The parties acknowledge
that Seller shall not be entitled to an injunction or injunctions to
prevent breaches of this Agreement by Parent or Buyer or to enforce
specifically the terms and provisions of this Agreement and that Seller's
sole and exclusive remedy with respect to any such breach shall be the
remedy set forth in Section 7.2. In addition, each of the parties hereto
(a) consents to submit itself (without making such submission exclusive)
to the personal jurisdiction of any federal court located in Delaware or
Chancery Court located in Delaware in the event any dispute arises out of
this Agreement or any of the transactions contemplated by this Agreement
and (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court.
8.9 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, Parent, Buyer and Seller have caused this
Agreement to be signed by their respective officers thereunto duly
authorized all as of the date first written above.
BERKSHIRE REALTY HOLDINGS, L.P.,
a Delaware limited partnership
By: /s/ DOUGLAS S. KRUPP
------------------------------
Douglas S. Krupp
Authorized Signatory
BRI ACQUISITION, LLC,
a Delaware limited liability company
By: /s/ DOUGLAS S. KRUPP
------------------------------
Douglas S. Krupp
Authorized Signatory
BERKSHIRE REALTY COMPANY, INC.,
a Delaware corporation
By: /s/ DAVID F. MARSHALL
------------------------------
Name: David F. Marshall
Title: Chief Executive Officer
<PAGE>
<PAGE>
BRI OP LIMITED PARTNERSHIP,
a Delaware limited partnership
joins in this Agreement solely with
respect to Section 7.2
By: Berkshire Apartments, Inc.
By: /s/ DAVID F. MARSHALL
------------------------------
Name: David F. Marshall
Title: Chief Executive Officer
EXHIBIT 11
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EXECUTION COPY
===========================================================================
AGREEMENT AND PLAN OF MERGER
by and among
BERKSHIRE REALTY HOLDINGS, L.P.,
BRI ACQUISITION SUB, LP,
BERKSHIRE APARTMENTS, INC.
and
BRI OP LIMITED PARTNERSHIP
__________________
April 13, 1999
__________________
==============================================================================<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 The Partnership Merger . . . . . . . . . . . . . 2
Section 1.2 Closing; Effective Time . . . . . . . . . . . . . 2
Section 1.3 Certificate and Agreement of Limited
Partnership; Officers . . . . . . . . . . . . . . . . 2
Section 1.4 Conversion of Seller OP Units . . . . . . . . . . 3
Section 1.5 Conversion of Units Owned by Seller General
Partner . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.6 Parent and Seller-Owned Interests . . . . . . . . 4
Section 1.7 Conversion of Interests in Buyer Operating
Partnership . . . . . . . . . . . . . . . . . . . . . 4
Section 1.8 Cancellation and Retirement of Seller OP
Units . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.9 Interest Elections . . . . . . . . . . . . . . . 4
Section 1.10 Payment for Seller OP Units . . . . . . . . . . . 5
Section 1.11 Further Assurances . . . . . . . . . . . . . . . 6
ARTICLE 2REPRESENTATIONS AND WARRANTIESOF SELLER GENERAL PARTNER AND
THE SELLER PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.1 Organization, Standing and Power . . . . . . . . 6
Section 2.2 Authority; Noncontravention; Consents . . . . . . 7
Section 2.3 Information Supplied . . . . . . . . . . . . . . 8
ARTICLE 3REPRESENTATIONS AND WARRANTIESOF PARENT AND BUYER OPERATING
PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.1 Organization, Standing and Power . . . . . . . . 8
Section 3.2 Authority; Noncontravention; Consents. . . . . . 9
Section 3.3 Information Supplied . . . . . . . . . . . . . . 10
ARTICLE 4COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.1 Reasonable Best Efforts; Additional Actions . . . 11
Section 4.2 Notification of Certain Matters . . . . . . . . . 11
Section 4.3 Consent Solicitation Statement; Securities
Filings . . . . . . . . . . . . . . . . . . . . . . . 11
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Page
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE PARTNERSHIP MERGER . . . . . . . 12
Section 5.1 Conditions to Each Party's Obligations to
Effect the
Partnership Merger. . . . . . . . . . . . . . . 12
Section 5.2 Conditions to Seller General Partner's and
the Seller
Partnership's Obligations to Effect the Partnership
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.3 Conditions to Parent's and Buyer Operating
Partnership's
Obligations to Effect the Partnership . . . . . 14
ARTICLE 6TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.1 Termination . . . . . . . . . . . . . . . . . . . 15
Section 6.2 Procedure for and Effect of Termination . . . . . 15
ARTICLE 7MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.1 Amendment and Modification . . . . . . . . . . . 15
Section 7.2 Waiver of Compliance; Consents . . . . . . . . . 15
Section 7.3 Survival . . . . . . . . . . . . . . . . . . . . 15
Section 7.4 Notices . . . . . . . . . . . . . . . . . . . . . 15
Section 7.5 Assignment . . . . . . . . . . . . . . . . . . . 17
Section 7.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . 17
Section 7.7 Counterparts . . . . . . . . . . . . . . . . . . 17
Section 7.8 Enforcement . . . . . . . . . . . . . . . . . . . 18
Section 7.9 Interpretation . . . . . . . . . . . . . . . . . 18
Section 7.10 Entire Agreement . . . . . . . . . . . . . . . . 18
Section 7.11 No Third Party Beneficiaries . . . . . . . . . . 18
Section 7.12 Severability . . . . . . . . . . . . . . . . . . 18
Section 7.13 Tax Election . . . . . . . . . . . . . . . . . . 18
EXHIBITS
Exhibit A Partnership Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 13, 1999,
by and among BERKSHIRE REALTY HOLDINGS, L.P., a Delaware limited partnership
("Parent"), BRI ACQUISITION SUB, LP, a Delaware limited partnership ("Buyer
Operating Partnership"), BERKSHIRE APARTMENTS, INC., a Delaware corporation
("Seller General Partner"), and BRI OP LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Seller Partnership").
WHEREAS, the respective Boards of Directors (or
comparable body or entity) of Parent, BRI Acquisition, LLC ("Buyer") and
Berkshire Realty Company, Inc., a Delaware corporation (the "Seller"), have
approved the acquisition of the Seller and its assets (including, without
limitation, the Seller's direct and indirect interest in the Seller
Partnership) by Parent on the terms and subject to the conditions set forth
in the Agreement and Plan of Merger, dated as of April 13, 1999 (the "Merger
Agreement"), by and among Parent, Buyer and the Seller;
WHEREAS, it is proposed that, immediately prior to the
merger of the Buyer and Seller as contemplated by the Merger Agreement (the
"Merger"), Buyer Operating Partnership will merge with and into the Seller
Partnership (the "Partnership Merger") on the terms and subject to the
conditions of this Agreement;
WHEREAS, the Board of Directors of Seller General
Partner, in light of and subject to the terms and conditions set forth
herein, (i) approved this Agreement and (ii) resolved to recommend that the
holders of Seller OP Units adopt this Agreement and approve the Partnership
Merger;
WHEREAS, Parent, Buyer Operating Partnership, Seller
General Partner and the Seller Partnership desire to make certain
representations, warranties, covenants and agreements in connection with the
Partnership Merger and also to prescribe various conditions thereto; and
WHEREAS, capitalized terms used herein and not otherwise
defined have the respective meanings given them in the Merger Agreement.
NOW THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
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ARTICLE 1
THE MERGER
Section 1.1 The Partnership Merger. Upon the terms and
subject to the conditions of this Agreement, at the Effective Time (as
defined in Section 1.2) and in accordance with the Revised Uniform Limited
Partnership Act of the State of Delaware (the "DRULPA"), Buyer Operating
Partnership shall be merged with and into the Seller Partnership, with the
Seller Partnership as the surviving partnership in the Partnership Merger
(the "Surviving Operating Partnership"). At the Effective Time, the separate
existence of Buyer Operating Partnership shall cease and the other effects of
the Partnership Merger shall be as set forth in Section 17-211 of the DRULPA.
Section 1.2 Closing; Effective Time. Provided that the
conditions set forth in Article 5 have been satisfied (or waived by the
appropriate party), the closing of the Partnership Merger (the "Closing")
shall take place at the place of the closing of the Merger set forth in
Section 1.2(a) of the Merger Agreement, on the Closing Date immediately prior
to the closing of the Merger, or at such other place, at such other time or
on such other date as the parties hereto may mutually agree. At the Closing,
the parties hereto shall cause a certificate of merger (the "Certificate of
Merger") to be executed and filed with the Secretary of State of the State of
Delaware in accordance with the DRULPA. The Partnership Merger shall become
effective as of the date and time of such filing, or such other time within
24 hours after such filing as the parties hereto shall agree to be set forth
in the Certificate of Merger (the "Effective Time"), which, in either case,
shall be immediately prior to the effective time of the Merger. If the
closing date of the Merger has been extended as contemplated under Section
1.2(b) of the Merger Agreement, then for purposes of the conditions set forth
in Section 5.3 hereof, all references in the lettered subsections thereof to
the term "Closing Date" shall be deemed to mean the Satisfaction Date, and
the certificates and other documents to be delivered by the parties pursuant
to Section 5.3 hereof shall be delivered on and as of the Satisfaction Date.
The parties hereto agree that none of the conditions set forth in Section 5.3
shall be required to be satisfied at any time after the Satisfaction Date.
Section 1.3 Certificate and Agreement of Limited
Partnership; Officers.
(a) At the Effective Time, and without any further
action on the part of Buyer Operating Partnership or the Seller Partnership,
the agreement of limited partnership and the certificate of limited
partnership of the Seller Partnership, as in effect immediately prior to the
Effective Time, shall become, from and after the Effective Time, the
agreement of limited partnership and the certificate of limited partnership
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of the Surviving Operating Partnership, until thereafter amended as provided
therein and under applicable law.
