UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _______________
Commission file number 1-10660
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Berkshire Realty Company, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 04-3086485
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
One Beacon Street, Boston, Massachusetts 02108
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (617) 646-2300
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title Name of Exchange on which Registered
----- ------------------------------------
Common Stock New York Stock Exchange
$.01 par value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K[ ].
The aggregate market value of voting common equity held by non-affiliates of the
registrant was approximately $411,634,000 as of March 15, 1999.
As of March 15, 1999, there were 36,713,400 shares of the registrant's common
stock outstanding.
Documents incorporated by reference: See below.
The exhibit index is located on pages 40 - 43
The total number of pages in this document is 89.
<PAGE>
Forward-Looking Statements
- --------------------------
This Annual Report on Form 10-K contains forward-looking statements,
estimates or plans. There are a number of factors that could cause the Company's
actual results to differ materially from those indicated by such forward-looking
statements. These factors include the matters set forth under the caption "Risk
Factors" in the Company's Registration Statement on Form S-3, which was filed
with the Securities and Exchange Commission on November 23, 1998, and which
matters are incorporated herein by reference. Any statements contained in such
filing shall be deemed to be superseded or modified for purposes of the Annual
Report to the extent that a statement contained herein modifies or supersedes
such statement. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
-2-
<PAGE>
PART I
ITEM 1. BUSINESS
- -------
Organization
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Berkshire Realty Company, Inc. (the "Company") was formed on April 26,
1990 by filing a certificate of incorporation in the State of Delaware. The
Company commenced operations on June 27, 1991, as an equity real estate
investment trust ("REIT"). The principal business of the Company is the
acquisition, renovation, rehabilitation, development and operation of
multifamily apartment communities located in Florida, Texas and the Mid-Atlantic
and Southeast regions of the United States. The Company has formed several
wholly-owned qualifying REIT subsidiaries in connection with multifamily asset
acquisitions and financings.
On June 4, 1991, the unitholders of Krupp Cash Plus-III Limited
Partnership and Krupp Cash Plus-IV Limited Partnership (collectively the
"Participating Cash Plus Partnerships") voted in favor of and agreed to
participate in an exchange (the "Exchange") with the Company. On June 27, 1991,
the Company, exchanged 25,097,923 shares of its common stock ("Shares") for the
assets, subject to the liabilities, of the Participating Cash Plus Partnerships.
The Participating Cash Plus Partnerships then distributed the Shares received in
the Exchange to their respective investors and the Participating Cash Plus
Partnerships were dissolved.
In 1995, the Company was restructured as an umbrella partnership real
estate investment trust ("UPREIT"). On May 1, 1995, the Company's assets,
subject to its liabilities, were transferred to a newly-formed subsidiary, BRI
OP Limited Partnership ("Operating Partnership"). Upon transfer of its net
assets, the Company was issued 25,392,452 units of the Operating Partnership
("Units") which was equal to the number of Shares outstanding on May 1, 1995.
The Company, in its capacity as the Special Limited Partner and through its
ownership of Berkshire Apartments, Inc., the sole general partner of the
Operating Partnership, owned 79.2% of the Operating Partnership as of December
31, 1998.
In connection with the organization of the Operating Partnership, on May
1, 1995, an affiliate of Berkshire Realty Advisors Limited Partnership, the
Company's former advisor, contributed $5,000 and River Oaks Apartments, subject
to mortgage debt of $5.4 million, to the Operating Partnership at a valuation of
$10.5 million in a transaction approved by the independent members of the Board
of Directors. The seller received 534,975 Units in the Operating Partnership
("Minority Interest") in exchange for its interest in the property.
On March 1, 1996, the Company acquired, via contribution, certain assets
of Berkshire Realty Advisors Limited Partnership, an entity affiliated with a
director which provided advisory and development services to the Company, in
exchange for 1.3 million Units of the Operating Partnership (the "Advisor
Transaction"). The transaction was valued at $13 million (based on a price of
$10.00 per share of the Company's common stock, $.01 par value) and has been
recorded as the acquisition of a workforce and other intangible assets.
Additional Units, up to a total of $7.2 million, may be issued during a six-year
period if certain share price benchmarks are achieved by the Company. During
1997, the $11.00 and $12.00 share price benchmarks were achieved and an
additional 209,091 Units were issued at a value of $2.4 million. (See Note C to
the Consolidated Financial Statements). The Advisor Transaction enabled the
Company to eliminate fees previously incurred for asset management, acquisition
and disposition functions.