(b) The officers of the Seller Partnership
immediately prior to the Effective Time shall become, from and after the
Effective Time, the officers of the Surviving Operating Partnership, until
their respective successors are duly elected or appointed and shall qualify
or their earlier resignation or removal.
Section 1.4 Conversion of Seller OP Units. The
Seller OP Units issued and outstanding immediately prior to the Effective
Time (other than Seller OP Units owned by Seller General Partner, which shall
be treated as set forth in Section 1.5, and other than Seller OP Units to be
canceled in accordance with Section 1.6) shall, at the Effective Time, be
converted into the following (the consideration set forth in clauses (a), (b)
and (c) below being collectively referred to as the "Merger Consideration"):
(a) for each Seller OP Unit with respect
to which an election to receive a Class A Preferred Unit (as defined
below) has been effectively made pursuant to Section 1.9 and not
revoked or lost ("Class A Electing Units"), the right to receive one
fully paid and nonassessable "Class A Preferred Unit" (each, a
"Class A Preferred Unit") as defined in the partnership agreement of
Parent attached hereto as Exhibit A (the "Partnership Agreement");
(b) for each Seller OP Unit with respect
to which an election to receive a Class B Unit (as defined below) has
been effectively made pursuant to Section 1.9 and not revoked or lost
("Class B Electing Units"), the right to receive one fully paid and
nonassessable "Class B Unit" as defined in the Partnership Agreement
(each, a "Class B Unit"); and
(c) for each Seller OP Unit, other than
Class A Electing Units and Class B Electing Units, the right to
receive in cash, without interest, an amount equal to the Common
Merger Consideration (the "Cash Election Price").
Notwithstanding the foregoing, if between the date of
this Agreement and the Effective Time the outstanding Seller OP Units,
Class A Preferred Units (if any) or Class B Units (if any) shall have been
changed into a different number of units or a different class by reason of
any distribution, dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of Seller OP Units, Class A Preferred Units
(if any) or Class B Units (if any), the Merger Consideration shall be
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correspondingly adjusted to reflect such distribution, dividend, subdivision,
reclassification, recapitalization, split, combination or exchange.
Section 1.5 Conversion of Units Owned by Seller General
Partner. The Seller OP Units that are owned by Seller General Partner
immediately prior to the Effective Time (collectively, the "Seller GP
Interest") shall, at the Effective Time, by virtue of the Partnership Merger
and without any action on the part of Seller General Partner, be converted
into a 1% general partnership interest in the Surviving Operating
Partnership.
Section 1.6 Parent and Seller-Owned Interests. Each
Seller OP Unit that is owned by Parent or the Seller immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the Partnership
Merger and without any action on the part of Parent or the Seller,
automatically be canceled and retired and cease to exist, and no
consideration shall be delivered in exchange therefor.
Section 1.7 Conversion of Interests in Buyer Operating
Partnership. The aggregate limited partnership interests in Buyer
Operating Partnership issued and outstanding immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the Partnership
Merger and without any action on the part of Parent, be converted into a 99%
limited partnership interest in the Surviving Operating Partnership. The
aggregate general partnership interests in Buyer Operating Partnership issued
and outstanding immediately prior to the Effective Time shall, at the
Effective Time, by virtue of the Partnership Merger and without any action on
the part of Buyer, automatically be canceled and retired and cease to exist,
and no consideration shall be delivered in exchange therefor.
Section 1.8 Cancellation and Retirement of Seller OP
Units. Each Seller OP Unit converted into the right to receive the Merger
Consideration pursuant to Section 1.4 shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a Seller OP Unit shall cease to have any rights with respect
thereto, except for the right to receive the Merger Consideration, if any,
applicable thereto.
Section 1.9 Interest Elections.
(a) Subject to Section 1.9(e), each holder of a
Seller OP Unit shall be entitled, with respect to all, but not less than all,
of such holder's Seller OP Units, to make an unconditional election, on or
prior to the Election Date (as defined in Section 1.9(b)), to receive
(i) Class A Preferred Units or Class B Units (a "Non-Cash Election") or
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(ii) the Cash Election Price (a "Cash Election"), on the basis hereinafter
set forth.
(b) Buyer Operating Partnership shall prepare,
and the Seller Partnership shall mail pursuant to Section 4.3(a), a form of
election, which form shall be subject to the reasonable approval of Seller
General Partner (the "Form of Election"). The Form of Election shall be used
by each holder of a Seller OP Unit to designate such holder's election to
exchange all, but not less than all, of the Seller OP Units held by such
holder into either Class A Preferred Units, Class B Units or the Cash
Election Price. Any such holder's election to receive Class A Preferred
Units, Class B Units or the Cash Election Price shall be deemed to have been
properly made only if Parent shall have received at its principal executive
office, not later than 5:00 p.m., New York City time on the date that is five
business days before the scheduled date of the Seller Shareholders Meeting
(the "Election Date"), a Form of Election specifying whether such holder
elects to receive Class A Preferred Units, Class B Units or the Cash
Election Price and otherwise properly completed and signed. The Form of
Election shall state therein the date that constitutes the Election Date.
(c) A Form of Election may be revoked by any
holder of a Seller OP Unit only by written notice received by Parent prior to
5:00 p.m., New York City time, on the Election Date. In addition, all Forms
of Election shall automatically be revoked if the Partnership Merger has been
abandoned.
(d) The reasonable determination of Parent
shall be binding as to whether or not elections to receive Class A Preferred
Units, Class B Units or the Cash Election Price have been properly made or
revoked pursuant to this Section 1.9 and when elections and revocations were
received by it. If Parent determines that any election to receive Class A
Preferred Units, Class B Units or the Cash Election Price was not properly
made, the Seller OP Units with respect to which such election was not
properly made shall be treated by Parent as Seller OP Units for which a Cash
Election was made, and such Seller OP Units shall be converted in accordance
with Section 1.4(c). Parent may, with the agreement of Seller General
Partner, make such rules as are consistent with this Section 1.9 for the
implementation of the elections provided for herein as shall be necessary or
desirable fully to effect such elections.
(e) Parent reserves the right to require any
holder of Seller OP Units, as a condition to making a Non-Cash Election with
respect to such holder's Seller OP Units, to (i) represent to Parent that
such holder is an "Accredited Investor" (as such term is defined under Rule
501 promulgated under the Securities Act) and (ii) agree to abide by the
terms of the Partnership Agreement and to become a party thereto.
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Section 1.10 Payment for Seller OP Units.
(a) Payment. Promptly after the Effective
Time, Parent shall pay the Merger Consideration to which holders of Seller OP
Units shall be entitled at the Effective Time pursuant to Section 1.4(c).
Parent shall be entitled to deduct and withhold, from the consideration
otherwise payable pursuant to Section 1.4(c) to any former holder of
Seller OP Units, such amounts as Parent is required to deduct and withhold
with respect to the making of such payment under the Code or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld
by Parent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the former holder of Seller OP Units in
respect of which such deduction and withholding was made by Parent.
(b) No Further Ownership Rights in Seller OP
Units. The Merger Consideration delivered in accordance with the terms of
Article 1 shall be deemed to have been issued (or paid, as applicable) in
full satisfaction of all rights pertaining to the Seller OP Units.
Section 1.11 Further Assurances. If, at any time after
the Effective Time, the Surviving Operating Partnership shall determine or be
advised that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in the Surviving Operating Partnership the right, title
or interest in, to or under any of the rights, properties or assets of the
Seller Partnership acquired or to be acquired by the Surviving Operating
Partnership as a result of, or in connection with, the Partnership Merger or
otherwise to carry out this Agreement, the Surviving Operating Partnership
shall be authorized to execute and deliver, in the name and on behalf of each
of Buyer Operating Partnership and the Seller Partnership or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in
the name and on behalf of each of Buyer Operating Partnership and the Seller
Partnership or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the
Surviving Operating Partnership or otherwise to carry out this Agreement.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLER GENERAL PARTNER AND THE SELLER PARTNERSHIP
Each of Seller General Partner and the Seller Partnership
represents and warrants to Parent and Buyer Operating Partnership as follows:
Section 2.1 Organization, Standing and Power. Each of
Seller General Partner and Seller Partnership is duly organized and validly
existing under the Laws of Delaware. Each of Seller General Partner and
Seller Partnership has the requisite corporate or limited partnership power
and authority to carry on its business as now being conducted. Each of Seller
General Partner and Seller Partnership is duly qualified or licensed to do
business as a foreign corporation or limited partnership and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
Seller Material Adverse Effect. Each of Seller General Partner and Seller
Partnership has delivered to Parent complete and correct copies of its
Certificate of Incorporation and By-laws or similar organizational documents,
in each case, as amended to the date of this Agreement.
Section 2.2 Authority; Noncontravention; Consents.
(a) Each of Seller General Partner and Seller
Partnership has the requisite corporate or limited partnership power and
authority to enter into this Agreement and, subject to the Seller Partner
Approval, to consummate the transactions contemplated by this Agreement to
which it is a party. The execution and delivery of this Agreement by Seller
General Partner and Seller Partnership and the consummation by Seller General
Partner and Seller Partnership of the transactions contemplated by this
Agreement to which Seller General Partner and/or Seller Partnership is a
party have been duly authorized by all necessary corporate or limited
partnership action on the part of Seller General Partner and Seller
Partnership, except for and subject to the Seller Partner Approval. This
Agreement has been duly executed and delivered by Seller General Partner and
Seller Partnership and constitutes a valid and binding obligation of each of
Seller General Partner and Seller Partnership, enforceable against each of
Seller General Partner and Seller Partnership in accordance with and subject
to its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar Laws relating to creditors' rights and general principles of
equity.
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(b) The execution and delivery of this
Agreement by each of Seller General Partner and Seller Partnership does not,
and the consummation of the transactions contemplated by this Agreement to
which it is a party and compliance by it with the provisions of this
Agreement will not, require any consent, approval or notice under, or
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Seller General Partner, Seller Partnership or any of
their Subsidiaries under, (i) the Certificate of Incorporation or the By-laws
or the comparable certificate of incorporation or organizational documents or
partnership or similar agreement (as the case may be) of Seller General
Partner, Seller Partnership or any of their Subsidiaries, each as amended or
supplemented to the date hereof, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, reciprocal easement agreement, lease, joint
venture agreement, development agreement, benefit plan or other agreement,
instrument, permit, concession, franchise or license applicable to Seller
General Partner, Seller Partnership or any of their Subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation (collectively, "Laws")
applicable to Seller General Partner, Seller Partnership or any of their
Subsidiaries, or their respective properties or assets, other than, in the
case of clause (ii) (other than such items relating to the incurrence of
indebtedness) or (iii), any such conflicts, violations, defaults, rights,
loss or Liens that individually or in the aggregate would not reasonably be
expected to (x) have a Seller Material Adverse Effect or (y) prevent or delay
beyond December 31, 1999 the consummation of the transactions contemplated by
this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to Seller General Partner, Seller
Partnership or any of their Subsidiaries in connection with the execution and
delivery of this Agreement or the consummation by Seller General Partner or
Seller Partnership of the transactions contemplated by this Agreement, except
for (i) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, (ii) any filings required under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iii)
the filing of a Form D with the SEC and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations and filings (A) as are
set forth in Schedule 2.5 to the Seller Disclosure Letter, (B) as may be
required under (y) federal, state or local environmental Laws or (z) the
"blue sky" laws of various states, to the extent applicable or (C) which, if
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not obtained or made, would not prevent or delay beyond December 31, 1999 the
consummation of any of the transactions contemplated by this Agreement or
otherwise prevent or delay beyond December 31, 1999 Seller from performing
its obligations under this Agreement in any material respect or have,
individually or in the aggregate, a Seller Material Adverse Effect.
Section 2.3 Information Supplied. None of the
information supplied by Seller General Partner or the Seller Partnership for
inclusion or incorporation by reference in the Consent Solicitation Statement
(as defined in Section 4.3) or the other Solicitation Documents (as defined
Section 4.3) shall, at the time the Solicitation Documents are mailed to the
holders of Seller OP Units and at the Closing Date, contain any untrue
statement of material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND BUYER OPERATING PARTNERSHIP
Each of Parent and Buyer Operating Partnership represents
and warrants to Seller General Partner and the Seller Partnership as follows:
Section 3.1 Organization, Standing and Power.
(a) Parent is a limited partnership duly
organized and validly existing under the Laws of Delaware and has the
requisite power and authority to carry on its business as now being
conducted. Parent is duly qualified or licensed to do business as a foreign
limited partnership and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed, individually or in the
aggregate, would not have a material adverse effect on the ability of Parent
to consummate the transactions contemplated by this Agreement. Parent has
delivered to Seller complete and correct copies of its organizational
documents as amended or supplemented to the date of this Agreement. Attached
hereto as Exhibit A is a complete and correct copy of the Partnership
Agreement. The Partnership Agreement has not been amended subsequent to the
date hereof, except for such amendments as are permitted under Section 4.3(c)
of the Merger Agreement.
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(b) Buyer Operating Partnership is a limited
partnership duly organized and validly existing under the Laws of Delaware
and has the requisite power and authority to carry on its business as now
being conducted. Buyer Operating Partnership is duly qualified or licensed
to do business as a foreign limited partnership and is in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualifications or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed, individually or in the aggregate, would not have a material adverse
effect on the ability of Buyer Operating Partnership to consummate the
transactions contemplated by this Agreement. Buyer Operating Partnership has
delivered to Seller complete and correct copies of its organizational
documents as amended or supplemented to the date of this Agreement.
(c) Parent and Buyer Operating Partnership are
newly formed and, except for activities incident to the acquisition of Seller
Partnership, neither Parent nor Buyer Operating Partnership has (i) engaged
in any business activities of any type or kind whatsoever or (ii) acquired
any property of any type or kind whatsoever.
Section 3.2 Authority; Noncontravention; Consents.
(a) Each of Parent and Buyer Operating
Partnership has the requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated by this Agreement
to which it is a party. The execution and delivery of this Agreement by
Parent and Buyer Operating Partnership and the consummation by Parent and
Buyer Operating Partnership of the transactions contemplated by this
Agreement to which Parent and/or Buyer Operating Partnership is a party have
been duly authorized by all necessary partnership action on the part of
Parent and Buyer Operating Partnership (including, without limitation, the
issuance of the Class A Preferred Units and the Class B Units in the
Partnership Merger). This Agreement has been duly executed and delivered by
Parent and Buyer Operating Partnership and constitutes a valid and binding
obligation of each of Parent and Buyer Operating Partnership, enforceable
against each of Parent and Buyer Operating Partnership in accordance with and
subject to its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar Laws relating to creditors' rights and general
principles of equity.
(b) The execution and delivery of this
Agreement by each of Parent and Buyer Operating Partnership does not, and the
consummation of the transactions contemplated by this Agreement to which
Parent and/or Buyer is a party and compliance by each of Parent and Buyer
Operating Partnership with the provisions of this Agreement will not,
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conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to
loss of a material benefit under, or result in the creation of any Lien upon
any of the properties or assets of Parent or any of its Subsidiaries under,
(i) the organizational documents of Parent (including the Partnership
Agreement) or Buyer Operating Partnership or the comparable certificate of
incorporation or organizational documents or partnership or similar agreement
(as the case may be) of any other Subsidiary of the Parent, each as amended
or supplemented to the date of this Agreement, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement agreement,
lease or other agreement, instrument, permit, concession, franchise or
license applicable to Parent or any of its Subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any Laws applicable to Parent
or any of its Subsidiaries or their respective properties or assets, other
than, in the case of clause (ii) or (iii), any such conflicts, violations,
defaults, rights, loss or Liens that individually or in the aggregate would
not reasonably be expected to (x) have a Parent Material Adverse Effect or
(y) prevent the consummation of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Parent or any of its Subsidiaries in connection with the execution
and delivery of this Agreement by Parent or Buyer Operating Partnership or
the consummation by Parent or Buyer Operating Partnership of any of the
transactions contemplated by this Agreement, except for (i) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware,
(ii) such filings as may be required in connection with the payment of any
Transfer Taxes, (iii) any filings required under the HSR Act, (iv) the filing
of a Form D with the SEC and (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings (A) as may be
required under federal, state or local environmental Laws, (B) the "blue sky"
laws of various states, to the extent applicable, or (C) which, if not
obtained or made, would not prevent or delay beyond December 31, 1999 the
consummation of any of the transactions contemplated by this Agreement or
otherwise prevent Parent or Buyer Operating Partnership from performing its
obligations under this Agreement in any material respect or have,
individually or in the aggregate, a Parent Material Adverse Effect.
Section 3.3 Information Supplied. None of the
information supplied by Parent or Buyer Operating Partnership for inclusion
or incorporation by reference in the Consent Solicitation Statement or the
other Solicitation Documents shall, at the time the Solicitation Documents
are mailed to the holders of Seller OP Units and at the Closing Date, contain
any untrue statement of material fact or omit to state any material fact
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necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE 4
COVENANTS
Section 4.1 Reasonable Best Efforts; Additional
Actions. Upon the terms and subject to the conditions of this Agreement,
each of the parties hereto shall use all reasonable best efforts to take, or
cause to be taken, all actions, and to do or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by, and in connection with, this Agreement. In
connection with and without limiting the foregoing, Seller General Partner
shall take all necessary action to obtain the requisite consent of the
holders of Seller OP Units to adopt this Agreement and approve the
Partnership Merger prior to the closing of the Merger.
Section 4.2 Notification of Certain Matters. Each of
Seller General Partner and the Seller Partnership shall give notice to Parent
and Buyer Operating Partnership, and each of Parent and Buyer Operating
Partnership shall give notice to Seller General Partner and the Seller
Partnership, promptly upon becoming aware of (a) any occurrence, or failure
to occur, of any event, which occurrence or failure to occur has caused or
would reasonably be expected to cause any representation or warranty that is
qualified as to materiality in this Agreement to be untrue or inaccurate or
any representation or warranty that is not so qualified to be untrue or
inaccurate in any material respect at any time after the date hereof and
prior to the Closing Date and (b) any material failure on its part to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided that the delivery of any notice pursuant
to this Section 4.2 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 4.3 Consent Solicitation Statement; Securities
Filings.
(a) Seller Partnership and Parent shall jointly
and promptly prepare a Consent Solicitation Statement soliciting the written
consent of the holders of Seller OP Units to the adoption of this Agreement
and the approval of the Partnership Merger (the "Consent Solicitation
Statement"), which Consent Solicitation Statement shall contain a description
of the terms of the Class A Preferred Units and the Class B Units and the
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recommendation of Seller General Partner's Board of Directors that the
holders of Seller OP Units consent to the adoption of this Agreement and the
approval of the Partnership Merger. The Consent Solicitation Statement shall
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations thereunder applicable to an
offering of securities exempt from registration under the Securities Act
pursuant to Rule 506 thereunder. As soon as practicable following the mailing
of the Proxy Statement in connection with the Merger, Seller Partnership
shall mail the Consent Solicitation Statement, together with a form of
written consent, a Form of Election and any other documents relating thereto
(collectively, the "Solicitation Documents"), to the holders of Seller OP
Units. Seller Partnership and Parent shall consult and cooperate with each
other in the preparation of the Solicitation Documents. All mailings to the
holders of Seller OP Units in connection with the Partnership Merger,
including the Solicitation Documents, shall be subject to the prior review,
comment and approval of Parent (such approval not to be unreasonably withheld
or delayed). Parent shall take all actions required to be taken under any
applicable federal and state securities laws in connection with the issuance
of the Class A Preferred Units and the Class B Units in the Partnership
Merger pursuant to this Agreement, including but not limited to the filing
with the SEC of a "Notice of Sale of Securities Pursuant to Regulation D" on
Form D.