On February 26, 1997, the Board of Directors, acting on the recommendation
of a special committee comprised solely of independent directors, approved the
acquisition of the workforce and other assets of the multifamily property
management company, affiliated with certain officers and directors, which
provided property management services to the Company (the "Property Manager").
The Property Manager was contributed on February 28, 1997 in exchange for 1.7
million Units at a value of approximately $17.6 million (the "Property Manager
Transaction").
-3-
<PAGE>
At the time of the contribution, the Property Manager managed 57 apartment
communities, including the Company's 35 assets, and employed approximately 85
professionals, excluding site employees. As a result of this transaction, the
Company ceased payment of management fees and reimbursements to the affiliate
for the management operations of its multifamily portfolio. In addition, the
Company acquired 22 third-party management contracts which generate management
fee and reimbursement revenue. Those contracts are primarily with partnerships
affiliated with certain directors and officers of the Company.
The Company recorded intangible assets of $4.4 million based on discounted
cash flows from third-party property management contracts and $13.2 million
based on the value of intangible assets associated with the workforce acquired.
The total value of the transaction was allocated to workforce and other
intangible assets on the Company's Consolidated Balance Sheet. (See Note D to
the Consolidated Financial Statements).
The Company has an infinite life; however, the Company's Certificate of
Incorporation, as amended, requires the Company's Board of Directors (the
"Board") to prepare and submit a Plan of Liquidation to the shareholders on or
before December 31, 1998, together with a recommendation by the Board of
Directors whether to adopt or reject the Plan of Liquidation. The Plan of
Liquidation would become effective if approved by shareholders holding a
majority of the shares outstanding at the time of the vote.
In May 1998, the Company began the process of evaluating its strategic
alternatives which included the potential sale or merger of the Company or
adoption of a Plan of Liquidation. Although the evaluation process had not
concluded, on December 31, 1998, the Company filed proxy materials related to a
Plan of Liquidation with the Securities and Exchange Commission. Included in the
proxy materials was a recommendation of the Board of Directors that shareholders
vote against approval of the Plan of Liquidation because, in the opinion of the
Board, other alternatives available to the Company would likely produce greater
value for the shareholders.
In the first quarter of 1999, as a result of the process initiated by the
Board, the Company received several offers to acquire the Company. Among these
offers was one from a group that included Douglas Krupp, the Chairman of the
Board of the Company, to acquire the Company at a price of $11.05 per share of
common stock. A special committee of disinterested directors established by the
Board to review and negotiate these offers advised this group that the price of
$11.05 per share was insufficient. This group subsequently revised its offer to
$12.05 per share of common stock. The special committee of the Board is
continuing to review and negotiate the offers the Company has received. There
can be no assurance that the Company will accept any acquisition offer or that
any of these offers will result in the consummation of a sale or merger of the
Company.
Competition
- -----------
All of the Company's properties are located in markets where they are
subject to competition from other multifamily residential properties. The number
of competitive properties in a particular area could have a material adverse
effect on the Company's ability to lease its current apartment units or newly
acquired properties and the rents charged at such properties. The Company's
properties generally compete by offering competitive rental rates, including
leasing incentives, and additional amenities. In addition, other forms of
housing, including manufactured housing community properties and single-family
housing, provide alternatives to potential residents of multifamily residential
properties.
Capital Resources and Liquidity
- -------------------------------
The Company has a policy to maintain leverage at or below 50% of the
reasonably estimated value of its assets. The Company believes that based upon
both its internally-generated estimated values and upon estimated values
calculated using valuation parameters consistent with the Company's credit
facilities, the Company is in compliance with such debt policy. The Company
believes that its access to capital
-4-
<PAGE>
through its credit facilities, sources of private equity and debt financing,
sales of assets and utilization of Units as currency, as well as its access to
the public capital markets provide it with capital to fund its acquisition,
development and capital expenditure requirements.
Other Matters
- -------------
The performance of the Company's real estate investments is subject to
seasonal fluctuations resulting from changes in utility consumption and seasonal
maintenance expenditures. Future performance of the Company may be impacted by
unpredictable factors which include general and local economic and real estate
market conditions, variable interest rates, environmental concerns, energy
costs, government regulations and federal and state income tax laws. The
requirements for compliance with federal, state and local regulations to date
have not had an adverse effect on the Company's operations, and no adverse
effects are anticipated in the future.
The Company is currently addressing two matters which pertain to
compliance with certain REIT tax provisions. Both matters relate to certain
services being provided to tenants in 1997 and earlier years which could be
considered impermissible under certain Internal Revenue Service regulations. It
is management's opinion, based on advice from its tax advisors, that the
situation will be satisfactorily resolved without any significant cost to the
Company, although there can be no assurance that this will be the case.
Employees
- ---------
At December 31, 1998, the Company had approximately 1,000 employees.
-5-
<PAGE>
ITEM 2. PROPERTY
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As of December 31, 1998, the Company had investments in 81 multifamily
apartment communities in eight states consisting of 24,123 units. In addition,
the Company has started two development projects, one located near Clemson,
South Carolina totaling 177 units and one located in Atlanta, Georgia totaling
478 units. The Company also owned two parcels of land held for future
development located in Greenville, South Carolina. The Company has contracted to
acquire, upon the satisfaction of certain conditions, three development
properties from Questar Builders, Inc. as a result of the Questar Transaction
described in Note E to the Consolidated Financial Statements. The Company also
entered into a Development Acquisition Agreement in conjunction with the Questar
Transaction which granted the Company an exclusive right to acquire all
multifamily communities developed in the Mid-Atlantic Region by affiliates of an
officer of the Company which meet the Company's acquisition and development
criteria. Subsequent to December 31, 1998, the Company acquired a newly
constructed, 264-unit apartment community for $25.5 million, one of the
development properties the Company had contracted to acquire from Questar
Builders, Inc. Schedule III and Notes E and F to the Consolidated Financial
Statements included in Appendix A to this report contain additional detailed
information with respect to individual assets.
Some of the Company's apartment communities have been pledged as
collateral for various debt incurred by the Company. (See Notes L and M to the
Consolidated Financial Statements included in Appendix A).
The following table summarizes by geographic region, the Company's
multifamily properties at December 31, 1998. The table does not reflect the
value of the Company's investments.
<TABLE>
<CAPTION>
Region Properties Units
------ ---------- -----
<S> <C> <C>
Mid-Atlantic 27 6,218
Texas 24 8,455
Southeast 20 6,289
Florida 10 3,161
-- ------
81 24,123
== ======
</TABLE>
The following table provides a more detailed description of the
multifamily properties, developments in progress and land held for development
which the Company owns or has contracted to acquire as of December 31, 1998. The
occupancy rates presented below are based on physical occupancy, without
reference to whether leases in effect are at, below, or above market rates and
without reference to lease-up incentives or concessions.
-6-
<PAGE>
<TABLE>
<CAPTION>
1998 1998
Average Average
Month/ Average Monthly Physical
Year Total Unit Size Rental Rates Occupancy
Multifamily Location Acquired Units (sq. ft.) (dollars) (percent)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Region
Arborview (1) Belcamp, MD 1997 288 1,023 713 93
Berkshire Towers (1) Silver Spring, MD 1996 1,119 873 849 99
Calvert's Walk (1) Belair, MD 1997 276 896 707 96
The Channel Glen Burnie, MD 1997 120 952 695 99
Courtleigh (1) Baltimore, MD 1997 280 1,050 657 91
The Cove Glen Burnie, MD 1997 181 971 709 99
Coventry (1) Baltimore, MD 1997 122 1,050 645 92
Diamond Ridge (2) Baltimore, MD 1997 92 912 712 92
The Estates (1) Pikesville, MD 1997 208 883 772 97