(b) Parent, on the one hand, and Seller
Partnership, on the other hand, shall each advise the other promptly if,
prior to the Closing Date, it obtains knowledge of any facts that would make
it necessary to amend any of the Solicitation Documents in order to render
the statements therein not false or misleading or to comply with applicable
law. Seller Partnership and Parent shall promptly amend or supplement any
information in such documents if and to the extent that such information has
become false or misleading, and Seller Partnership shall take all steps
necessary to disseminate the amended documents or supplements to the holders
of Seller OP Units, in each case, as and to the extent required by applicable
law.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE PARTNERSHIP MERGER
Section 5.1 Conditions to Each Party's Obligations to
Effect the Partnership Merger. The respective obligations of each party
hereto to effect the Partnership Merger is subject to the satisfaction on or
prior to the Closing Date of each of the following conditions, any and all of
which may be waived in whole or in part by the parties hereto with respect to
such party's conditions, to the extent permitted by applicable law:
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(a) Conditions to the Merger. All of the
conditions to the closing of the Merger shall have been satisfied or waived
in accordance with the terms of the Merger Agreement (other than those set
forth in Section 6.2(h), 6.2(i) or 6.3(f) of the Merger Agreement).
(b) Unitholders' Consent. The requisite
consent of the holders of the Seller OP Units to adopt this Agreement and
approve the Partnership Merger shall have been obtained; and
(c) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Partnership Merger or any of
the other transactions contemplated hereby shall be in effect.
(d) HSR Act. All applicable waiting periods
(and any extensions thereof) under the HSR Act shall have expired or
otherwise been terminated.
Section 5.2 Conditions to Seller General Partner's and
the Seller Partnership's Obligations to Effect the Partnership Merger. The
obligation of Seller General Partner and the Seller Partnership to effect the
Partnership Merger is also subject to the satisfaction (or waiver by Seller
General Partner and the Seller Partnership) on or prior to the Closing Date
of each of the following additional conditions:
(a) Accuracy of Representations and Warranties.
All representations and warranties made by each of Parent and Buyer Operating
Partnership herein shall be true and correct in all material respects (except
for representations having a materiality, Parent Material Adverse Effect or
Buyer Material Adverse Effect qualification, which shall be true and correct
in all respects) as of the date of the Agreement and as of the Closing Date
with the same force and effect as though such representations and warranties
had been made on and as of the Closing Date, except for representations and
warranties that are made as of a specified date or time, which shall be true
and correct in all material respects (except for representations having a
materiality, Parent Material Adverse Effect or Buyer Material Adverse Effect
qualification, which shall be true and correct in all respects) only as of
such specific date or time.
(b) Compliance with Covenants. Each of Parent
and Buyer Operating Partnership shall have performed in all material respects
all obligations and agreements, and complied in all material respects with
covenants, contained in this Agreement to be performed or complied with by it
prior to or as of the Closing Date.
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(c) Officer's Certificate. Seller General
Partner and the Seller Partnership shall have received a certificate of
Parent, dated as of the Closing Date, signed by an executive officer of
Parent to evidence satisfaction of the conditions set forth in
Sections 5.2(a) and (b).
Section 5.3 Conditions to Parent's and Buyer Operating
Partnership's Obligations to Effect the Partnership. The obligation of
Parent and Buyer Operating Partnership to effect the Partnership Merger is
also subject to the satisfaction (or waiver by Parent and Buyer Operating
Partnership) at or prior to the Closing Date of each of the following
additional conditions:
(a) Accuracy of Representations and Warranties.
All representations and warranties made by each of Seller General Partner and
the Seller Partnership herein shall be true and correct in all material
respects (except for representations having a materiality or Seller Material
Adverse Effect qualification, all of which shall be true and correct in all
respects) as of the date of this Agreement and as of the Closing Date, with
the same force and effect as though such representations and warranties had
been made on and as of the Closing Date, except for representations and
warranties that are made as of a specified date or time, which shall be true
and correct in all material respects (except for representations having a
materiality or Seller Material Adverse Effect qualification, which shall be
correct in all respects) only as of such specific date or time.
(b) Compliance with Covenants. Each of Seller
General Partner and the Seller Partnership shall have performed in all
material respects all obligations and agreements, and complied in all
material respects with covenants, contained in this Agreement to be performed
or complied with by it prior to or as of the Closing Date.
(c) Officer's Certificate. Parent and Buyer
Operating Partnership shall have received a certificate of Seller General
Partner, dated as of the Closing Date, signed by an executive officer of
Seller General Partner to evidence satisfaction of the conditions set forth
in Sections 5.3(a) and (b).
Notwithstanding anything to the contrary in this
Agreement, none of the initiation, threat or existence of any legal action of
any kind with respect to this Agreement or the Merger Agreement or any
transaction contemplated hereby or thereby, including without limitation any
action initiated, threatened or maintained by any stockholder of the Seller
or any holders of Seller OP Units, whether alleging rights with respect to
Dissenting Shares, claims under any Federal or state securities law, contract
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or tort claims, for breach of fiduciary duty or otherwise, will constitute a
failure of the conditions set forth in Sections 5.2(a), 5.2(b), 5.3(a) or
5.3(b) (and no such action shall cause an executive officer of Seller General
Partner or of Parent to be unable to deliver a certificate attesting to
compliance with such conditions) unless that action has resulted in the
granting of injunctive relief that prevents the consummation of the
Partnership Merger and the other transaction contemplated hereby or thereby,
and such injunctive relief has not been dissolved or vacated.
ARTICLE 6
TERMINATION
Section 6.1 Termination. This Agreement shall
terminate, without any further action on the part of the parties hereto, upon
the termination of the Merger Agreement in accordance with its terms. This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time prior to the Closing Date by the mutual written consent
of the parties hereto.
Section 6.2 Procedure for and Effect of Termination.
If this Agreement is terminated as provided herein, no party hereto shall
have any liability or further obligation to any other party under the terms
of this Agreement.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Amendment and Modification. Subject to
applicable law, this Agreement may be amended, modified or supplemented only
by a written agreement signed by each of the parties hereto at any time prior
to the Closing Date with respect to any of the terms contained herein;
provided, however, that after this Agreement is adopted by the holders of
Seller OP Units, no such amendment shall be made which requires the approval
of such holders.
Section 7.2 Waiver of Compliance; Consents. Any
failure of Parent or Buyer Operating Partnership, on the one hand, or Seller
General Partner or the Seller Partnership, on the other hand, to comply with
any obligation, covenant, agreement or condition herein may, subject to
Section 7.1, be waived by Parent and Buyer Operating Partnership or Seller
General Partner and the Seller Partnership, respectively, only by a written
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instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 7.2 and in Section 7.1.
Section 7.3 Survival. The respective representations
and warranties of Parent and Buyer Operating Partnership and Seller General
Partner and the Seller Partnership contained herein shall not survive the
Closing hereunder.
Section 7.4 Notices. All notices, requests, claims,
demands and other communications under this Agreement shall be in writing and
shall be delivered personally, sent by overnight courier (providing proof of
delivery) to the parties or sent by telecopy (providing confirmation of
transmission) at the following addresses or telecopy numbers (or at such
other address or telecopy number for a party as shall be specified by like
notice):
(a) if to Parent or Buyer Operating
Partnership, to:
Berkshire Realty Holdings, L.P.
One Beacon Street
Suite 1500
Boston, Massachusetts 02108
Attention: Douglas S. Krupp
Telecopier: (617) 423-8916
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: James M. Dubin, Esq.
Michele R. Jenkinson, Esq.
Telecopier: (212) 757-3990
and
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Sullivan & Cromwell
125 Broad Street
New York, NY 10004-2498
Attention: Anthony J. Colletta, Esq.
Telecopier: (212) 558-3588
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Gregory J. Ressa, Esq.
Brian M. Stadler, Esq.
Telecopier: (212) 455-2502
(b) if to Seller General Partner or the Seller
Partnership, to:
Berkshire Realty Company, Inc.
One Beacon Street
Suite 1550
Boston, Massachusetts 02108
Attention: President
Telecopier: (617) 646-2373
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
Kenneth A. Hoxsie, Esq.
Telecopier: (617) 526-5000
and
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Baker & Hostetler LLP
1900 East Ninth Street, Suite 3200
Cleveland, Ohio 44114
Attention: Robert A. Weible, Esq.
Telecopier: (216) 696-0740
All notices shall be deemed given only when actually received.
Section 7.5 Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties.
Section 7.6 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICT OF LAWS THEREOF.
Section 7.7 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Section 7.8 Enforcement. The parties agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed by Seller General Partner and Seller
Partnership in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that Parent and Buyer Operating
Partnership shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement by Seller General Partner and Seller Partnership
and to enforce specifically the terms and provisions of this Agreement in any
federal court located in Delaware or in Chancery Court in Delaware, this
being in addition to any other remedy to which they are entitled at law or in
equity. The parties acknowledge that Seller General Partner and Seller
Partnership shall not be entitled to an injunction or injunctions to prevent
breaches of this Agreement by Parent or Buyer Operating Partnership or to
enforce specifically the terms and provisions of this Agreement and that
Seller General Partner's and Seller Partnership's sole and exclusive remedy
with respect to any such breach shall be the remedy set forth in Section 7.2
of the Merger Agreement. In addition, each of the parties hereto (a)
consents to submit itself (without making such submission exclusive) to the
personal jurisdiction of any federal court located in Delaware or Chancery
Court located in Delaware in the event any dispute arises out of this
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Agreement or any of the transactions contemplated by this Agreement and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court.
Section 7.9 Interpretation. The article and
Section headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not in any
way affect the meaning or interpretation of this Agreement.