Fairway Ridge (1) Baltimore, MD 1997 274 999 528 91
Harper's Mill Millersville, MD 1997 144 968 767 99
Hazelcrest (1) Baltimore, MD 1997 48 917 477 96
Heraldry Square (1) Baltimore, MD 1997 270 1,052 629 95
Hilltop (2) Baltimore, MD 1997 50 787 501 94
Jamestowne (1) Baltimore, MD 1997 335 958 540 96
Kingswood I (1) Baltimore, MD 1997 203 1,051 577 94
Kingswood II (1) Baltimore, MD 1997 203 1,051 609 91
The Lighthouse Glen Burnie, MD 1997 168 1,027 743 99
Liriope (2) Belcamp, MD 1997 84 1,038 835 96
Olde Forge (1) Baltimore, MD 1998 144 1,122 734(3) 99(3)
Ridgeview Chase (2) Westminster, MD 1997 204 916 800 95
Rolling Wind (1) Baltimore, MD 1997 280 1,062 822 93
Stratton Meadows (1) Baltimore, MD 1997 268 1,053 699 91
Warren Park (1) Baltimore, MD 1997 200 723 546 94
Westchester West (1) Silver Spring, MD 1997 345 1,003 756 98
Williston (1) Baltimore, MD 1997 98 1,043 564 95
Southpointe at Massapequa (1) Massapequa, NY 1993 214 987 1,235 99
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Subtotal/Weighted Average 6,218 968 726 96
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Texas
6200 Gessner (1) Houston, TX 1998 659 743 425(3) 97(3)
Berkshires of Addison (2) Addison, TX 1997 212 832 597 91
Berkshire Crossing (1) Houston, TX 1998 240 619 479(3) 98(3)
Berkshire Hills (2) Austin, TX 1998 238 753 649(3) 98(3)
Berkshire Springs (1) Dallas, TX 1998 208 798 616(3) 97(3)
Benchmark (2) Irving, TX 1996 250 845 635 96
Bluffs of Berkshire (2) Austin, TX 1998 382 753 662(3) 96(3)
Carlyle Place (2) San Antonio, TX 1998 184 926 694(3) 97(3)
Golf Side (1) Haltom City, TX 1996 402 781 487 95
Hunter's Glen (2) Plano, TX 1996 276 943 688 95
Huntington Brook (2) Dallas, TX 1997 320 828 605 95
Huntington Lake (2) Dallas, TX 1997 405 786 654 95
Huntington Ridge (2) Irving, TX 1997 232 833 617 97
Indigo on Forest (1) Dallas, TX 1994 1,217 789 611 94
Kings Crossing (1) Kingwood, TX 1994 404 838 632 97
Kingwood Lakes (1) Kingwood, TX 1994 390 940 636 97
Oaks of Marymont (2) San Antonio, TX 1998 319 1,140 650(3) 95(3)
Pleasant Woods (1) Dallas, TX 1996 208 887 598 95
Prescott Place Mesquite, TX 1996 318 762 554 95
Prescott Place II (1) Mesquite, TX 1996 336 712 549 96
Providence (2) Dallas, TX 1996 244 794 541 96
River Oaks (1) Houston, TX 1995 136 1,520 2,078 98
Sweetwater Ranch (2) Richardson, TX 1997 312 889 791 96
Yorktown (2) Houston, TX 1998 563 848 714(3) 98(3)
-------------------------------------------------------
Subtotal/Weighted Average 8,455 831 631 96
-------------------------------------------------------
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
1998 1998
Average Average
Month/ Average Monthly Physical
Year Total Unit Size Rental Rates Occupancy
Multifamily Location Acquired Units (sq. ft.) (dollars) (percent)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Southeast Region
The Arbors at Breckinridge (2) Duluth, GA 1993 514 1,025 780 96
The Avalon on Abernathy (1) Atlanta, GA 1992 240 1,356 926 95
Berkshires at Crooked Creek (1) Durham, NC 1998 296 1,021 865(4) 84(4)
British Woods (2) Nashville, TN 1995 264 1,082 667 94
Brookfield Trace (1) Mauldin, SC 1995 300 1,013 682 96
Brookwood Valley (1) Mauldin, SC 1995 226 970 623 95
Cumberland Cove (1) Raleigh, NC 1991 552 1,090 766 96
East Lake Village(1) Charlotte, NC 1993 214 1,200 680 97
Essex House (1) Atlanta, GA 1998 120 1,239 803(3) 98(3)
Highlands at Briarcliff (1) Atlanta, GA 1998 140 1,168 816(3) 97(3)
Highland Ridge Madison, TN 1995 280 1,050 564 93
Huntington Chase (1) Norcross, GA 1993 467 746 692 94
Huntington Downs (1) Greenville, SC 1988 502 964 603 93
The Oaks (1) Mauldin, SC 1990 176 956 644 95
Pines at Dunwoody (1) Atlanta, GA 1998 389 1,301 683(3) 89(3)
River Parkway (1) Atlanta, GA 1998 427 1,099 745(3) 96(3)
Roper Mountain Woods Greenville, SC 1988 248 797 522 94