Section 7.10 Entire Agreement. The Merger Agreement
(including the schedules, exhibits, documents or instruments referred to
herein) and this Agreement together embody the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof
and thereof and supersede all prior agreements and understandings, both
written and oral, among the parties, or between any of them, with respect to
the subject matter hereof and thereof.
Section 7.11 No Third Party Beneficiaries. This
Agreement is not intended to, and does not, create any rights or benefits of
any party other than the parties hereto.
Section 7.12 Severability. In the event that any one or
more of the provisions contained in this Agreement or in any other instrument
referred to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
instrument.
Section 7.13 Tax Election. The parties hereby agree
that an election pursuant to Section 754 of the Internal Revenue Code shall
be made for the Seller Partnership and each partnership which is a subsidiary
of the Seller Partnership (or shall be in effect) with respect to any
transfers of interests in the Seller Partnership pursuant to the Merger and
the Partnership Merger.
[Signatures appear on next page]
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IN WITNESS WHEREOF, the Parent, Buyer Operating Partnership,
Seller General Partner and the Seller Partnership have caused this Agreement
and Plan of Merger to be signed by a person duly authorized to do so as of
the date first above written.
BERKSHIRE REALTY HOLDINGS, L.P.
By: /s/ DOUGLAS KRUPP
-------------------------
Name: Douglas Krupp
Title: Authorized Signatory
BRI ACQUISITION SUB, LP
By: /s/ DOUGLAS KRUPP
-----------------------
Name: Douglas Krupp
Title: Authorized Signatory
BERKSHIRE APARTMENTS, INC.
By: /s/ DAVID F. MARSHALL
------------------------
Name: David F. Marshall
Title: Chief Executive Officer
BRI OP LIMITED PARTNERSHIP
By: BERKSHIRE APARTMENTS, INC., its
general partner
By: /s/ DAVID F. MARSHALL
----------------------
Name: David F. Marshall
Title: Chief Executive
Officer
EXHIBIT 12
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ESCROW AGREEMENT
This Escrow Agreement is made and entered into as of April 13,
1999, by and among BRI OP Limited Partnership, a Delaware limited partnership
(the "Partnership"), Berkshire Realty Company, Inc., a Delaware corporation
("BRI"), Berkshire Realty Holdings, L.P., a Delaware limited partnership
("Parent"), and American Stock Transfer and Trust Company, a New York
corporation, as escrow agent (the "Escrow Agent"). BRI, the Partnership,
Parent and the Escrow Agent are referred to individually herein as a "Party"
and are referred to together herein as the "Parties."
WITNESSETH:
WHEREAS, BRI, BRI Acquisition, L.L.C., a Delaware limited liability
company (the "Buyer") whose sole member is Parent, and Parent have entered
into an Agreement and Plan of Merger dated of even date herewith (the "Merger
Agreement"); and
WHEREAS, the Partnership, Parent and BRI Acquisition Sub, LP have
entered into an Agreement and Plan of Merger of even date herewith (the
"Partnership Merger Agreement"); and
WHEREAS, pursuant to the Merger Agreement, Buyer will be merged
with BRI; and
WHEREAS, pursuant to the Partnership Merger Agreement, BRI
Acquisition Sub, LP, a Delaware limited partnership, will be merged with the
Partnership; and
WHEREAS, Section 4.7 of the Merger Agreement requires the Buyer to
provide cash in the amount of $29,500,000, which amount may be increased to
$54,500,000 as provided in said Section 4.7 (the "Cash Collateral") for the
benefit of the Escrow Agent on behalf of the Partnership, the holders of
common stock of BRI ("Common Stock") and the holders of units of limited
partnership in the Partnership other than BRI (the "Units") (the Partnership,
the holders of Common Stock and such holders of Units, collectively being
sometimes referred to as the "Beneficiaries"); and
WHEREAS, Section 4.7 of the Merger Agreement provides that the
Buyer, at its election, may provide a letter of credit substantially in the
form of Attachment A, which letter of credit may be amended as provided in
said Section 4.7 to increase the amount available thereunder to $54,500,000
(the "Letter of Credit"), with such changes as shall be reasonably
satisfactory to Seller and from a bank satisfactory to Seller, in
substitution of the Cash Collateral; and
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WHEREAS, BRI conducts substantially all of its operations through
the Partnership; and
WHEREAS, Section 7.2(b) of the Merger Agreement provides for the
payment of a Break-Up Fee and/or Break-Up Expenses as liquidated damages in
certain circumstances, which obligation is secured by the Cash Collateral or
Letter of Credit, as applicable; and
WHEREAS, Parent, BRI and the Partnership wish to appoint the Escrow
Agent as escrow agent for such escrow account and to hold and draw upon the
Letter of Credit, and the Escrow Agent wishes to accept such appointment,
upon the terms and conditions set forth below.
NOW, THEREFORE, the Parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and
not otherwise defined shall have the meanings given them in the Merger
Agreement.
2. Cash Collateral. The Cash Collateral shall be held by the
Escrow Agent in a segregated trust account designated as the "BRI Cash
Collateral Account" or in an account having a similar designation. The Cash
Collateral shall be invested in accordance with Section 6 hereof pursuant to
the written instruction of BRI on behalf of the Beneficiaries. The Escrow
Agent agrees to accept delivery of the Cash Collateral and to hold such Cash
Collateral subject to the terms and conditions of this Agreement.
3. Escrow Fund. Promptly upon receipt from BRI of a certificate
(the "Draw Certificate") certifying that a payment of the Break-Up Fee and/or
the Break-Up Expenses is owing pursuant to Section 7.2(b) of the Merger
Agreement and the amount thereof, the Escrow Agent shall (i) if the Letter of
Credit has been substituted for the Cash Collateral, draw the amount of the
Letter of Credit specified by BRI in the Draw Certificate, and at the
direction and expense of BRI, take all actions necessary to collect such
amount, employing such counsel in connection therewith as BRI may direct; or
(ii) if the Letter of Credit has not been substituted for the Cash
Collateral, segregate a portion of the Cash Collateral equal to the amount
specified by BRI in the Draw Certificate (with any balance of the Cash
Collateral being subject to Section 5(a) hereof), which segregation shall
terminate any right of Parent to the return of such portion of the Cash
Collateral. The portion of the Cash Collateral so segregated and/or any
amounts drawn under the Letter of Credit, are referred to herein as the
"Escrow Fund" and shall be held by the Escrow Agent in a segregated trust
account designated as "BRI Escrow Account" or in an account having such other
similar designation. The Escrow Fund shall be invested in accordance with
Section 6 hereof pursuant to the written instructions of BRI on behalf of the
Beneficiaries. The Escrow Agent agrees to accept delivery of the Escrow Fund
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and to hold such Escrow Fund in escrow subject to the terms and conditions of
this Agreement.
4. Release of Escrow Fund. With respect to each taxable year of
BRI (for federal income tax purposes) in which the undistributed Escrow Fund
is a positive number, all or a portion of the undistributed Escrow Fund shall
be distributable to the Beneficiaries in accordance with Sections 4(a) and
(b), below. The amounts to be distributed to each Beneficiary with respect
to any taxable year shall be calculated by BRI (after consultation with BRI's
independent accountants (the "Accountants")) as soon as practicable after the
end of BRI's taxable year (or such later time as BRI shall determine in its
sole discretion if litigation with regard to the Beneficiaries' right to
liquidated damages pursuant to the Merger Agreement has commenced or been
threatened) based upon the facts in existence as of the end of such taxable
year. Following such calculations, BRI shall promptly notify the Escrow
Agent by delivery of a certificate (the "Disbursement Certificate") of the
amounts, if any, to be distributed to each Beneficiary together with the full
name and address of the Beneficiary. Promptly after receipt of a
Disbursement Certificate for a taxable year of BRI, the Escrow Agent shall
distribute all or a portion of the undistributed Escrow Fund in the amounts
and to the recipients specified in the Disbursement Certificate. Any
Disbursement Certificate shall direct the Escrow Agent to disburse the
undistributed Escrow Fund only as follows:
(a) First, to the Partnership in an amount equal to the sum
of (i) any portion of the undistributed Escrow Fund that is determined
pursuant to a Break-Up Fee Tax Opinion (as defined below) or a Ruling (as
defined below)to be either (A) income described in Section 856(c)(2) of the
Internal Revenue Code of 1986, as amended ("Qualifying Income") or (B) income
of a nature that it is not includable in BRI's gross income for purposes of
determining whether BRI meets the requirement of Section 856(c)(2) (the "REIT
Requirement") for such year and (ii) the quotient of (A) the excess of
(I) 4.95% of BRI's federal gross income for such taxable year over (II) the
amount of gross income of BRI for the taxable year from all other sources to
the extent such income is not Qualifying Income and (B) BRI's percentage
share of the capital of the Partnership (determined in accordance with
Treasury Regulation Section 1.856-3(g) or any applicable successor provision)
for such year. As used herein, "Break-Up Fee Tax Opinion" means an opinion
letter from BRI's outside counsel, and "Ruling" means a private letter ruling
from the Internal Revenue Service. In the event that the foregoing does not
permit the distribution to the Partnership of the entire undistributed Escrow
Fund for any taxable year of BRI, the Escrow Agent shall retain the unpaid
amount in escrow for distribution pursuant to (x) this Section 4(a) in
subsequent taxable years of BRI, (y) Section 4(b) or (z) Section 4(c), as
applicable.
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(b) Second, if the amount of any undistributed Escrow Fund is
greater than zero and outside counsel to BRI informs BRI in writing that such
counsel believes that BRI is unlikely to receive a Break-Up Fee Tax Opinion
or Ruling with respect to the distribution to the Partnership of the
undistributed Escrow Fund, then the undistributed Escrow Fund shall be
distributed to holders of Common Stock and Units, in equal amounts per share
of Common Stock and per Unit; provided, however, that amounts shall only be
so distributed to the holders of Common Stock and Units if, and to the
extent, BRI receives a Break-Up Fee Tax Opinion or a Ruling with respect to
such distributions.
(c) Third, any amounts remaining in escrow at the end of the
ten (10) year period commencing on the date the Draw Certificate is delivered
shall be paid to a charity chosen by Parent that qualifies as a charity under
Section 501(c)(3) of the Code.
5. Substitution or Return of Collateral. (a) At the direction of
BRI and following the delivery to the Escrow Agent of the Letter of Credit,
the Escrow Agent shall disburse the Cash Collateral (other than any portion
thereof that has become part of the Escrow Fund) to Parent, together with all
interest thereon. BRI agrees that it shall provide the foregoing direction
to the Escrow Agent promptly upon notice from the Escrow Agent that it has
received the Letter of Credit.
(b) The Escrow Agent shall return the Letter of Credit to
Parent when and as BRI may direct. BRI shall so direct the Escrow Agent
within five business days of Parent's becoming entitled to such return in
accordance with Section 7.2(b) of the Merger Agreement.
6. Investment of Escrow Fund. (a) Any monies held as Cash
Collateral or in the Escrow Fund shall be invested by the Escrow Agent, to
the extent permitted by law and as directed in writing by BRI on behalf of
the Beneficiaries, in (i) obligations having a maturity date of 30 days or
less issued or guaranteed by the United States of America or any agency or
instrumentality thereof, (ii) obligations having a maturity date of 30 days
or less (including certificates of deposit and bankers' acceptances) of banks
which at the date of their last public reporting had total assets in excess
of $500 million, (iii) commercial paper having a maturity date of 30 days or
less rated at least A-1 or P-1 or, if not rated, issued by companies having
outstanding debt rated at least AA or Aa and (iv) money market mutual funds
invested primarily in the securities described in the foregoing clauses (i),
(ii) and (iii).
(b) Any interest earned on the Cash Collateral shall be for
the account of Parent. Any interest earned on the Escrow Fund shall be for
the account of the Beneficiaries and shall be included in the amounts
distributed pursuant to Section 4 hereof.
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7. Fees and Expenses. BRI and the Partnership shall be jointly
and severally liable for the fees of the Escrow Agent, including, but not
limited to, reasonable legal fees and expenses for the services rendered by
the Escrow Agent hereunder and for its attorney's fees and expenses incurred
in connection with the preparation of this Agreement. In furtherance of the
foregoing, BRI and the Partnership agree to pay or reimburse the Escrow Agent
for the Escrow Agent's reasonable compensation for its normal services
hereunder and the preparation of this Agreement in accordance with the fee
schedule attached hereto as Attachment B. The Escrow Agent shall be entitled
to reimbursement on demand for all expenses incurred in connection with the
administration of the escrow created hereby that are in excess of its
compensation for normal services hereunder, including, without limitation,
payment of any legal fees and expenses incurred by the Escrow Agent in
connection with the resolution of any claim by any Party hereunder.
8. Limitation of Escrow Agent's Liability.
(a) Neither the Escrow Agent nor any of its directors,
officers or employees shall incur liability with respect to any action taken
or suffered by it in reliance upon any notice, direction, instruction,
consent, statement or other documents believed by it to be genuine and duly
authorized, nor for other action or inaction except its own willful
misconduct or gross negligence; provided, that with respect to the custody of
the Cash Collateral and Escrow Fund, the Escrow Agent shall use the standard
care of customarily used by custodians of funds. The Escrow Agent shall not
be responsible for the validity or sufficiency of this Agreement and shall
not be responsible for any of the agreements referred to herein, including
the Merger Agreement and the Partnership Merger Agreement, but shall be
obligated only for the performance of such duties as are specifically set
forth in this Escrow Agreement. Without limiting the foregoing, the Escrow
Agent (i) shall not be obligated to inquire as to the accuracy of any
calculations used in preparing the Disbursement Certificate and (ii) shall
have no obligation to inquire whether the Partnership has the right to
liquidated damages pursuant to the Merger Agreement. In all questions
arising under this Agreement, the Escrow Agent may rely on the advice of
counsel, including in-house counsel, and for anything done, omitted or
suffered in good faith by the Escrow Agent based on such advice the Escrow
Agent shall not be liable to anyone. The Escrow Agent shall not be required
to take any action hereunder involving any expense unless the payment of such
expense is made or provided for in a manner reasonably satisfactory to it.
The Escrow Agent shall not be liable for any losses resulting from the
investments made in accordance with this Agreement. In no event shall the
Escrow Agent be liable for indirect, punitive, special or consequential
damages.
(b) BRI and the Partnership shall jointly and severally
indemnify the Escrow Agent for, and hold it harmless against, any loss,
-5-
<PAGE>
<PAGE>
liability or expense (including reasonable attorneys' fees and expenses)
incurred without gross negligence or willful misconduct on the part of the
Escrow Agent, arising out of or in connection with its carrying out of its
duties hereunder, including without limitation drawing on the Letter of
Credit.
(c) BRI and the Partnership jointly and severally hereby
agree to assume any and all obligations imposed now or hereafter by any
applicable tax law with respect to the payment of Escrow Funds under this
Agreement, and to indemnify and hold the Escrow Agent harmless from and
against any taxes, additions for late payment, interest, penalties and other
expenses, that may be assessed against the Escrow Agent in any such payment
or other activities under this Agreement (other than taxes on the net income
of the Escrow Agent attributable to the payment of fees hereunder). BRI and
the Partnership undertake to instruct the Escrow Agent in writing with
respect to the Escrow Agent's responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting in connection with its acting as Escrow Agent under this Agreement.
BRI and the Partnership jointly and severally hereby agree to indemnify and
hold the Escrow Agent harmless from any liability on account of taxes,
assessments or other governmental charges, including without limitation the
withholding or deduction or the failure to withhold or deduct the same, and
any liability for failure to obtain proper certifications or to properly
report to governmental authorities, to which the Escrow Agent may be or
become subject in connection with or which arises out of this Agreement,
including costs and expenses (including reasonable legal fees and expenses),
interest and penalties.
9. Termination. This Agreement shall terminate upon the earliest
of (i) notice from BRI to the Escrow Agent that the transactions contemplated
by the Merger Agreement have been consummated, (ii) notice from BRI to the
Escrow Agent that the Merger Agreement has been terminated without giving
rise to the right to realize on the Cash Collateral or draw on the Letter of
Credit, or (iii) the disbursement by the Escrow Agent of all of the Escrow
Funds (except in accordance with Section 5(a)) in accordance with this
Agreement; provided, however, that the provisions of Sections 7 and 8 shall
survive such termination.
10. Notices. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such
notice, instruction or communication shall be sent either (i) by registered
or certified mail, return receipt requested, postage prepaid or (ii) via a
reputable nationwide overnight courier service, in each case to the address
set forth below. Any such notice, instruction or communication shall be
deemed to have been delivered four business days after it is sent by
registered or certified mail, return receipt requested, postage prepaid; or
-6-
<PAGE>
<PAGE>
one business day after it is sent via a reputable nationwide overnight
courier service.
If to BRI or the Berkshire Realty Company, Inc.
Partnership: One Beacon Street
Suite 1550
Boston, MA 02108
Attention: Chief Executive Officer
Copies to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: David E. Redlick, Esq.
and Kenneth A. Hoxsie, Esq.
Fax: (617) 526-5000
Baker & Hostetler LLP
3200 National City Center
1900 East 9th Street
Cleveland, OH 44114
Attention: Robert A. Weible, Esq.
If to Parent: Berkshire Realty Holdings, L.P.
One Beacon Street
Suite 1500
Boston, MA 02108
Attention: Douglas S. Krupp
Fax: (617) 423-8916
with a copy to:
Paul, Weiss, Rifkind, Wharton &
Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: James M. Dubin, Esq.
and Michele R. Jenkinson, Esq.
Fax: (212) 757-3990
and
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: Anthony J. Colletta
Fax: (212) 558-3588
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<PAGE>
<PAGE>
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Gregory J. Ressa
Fax: (212) 455-2502
If to the Escrow Agent: American Stock Transfer and Trust
Company
40 Wall Street
New York, NY 10005
Any Party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery,
telecopy or ordinary mail), but no such notice, instruction or communication
shall be deemed to have been delivered unless and until it is actually
received by the Party to whom it was sent. Any Party may change the address
to which notices, instructions or communications are to be delivered by
giving the other Parties to this Agreement notice thereof in the manner set
forth in this Section 10.
11. Successor Escrow Agent. In the event the Escrow
Agent becomes unavailable or unwilling to continue in its capacity hereunder,
the Escrow Agent may resign and be discharged from its duties or obligations
hereunder by delivering a resignation to the Parties to this Escrow
Agreement, not less than 60 days' prior to the date when such resignation
shall take effect. BRI may appoint a successor Escrow Agent so long as such
successor is a bank with assets of at least $500 million. If, within such
notice period, BRI provides to the Escrow Agent written instructions with
respect to the appointment of a successor Escrow Agent and directions for the
transfer of the Letter of Credit, the Cash Collateral or any Escrow Fund then
held by the Escrow Agent to such successor, the Escrow Agent shall act in
accordance with such instructions and promptly transfer the Letter of Credit,
the Cash Collateral and such Escrow Fund to such designated successor. If no
successor escrow agent is named by BRI within such notice period, the Escrow
Agent may apply to a court of competent jurisdiction for appointment of a
successor escrow agent.
12. General.
(a) Governing Law. This Agreement shall be
governed by, enforced under and construed in accordance with the laws of the
Commonwealth of Massachusetts without regard to conflict-of-law principles.