Stoneledge Plantation (2) Greenville, SC 1988 320 794 540 96
The Timbers (1) Charlotte, NC 1993 343 753 589 95
Windover (2) Knoxville, TN 1995 271 1,013 615 92
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Subtotal/Weighted Average 6,289 1,016 689 95
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Florida
Arbor Keys (2) Tamarac, FL 1998 232 1,004 753(3) 95(3)
Altamonte Bay Club (1) Altamonte Springs, FL 1993 224 1,043 657 97
The Lakes at Jacaranda (1) Plantation, FL 1990 340 918 859 94
Lynn Lake (1) St. Petersburg, FL 1998 809 880 526(3) 97(3)
Newport (1) Tampa, FL 1993 320 721 549 97
Park Colony (1) Hollywood, FL 1994 316 764 791 95
Plantation Colony (1) Plantation, FL 1993 256 1,009 709 94
Berkshire West (1) Winter Garden, FL 1997 200 843 663 98
Sunchase (2) Bradenton, FL 1997 168 802 624 96
Woodland Meadows (1) Tamarac, FL 1992 296 900 709 95
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Subtotal/Weighted Average 3,161 883 662 96
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Total Residential Portfolio 24,123 921 675 95
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Developments in Progress Expected Completion Date
------------------------
Berkshires at Deerfield Atlanta, GA 478 October, 2000
Berkshire Commons Clemson, SC 177 August, 1999
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Subtotal 655
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Developments Under Contract
to Purchase Expected Acquisition Date
-------------------------
Granite Run (5) Baltimore, MD 264 January, 1999
The Courts of Avalon Pikesville, MD 258 December, 1999
Excalibur at Avalon Pikesville, MD 147 March, 2000
-------
Subtotal 669
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Land Held for Development Acres
- ------------------------- -----
Garlington Road Greenville, SC 23.8
Inglesby Greenville, SC 36.4
</TABLE>
-8-
<PAGE>
(1) Property pledged as collateral for outstanding debt. See Notes L and M to
the Consolidated Financial Statements included in Appendix A to this
report.
(2) Property was included in the pool of unencumbered assets which provide
the borrowing base availability under the Company's Revolving Credit
Agreement at December 31, 1998. See Note K to the Consolidated Financial
Statements included in Appendix A to this report.
(3) Property was acquired in 1998. The information provided is for the
quarter ended December 31, 1998.
(4) Development on the property was completed during the quarter ended
December 31, 1998. The information provided is for the month of December,
1998.
(5) The Company acquired this property on January 7, 1999 for approximately
$25.5 million.
ITEM 3. LEGAL PROCEEDINGS
- ------
There are no material pending legal proceedings to which the Company
is a party or to which its properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by the Annual Report on
Form 10-K dated December 31, 1998.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------- MATTERS
The Company's common stock is traded on the New York Stock Exchange
("NYSE") under the symbol BRI. The high and low prices of the Company's common
stock based on a composite average for each quarter during 1998 and 1997 and
dividends paid for such common stock are as follows:
<TABLE>
<CAPTION>
Dividends
Quarter Ended High Low Paid
------------- ---- --- ---------
<S> <C> <C> <C>
December 31, 1998 $10.44 $ 8.69 $.2425
September 30, 1998 11.94 9.06 .2425
June 30, 1998 12.31 11.00 .2425
March 31, 1998 12.38 11.44 .2325
------
$.9600
======
December 31, 1997 $12.31 $10.88 $.2325
September 30, 1997 12.38 11.63 .2325
June 30, 1997 11.25 10.63 .2250
March 31, 1997 11.75 10.00 .2250
------
$.9150
======
</TABLE>
The Company's common stock warrants were traded on the NYSE under the
symbol "BRI/WS". The warrants were admitted to trading on September 7, 1994.