-8-
<PAGE>
<PAGE>
(b) Counterparts. This Agreement may be
executed in two or more counterparts (which need not each be signed by all of
the Parties hereto), each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(c) Entire Agreement. This Agreement
constitutes the entire understanding and agreement of the Parties with
respect to the subject matter hereof and supersedes all prior agreements or
understandings, written or oral, between the Parties with respect to the
subject matter hereof.
(d) Waivers. No waiver by any Party hereto of
any condition or of any breach of any provision of this Escrow Agreement
shall be effective unless in writing. No waiver by any Party of any such
condition or breach, in any one instance, shall be deemed to be a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or breach of any other provision contained herein.
(e) Amendment. This Agreement may be amended
only by a written instrument signed by the Parties hereto.
(f) Consent to Jurisdiction and Service. BRI
and the Partnership hereby absolutely and irrevocably consent and submit to
the jurisdiction of the courts in the Commonwealth of Massachusetts and of
any federal court located in the Commonwealth of Massachusetts in connection
with any actions or proceedings brought against BRI and the Partnership by
the Escrow Agent arising out of or relating to this Escrow Agreement. In any
such action or proceeding, BRI and the Partnership hereby absolutely and
irrevocably waive personal service of any summons, complaint, declaration or
other process and hereby absolutely and irrevocably agree that the service
thereof may be made in accordance with the notice provisions of Section 10
hereof, directed to BRI and the Partnership, as the case may be, at their
respective addresses set forth in Section 10 hereof.
(g) Force Majeure. Neither BRI, the
Partnership nor the Escrow Agent shall be responsible for delays or failures
in performance resulting from acts beyond its, his or her control. Such acts
shall include but not be limited to acts of God, strikes, lockouts, riots,
acts of wars, epidemics, governmental regulations superimposed after the
fact, fire, communication line failures, computer viruses, power failures,
earthquakes or other disasters.
(h) Binding Effect, Assigns. This Agreement
shall be binding upon and inure to the benefit of the respective Parties
hereto and their heirs, executors, successors and assigns.
-9-
<PAGE>
<PAGE>
(i) Reproduction of Documents. This Agreement
and all documents relating thereto, including, without limitation, (a)
consents, waivers and modifications which may hereafter be executed, and (b)
certificates and other information previously or hereafter furnished, may be
reproduced by any photographic, photostatic, microfilm, optical disk,
micro-card, miniature photographic or other similar process. The Parties
agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not
the original is in existence and whether or not such reproduction was made by
a Party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
IN WITNESS WHEREOF, the Parties have duly executed this
Agreement as of the day and year first above written.
Berkshire Realty Company, Inc.
By: /s/ DAVID F. MARSHALL
-------------------------------
Name: David F. Marshall
Title: Chief Executive Officer
BRI OP Limited Partnership
By: Berkshire Apartments, Inc.
By: /s/ DAVID F. MARSHALL
-------------------------------
Name: David F. Marshall
Title:
-10-
<PAGE>
<PAGE>
American Stock Transfer and
Trust Company, as Escrow Agent
By:/s/ [Authorized Signatory]
Name:_________________________
Title:________________________
Berkshire Realty Holdings, L.P. joins in this
Agreement solely with respect to Section 4(c).
Berkshire Realty Holdings, L.P.
By: /s/ DOUGLAS S. KRUPP
--------------------
Douglas S. Krupp,
Authorized Signatory
[Signature Page to Escrow Agreement]
-11-
EXHIBIT 13
Issue Date: April 13, 1999
L/C No.: U-287508
The Chase Manhattan Bank
Global Trade Services Group
P.O. Box 44 Church Street Station
New York, NY 10008-0044
Cable Address: CHAMANBANK New York
Advising Bank
DIRECT Applicant:
Berkshire Realty Holdings, L.P.
345 Park Avenue
New York, NY 10154
Beneficiary
American Stock Transfer and Amount: USD 29,500,000.00
Trust Company, (Twenty Nine Million Five Hundred
as Escrow Agent Thousand and 00/100 United States Dollars
40 Wall Street
New York, NY 10005
IRREVOCABLE LETTER OF CREDIT NUMBER U-287508
Ladies and Gentlemen:
For the account of Berkshire Realty Holdings, L.P., a Delaware limited
partnership, we hereby authorize American Stock Transfer and Trust Company,
as escrow agent (the "Beneficiary"), to draw on us up to an aggregate amount
of twenty-nine million five hundred thousand United States dollars (US
$29,500,000.00) (the "Credit Amount") available by presentation to us at our
counters located at 4 Chase Metrotech Center, 8th floor, Brooklyn, New York
11245, Attention: Standby Letter of Credit Department of the Beneficiary's
Draft at sight on us accompanied by a written statement purportedly signed by
an authorized officer of the Beneficiary in the form of Exhibit A attached
hereto (the "Certificate to Accompany Draft").
/s/ [Authorized Signatory]<PAGE>
<PAGE>
Any draft so drawn must be marked: "Drawn Under The Chase Manhattan Bank
Letter of Credit No. U-287508." We engage with you that all drafts drawn by
you under and in compliance with the terms of this Letter of Credit will be
duly honored by us on delivery of documents as specified if presented at this
office on or before January 31, 2000 (the "Expiration Date"). There shall be
no conditions to drawings other than as stated above.
We hereby agree to honor a drawing made hereunder in compliance with
this Letter of Credit by transferring in immediately available funds the
amount specified in the draft, in accordance with the payment instructions
contained in the Certificate to Accompany Draft.
This Letter of Credit may not be transferred by Beneficiary.
This Letter of Credit sets forth in full the terms of our understanding
and such undertaking shall not in any way be modified, amended or amplified
by reference to any document, instrument or agreement referred to herein or
in which this Letter of Credit is referred to or to which this Letter of
Credit relates, and any such reference shall not be deemed to incorporate
herein by reference any document, instrument or agreement.
This Letter of Credit is subject to the International Standby Practices
("ISP 98"), International Chamber of Commerce Publication No. 590 (the
"ISP"). This Letter of Credit, as to matters not governed by the ISP, shall
be governed by the laws of the State of New York, including the Uniform
Commercial Code as in effect in the State of New York.
/s/ [Authorized Signatory]
-2-
EXHIBIT 14
----------
April 13, 1999
Reference is hereby made to (i) that certain Agreement of Limited
Partnership of Berkshire Realty Holdings, L.P. dated as of the date hereof
(as it may be amended, modified or supplemented from time to time, the
"Partnership Agreement") and (ii) that certain commitment letter dated as of
the date hereof (the "Bridge Loan Commitment Letter") issued by Whitehall
Street Real Estate Limited Partnership XI and Blackstone Real Estate
Acquisitions III L.L.C. All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to such terms in the
Partnership Agreement.
Each General Partner hereby acknowledges and agrees that any
election or decision to be made by the Partnership with respect to the Bridge
Loan Commitment Letter, including, without limitation, the election by the
Partnership to borrow the Bridge Loan thereunder, shall require the approval
of both the Blackstone GP and WHGP, each of which approvals may be withheld
in their sole discretion. BGP and Berkshire acknowledge that in the event
the Blackstone GP and WHGP elect not to authorize a borrowing under the
Bridge Loan Commitment Letter, the Partnership may be unable to satisfy its
obligations under the Merger Agreements and as a result, the Cash Collateral
(as defined in the Merger Agreement)(or its substitute) may be forfeited
thereunder. Failure of the Blackstone GP or WHGP to approve the
Partnership's borrowing of the Bridge Loan, whether or not such failure leads
to a loss of the Cash Collateral or other assets of the Partnership, shall
not (i) constitute a default by such Partner under the Partnership Agreement,
including under Section 12.21 of the Partnership Agreement, (ii) otherwise
constitute a breach of any obligations, express or implied, at law or in
equity, which otherwise may be owed by the Blackstone GP or WHGP to the
Partnership or (iii) excuse Berkshire or BGP from any of its obligations
under Section 12.21 of the Partnership Agreement.
The Partners acknowledge that, on the date hereof, the Partnership
will deliver a letter of credit issued by The Chase Manhattan Bank ("Chase")
in the amount of $29,500,000 (the "LC") to American Stock Transfer Trust
Company, as escrowee, pursuant to the terms of the Merger Agreement. In
connection with the issuance of the LC, each of the Investor Group Partners
have entered into reimbursement obligations with Chase with respect to the LC
as follows: (i) the members of the Blackstone Group have jointly agreed to
reimburse Chase for up to 40% of amounts due with respect to the LC; (ii) the
members of the Whitehall Group have jointly agreed to reimburse Chase for up
to 40% of amounts due with respect to the LC; and (iii) the members of the
Berkshire Group have jointly agreed to reimburse Chase for up to 20% of
amounts due with respect to the LC. The foregoing obligations of the members
of the Blackstone Group shall be several from the foregoing obligations of
the members of the Whitehall Group and the Berkshire Group; the foregoing
obligations of the members of the Whitehall Group shall be several from the
foregoing obligations of the members of the Blackstone Group and the
<PAGE>
<PAGE>
Berkshire Group; and the foregoing obligations of the members of the
Berkshire Group shall be several from the foregoing obligations of the
members of the Whitehall Group and the Blackstone Group. The Partners
further acknowledge and agree that for the purposes of Section 12.21 of the
Partnership Agreement, the amount any Partner shall be responsible for in
connection with its reimbursement obligations with respect to the LC shall be
deemed to be such Partner's Capital Contributions made to the Partnership
which will be reimbursed by a defaulting Partner in accordance with the
provisions of Section 12.21.
The Partners acknowledge and agree that as promptly as practicable
after the full execution and delivery of the BRI Merger Agreement and BRI OP
Merger Agreement (and in any event within seven (7) days after the date
hereof), the General Partners shall cause the Partnership to purchase an
interest rate hedge agreement having the following characteristics (such
agreement, the "Hedge"): (i) the Hedge will be a European style put option
with a strike rate equal to 50 basis points (0.50%) above the yield on the
five year U.S. Treasury security on the date of purchase; (ii) the expiration
date of the Hedge will be August 4, 1999 (or as soon thereafter as is
available); and (iii) the notional amount of the Hedge will be approximately
$593,000,000. Any two General Partners shall have the authority to execute
on behalf of the Partnership any and all documentation required to implement
the Hedge and all of the Partners agree to take any steps reasonably required
to implement the Hedge. Each of the Investor Group Partners shall fund its
pro rata share of the cost of the Hedge, based on its Partnership Percentage
Interest.
By its execution below, each of The Berkshire Companies Limited
Partnership and Douglas Krupp, jointly and severally, hereby guarantees to
the Partnership and the Partners the full payment and performance of all of
the obligations of BGP and Berkshire under Section 12.21 of the Agreement.
By its execution below, Blackstone Real Estate Acquisitions III
L.L.C. hereby guarantees to the Partnership and the Partners the full payment
and performance of all of the obligations of the Blackstone GP and the
Blackstone LP under Section 12.21 of the Agreement.
By its execution below, Whitehall Street Real Estate Limited
Partnership XI hereby guarantees to the Partnership and the Partners the full
payment and performance of all of the obligations of WHGP, Whitehall,
StoneStreet, BridgeStreet and StoneCorp under Section 12.21 of the Agreement.
The Partnership Agreement, as modified hereby, is and remains in
full force and effect and is hereby ratified and confirmed.
-2-
<PAGE>
<PAGE>
The terms of this letter shall be binding upon, and inure to the
benefit of, each of the parties hereto and their respective successors and
assigns.
This letter shall be governed by and construed in accordance with
the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this letter as
of the date written above.
GENERAL PARTNERS:
WXI/BRH GEN-PAR LLC
By: /s/ STEVEN FELDMAN
---------------------------
Name: Steven Feldman
Title: Vice President
BRE/BERKSHIRE GP L.L.C.
By: /s/ KENNETH C. WHITNEY
---------------------------
Name: Kenneth C. Whitney
Title: Vice President
APTCO GEN-PAR, L.L.C.
By: /s/ DOUGLAS KRUP
---------------------------
Name: Douglas Krupp
Title:
-4-
<PAGE>
<PAGE>
LIMITED PARTNERS:
WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP XI
By: WH Advisors, L.L.C. XI, its general partner
By: /s/ STEVEN FELDMAN
------------------------
Name: Steven Feldman
Title: Vice President
STONE STREET REAL ESTATE FUND 1998 L.P.
By: Stone Street Advantage Realty Corp., its
general partner
By: /s/ ALAN KAVA
------------------------
Name: Alan Kava
Title: Vice President
BRIDGE STREET REAL ESTATE FUND 1998 L.P.
By: Stone Street Advantage Realty Corp., its
general partner
By: /s/ ALAN KAVA
---------------------------
Name: Alan Kava
Title: Vice President
STONE STREET WXI/BRH CORP.
By: /s/ ALAN KAVA
--------------------------------
Name: Alan Kava
Title: Vice President
BRE/BERKSHIRE LP L.L.C.
By: /s/ KENNETH C. WHITNEY
--------------------------------
Name: Kenneth C. Whitney
Title: Vice President
APTCO HOLDINGS, L.L.C.
By: /s/ DOUGLAS KRUPP
-----------------------------
Name: Douglas Krupp
Title: Authorized signatory
-5-
<PAGE>
<PAGE>
GUARANTORS:
THE BERKSHIRE COMPANIES LIMITED PARTNERSHIP
By: /s/ DOUGLAS KRUPP
-------------------------
Name: Douglas Krupp
Title: Authorized Signatory
/s/ DOUGLAS KRUPP
---------------------------
DOUGLAS KRUPP
BLACKSTONE REAL ESTATE ACQUISITIONS III L.L.C.
By: /s/ KENNETH C. WHITNEY
---------------------------
Name: Kenneth C. Whitney
Title: Vice President
WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP XI
By: WH Advisors, L.L.C. XI, its general partner
By: /s/ STEVEN FELDMAN
---------------------------
Name: Steven Feldman
Title: Vice President
-6-
EXHIBIT 15
----------
VOTING AGREEMENT
This Agreement is made as of April 13, 1999 by and among Douglas S.
Krupp ("Krupp"), Berkshire Realty Company, Inc., a Delaware corporation (the
"Company") and BRI OP Limited Partnership, a Delaware limited partnership
(the "Partnership").
WHEREAS, the Company, Berkshire Realty Holdings, L.P. ("Parent") and BRI
Acquisition, LLC (the "Buyer") have entered into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement") providing for the
merger of the Buyer with and into the Company as the surviving entity; and
WHEREAS, the Partnership, Parent and BRI Acquisition Sub, LP have
entered into an Agreement and Plan of Merger dated as of the date hereof (the
"Partnership Merger Agreement") providing for the merger of BRI Acquisition
Sub, LP with and into the Partnership, with the Partnership as the surviving
entity; and
WHEREAS, Krupp and persons or entities affiliated with Krupp
(collectively, the "Krupp Entities") own shares of common stock, $.01 par
value per share, of the Company ("Common Stock") and units of limited
partnership interest in the Partnership ("OP Units"); and
WHEREAS, in order to induce the Company and the Partnership to enter
into the Merger Agreement and the Partnership Merger Agreement, respectively,
Krupp is making the covenants set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Krupp agrees to cause each of the Krupp Entities (i) to vote the
Common Stock they own (including any Common Stock issued after the date
hereof) in favor of adoption of the Merger Agreement and approval of the
transactions contemplated thereby and (ii) to vote the OP Units they own
(including any OP Units issued after the date hereof) in favor of adoption of
the Partnership Merger Agreement and approval of the transactions
contemplated thereby.
<PAGE>
<PAGE>
2. Krupp agrees, on behalf of the Krupp Entities that own Common Stock
or subsequently are issued Common Stock, that no such Krupp Entity shall
demand appraisal rights pursuant to Section 262 of the Delaware General
Corporation Law of the State of Delaware with respect to such shares of
Common Stock in connection with the transactions contemplated by the Merger
Agreement.
3. Krupp shall be relieved from his obligations hereunder if the Board
of Directors of the Company withdraws its recommendation that stockholders of
the Company vote to adopt the Merger Agreement and approve the transactions
contemplated thereby or if the Board of Directors of the Company fails to
confirm its recommendation with respect to the Merger Agreement within ten
days of being requested to do so by the Buyer.
4. This Agreement constitutes the entire agreement among the parties
hereto and supersedes any prior understandings, agreements or representations
by or between the parties, written or oral, that may have related in any way
to the subject matter hereof.
5. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Delaware (without regard to any
conflicts-of-law principles that would result in the application of the law
of any other jurisdiction).
6. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by Krupp and the Company.
7. Krupp acknowledges and agrees that the Company would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, Krupp agrees that the Company shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the parties and the matter, in addition to any other
remedy to which the Company may be entitled, at law or in equity.
8. This Agreement shall terminate upon the termination of the Merger
Agreement, provided that Krupp shall remain liable for any breaches of this
Agreement.
-2-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/s/ DOUGLAS S. KRUPP
-----------------------------------------
Douglas S. Krupp
BERKSHIRE REALTY COMPANY, INC.
By:/s/ DAVID F. MARSAHALL
---------------------------------------
Name: David F. Marshall
Title: Chief Executive Officer
-3-
EXHIBIT 16
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) of the Securities Exchange Act of 1934,
as amended, the undersigned hereby agree to the joint filing on behalf of
each of us of a statement on Schedule 13D relating to the Common Stock, par
value $.01 per share, of Berkshire Realty Company, Inc., a Delaware
corporation, and that any amendments thereto filed by any of us will be filed
on behalf of each of us. This agreement may be included as an exhibit to
such joint filing.
BLACKSTONE REAL ESTATE ACQUISITIONS
III L.L.C.
By:/s/ Thomas J. Saylak
Name: Thomas J. Saylak
Title: Vice President
BLACKSTONE REAL ESTATE ADVISORS
III, L.P.
By: BRE ADVISORS III L.L.C.
By:/s/ Thomas J. Saylak
Name: Thomas J. Saylak
Title: Vice President
BRE ADVISORS III L.L.C.
By:/s/ Thomas J. Saylak
Name: Thomas J. Saylak
Title: Vice President
<PAGE>
<PAGE>
BRE/BERKSHIRE GP L.L.C.
By:/s/ Thomas J. Saylak
Name: Thomas J. Saylak
Title: Vice President
BRE/BERKSHIRE LP L.L.C.
By:/s/ Thomas J. Saylak
Name: Thomas J. Saylak
Title: Vice President
/s/ Thomas J. Saylak
PETER G. PETERSON
By: Thomas J. Saylak, Attorney-in-Fact
/s/ Thomas J. Saylak
STEPHEN A. SCHWARZMAN
By: Thomas J. Saylak, Attorney-in-Fact
Dated: April 15, 1999
-2-
April 15, 1999
Re: Filing of Amendment to Schedule 13D
___________________________________
Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
On behalf of Blackstone Real Estate Acquisitions III L.L.C.,
Blackstone Real Estate Advisors III L.P., BRE Advisors III L.L.C.,
BRE/Berkshire GP L.L.C., BRE/Berkshire LP L.L.C., Peter G. Peterson and
Stephen A. Schwarzman (collectively, the "Blackstone Persons"), and pursuant
to Section 13 of the Securities Exchange Act of 1934, as amended, we hereby
file by EDGAR transmission a copy of Amendment No. 2 to the Schedule 13D
of the Blackstone Persons with respect to the shares of common stock of the
Berkshire Realty Company, Inc.
If you have any questions with respect to the foregoing,
please call Brian Stadler at 212-455-3765 or Victoria Deitcher at 212-455-2881.
Very truly yours,
/s/ Simpson Thacher & Bartlett
------------------------------------
SIMPSON THACHER & BARTLETT