Upon exercise, each stock warrant entitled the holder to the right to acquire
one share of common stock of the Company at the exercise price of $11.79. On
September 8, 1998, all unexercised outstanding warrants expired. For further
information see Note U to Notes to the Consolidated Financial Statement included
in Appendix A to this report. The high and low prices of the Company's warrants
based on a composite average for each quarter during 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ---- ---
<S> <C> <C>
December 31,1998 N/A N/A
September 30, 1998 $ .31 $.00
June 30, 1998 .69 .19
March 31, 1998 .69 .34
December 31, 1997 $ .88 $.50
September 30, 1997 .81 .44
June 30, 1997 .88 .50
March 31, 1997 1.00 .44
</TABLE>
The Company's practice is to review and declare dividends on a quarterly
basis, and to establish a dividend rate that is supportable by funds from
operations, after considering capital expenditures necessary for the maintenance
of the multifamily properties. On February 11, 1999, the Board approved a
dividend of $.25 per share payable on May 15, 1999 to the shareholders of record
on May 1, 1999. The Company intends to continue making quarterly dividend
payments.
As of March 1, 1999, there were approximately 32,500 holders of the
Company's common stock.
As of March 1, 1999, there were 2,737,000 shares of Series 1997-A
Convertible Preferred Stock (the "Preferred Shares"), $.01 par value,
outstanding. Holders of Preferred Shares are entitled to receive, if declared by
the Board, preferential cumulative quarterly cash dividends, at the greater of
the rate of 9% per annum or the dividend payable on shares of common stock. Each
Preferred Share is convertible, at the option of the holder beginning September
19, 1998, into 2.0756 shares of common stock, based on a conversion price of
$12.04 per share of common stock, subject to certain adjustments as defined in
the agreement.
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<PAGE>
The terms of the Preferred Shares provide that it will rank prior to any
other series of preferred stock, prior to common stock and prior to any other
class or series of capital stock of the Company with respect to the payment of
dividends, the right to redemption and the distribution preference in the event
of a change in ownership or the liquidation, dissolution or winding up of the
Company.
ITEM 6. SELECTED FINANCIAL DATA
- ------
The following table sets forth selected financial information regarding
the Company's financial position. This information should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements and Notes thereto.
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<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Dollars In Thousands,
Except Number of Apartment Units and Per Share Amounts)
<TABLE>
<CAPTION>
Operating Data: 1998 1997 1996 1995 1994
- -------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Rental revenue $175,965 $109,974 $89,451 $70,068 $63,222
Total revenue 182,785 115,499 93,002 74,441 68,470
Property operating expenses,
including property
management fees 77,611 50,221 42,353 33,347 31,826
Depreciation and amortization 70,827 43,315 30,172 21,984 19,507
Provision for losses on
real estate assets (1) - 1,850 7,500 - -
Interest 38,801 24,006 20,501 15,618 10,794
Non-recurring charges (2)(3)(4)(5) 1,470 - 442 1,728 2,555
Income (loss) from operations before
joint venture income (loss), gains on sales
of assets, gains on payoff of mortgage loans,
minority interest and extraordinary items (12,285) (12,037) (12,612) (1,157) 510
Joint venture income (loss) 132 (4,910) (3,009) 1,407 1,178
Gains on sales of real
estate assets 1,265 6,455 58 15,603 4,069
Minority interest in
Operating Partnership 3,370 2,154 1,403 (167) -
Extraordinary items, net (6) (478) (90) (149) (901) -
Net income (loss) (7,995) (8,429) (14,308) 14,786 5,757
Income allocated to
preferred shareholders (7) (6,158) (1,659) - - -
Net income (loss) allocated
to common shareholders (14,154) (10,088) (14,308) 14,786 5,757
Per Share Data - Common:
- ------------------------
Net income (loss)
(basic and diluted) $(.39) $(.37) $(.56) $.58 $.23
Dividends paid $.96 $.92 $.90 $.89 $.86
Weighted average common
shares outstanding 36,684,985 27,099,522 25,393,147 25,392,621 25,391,478
Weighted average preferred
shares outstanding 2,737,000 727,367 - - -
Balance Sheet Data:
- -------------------
Total assets $1,008,907 $846,420 $569,670 $486,968 $458,207
Real estate, excluding
joint ventures, before
accumulated depreciation $1,105,996 $880,652 $585,795 $465,846 $448,058
Long-term fixed rate obligations $413,953 $362,762 $206,837 $155,201 $88,279
Shareholders' equity $333,018 $368,195 $223,654 $260,788 $268,591
Other Information:
- ------------------
Apartment units owned, end of year 24,123 18,773 12,435 9,433 9,385
</TABLE>
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<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(1) The Company recorded provisions for losses on its wholly-owned retail
assets of $1,850,000 and $7,500,000 for the years ended December 31, 1997
and 1996, respectively, which represented the difference between carrying
value and estimated fair value less estimated costs to sell.
(2) The non-recurring charge in 1998 reflects the costs incurred by the Company
as a result of the evaluation of strategic alternatives. The charges are
comprised primarily of appraisal costs, investment banking fees, legal,
accounting and consulting fees. See Note A to the Consolidated Financial
Statements for additional information related to the evaluation of
strategic alternatives.
(3) Non-recurring charges in 1994 primarily represent the estimated value of
the warrants issued as settlement of litigation.
(4) The non-recurring charge in 1995 is related to costs associated with the
restructuring of the Company as an umbrella partnership real estate
investment trust.
(5) The non-recurring charge in 1996 is related to litigation related to a
property disposition.
(6) The extraordinary items in 1998, 1997, 1996 and 1995 relate to costs
associated with the refinancing or retirement of debt.
(7) On September 25, 1997, the Company sold 2,737,000 shares of Series 1997-A
Cumulative Preferred Stock. The holders of preferred stock are entitled to
receive a 9% preferential cumulative dividend, when, as and if declared by
the Board. See Note U to the Consolidated Financial Statements.
-13-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
A. Overview and Organization:
--------------------------
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere herein.
Capitalized terms used herein and not otherwise defined have the meanings
ascribed to them in the Notes to the Consolidated Financial Statements.
The Company is a real estate investment trust ("REIT") whose operations
consist primarily of the acquisition, renovation, rehabilitation, development
and operation of apartment communities located in Florida, Texas and the
Mid-Atlantic and Southeast regions of the United States. As of December 31,
1998, the Company owned 81 apartment communities consisting of 24,123 units. The
Company has 655 multifamily units under development and two parcels of land held
for future development. The Company has contracted to acquire three remaining
development properties totaling 669 units from an affiliate of Questar Builders,
Inc. The Company also entered into a Development Acquisition Agreement with
Questar Builders, Inc. which grants the Company an exclusive right to acquire
all apartment projects developed in the Mid-Atlantic Region by such affiliates
which meet the Company's acquisition and development criteria. Subsequent to
December 31, 1998, the Company acquired a newly constructed, 264-unit apartment
community for $25.5 million, the second of the four development properties the
Company had contracted to acquire from Questar Builders, Inc. (See Notes E and F
to the Consolidated Financial Statements).
UPREIT Reorganization:
----------------------
The Company reorganized as an Umbrella Partnership ("UPREIT") on May 1,
1995 when the Company contributed substantially all of its assets subject to all
liabilities to BRI OP Limited Partnership ("Operating Partnership"). The
Company, in its capacity as the Special Limited Partner and through its
ownership of Berkshire Apartments, Inc. as General Partner, owned 79.2% of the
Operating Partnership as of December 31, 1998. To facilitate the UPREIT
formation, GN Limited Partnership, an affiliate of certain officers and
directors, contributed River Oaks Apartments to the Operating Partnership in
exchange for 534,975 units in the Operating Partnership ("Units"). Units are
redeemable, at any time after one year and ten days following their issuance, on
a one for one basis for shares of common stock of the Company or, at the
Company's option, for cash. The purpose of becoming an UPREIT was to allow the
Company to offer Units in the underlying Operating Partnership in exchange for
assets from tax-motivated sellers. Under certain circumstances, the exchange of
Units for a seller's assets will defer the tax liability associated with the
sale. This structure has allowed the Company to use Units instead of stock or
cash to acquire properties, which provides an advantage over non-UPREIT
entities.
Advisor Transaction:
--------------------
Until early 1996, the Company was advised by Berkshire Realty Advisors
Limited Partnership ("Advisor"), an affiliate of certain directors and officers
of the Company. The Board of Directors determined that it was in the best
interest of the shareholders to become self-advised. Therefore, on February 28,
1996, the Board, acting on the recommendation of a Special Committee comprised
of the Independent Directors, approved the acquisition, via contribution of the
workforce and other assets of the Advisor, in exchange for 1.3 million Units
which were valued at $13 million (the "Advisor Transaction"). The acquisition
price together with related costs, was recorded as an intangible asset
associated with the workforce acquired. The contribution was completed on March
1, 1996. As of that date, all charges and expenses associated with the Advisory
Services Agreement ceased and the Company became a self-administered REIT.
In conjunction with the Advisor Transaction, additional Units, up to a
total of $7.2 million in value, may be issued during a six year period if
certain share price benchmarks are achieved. As of December 31, 1998, 209,091
additional Units have been
-14-
<PAGE>
issued as a result of achieving the $11.00 and $12.00 share price benchmarks.
(See Note C to the Consolidated Financial Statements for additional details).
Property Manager Transaction:
-----------------------------
On February 13, 1997, a Special Committee of the Board of Directors
comprised of the Independent Directors approved the acquisition of the workforce
and other assets of an affiliate of a director of the Company which provided
multifamily property management services to the Company (the "Property
Manager"). The Property Manager was contributed on February 28, 1997 in exchange
for 1.7 million Units or approximately $17.6 million in consideration as of the
pricing date.
On the date of the transaction, the Property Manager managed 57 apartment
communities, including the Company's 35 assets, and employed approximately 85
professionals, excluding site employees. As a result of this transaction, the
Company ceased payment of management fees and reimbursements to the affiliate
for the management operations of its multifamily portfolio. In addition, the
Company acquired 22 third-party management contracts, primarily with
partnerships affiliated with certain directors and officers of the Company,
which generate management fee and reimbursement revenue.
The value of the Units issued has been recorded on the balance sheet as an
intangible asset associated with the acquisition of a workforce and third-party
property management contracts. (See Note D to the Consolidated Financial
Statements for additional details).
Ownership:
----------
Executive officers and directors and their affiliates own 2.5% of the
Company's Common Stock and 12.0% of the Operating Partnership Units as of
December 31, 1998. The Company, directly and indirectly, had a 79.2% ownership
interest in the Operating Partnership as of December 31, 1998.
B. Results of Operations:
----------------------
Acquisition and disposition activity within the portfolio affects the
results of operations from period to period. The following discussion makes
comparisons as to same-store properties, multifamily communities sold and
acquired during the periods as well as development activities so as to explain
the changes in the Company's results of operations. The Company defines
same-store properties as those assets that were owned and operated in each of
the two most recent years.
Summary Overview
- ----------------
1998 to 1997
------------
The Company reflected a net loss of $7.9 million in 1998 compared to a net
loss of $8.4 million in 1997. Net loss remained relatively constant in 1998
compared to 1997 primarily because the Company's rental revenue and property
operating expenses increased in proportion to the growth of the portfolio in
1998. However, depreciation and amortization increased in greater proportion due
to increased amortization of the workforce and other intangible assets acquired
in the Advisor and Property Manager Transactions. This increase was offset by
the decrease in costs associated with the Advisor Transaction and a decrease in
provision for losses on real estate investments.
1997 to 1996
------------
The Company reflected a net loss of $8.4 million in 1997 compared to a
net loss of $14.3 million in 1996. A principal factor affecting the Company's
results was the recording of provisions for losses of $7.2 million in 1997 and
$12.0 million in 1996 on the Company's wholly-owned and joint venture retail
assets. The Company liquidated its retail portfolio over the past several years.
This divestiture strategy necessitated the valuation adjustments recorded during
1997 and 1996 which represented the difference between estimated fair value and
carrying value less estimated costs to sell (See Note F to the Consolidated
Financial Statements for additional details).
-15-
<PAGE>
The Company also incurred amortization costs related to the Advisor and
Property Manager Transactions of $8.0 million in 1997 and $1.1 million in 1996.
In 1997, an additional $2.4 million was expensed as a result of the issuance of
209,091 Units in connection with the Advisor Transaction (See Note C and D to
the Consolidated Financial Statements for additional details).
Income and Expenses
- -------------------
Rental income and property operating expenses, including repairs and
maintenance and real estate taxes increased for both periods as a result of and
in proportion to the increased weighted average number of apartment units in the
Company's portfolio. Rental revenue for the year ended December 31, 1998
increased $66.0 million or 60% over the prior year and the property operating
expenses mentioned above increased $26.2 million or 59.8% for the same period.
The average number of apartment units increased 63.3% from 1997 to 1998.
Rental revenue for the year ended December 31, 1997 increased $20.5
million or 22.9% over the prior year and property operating expenses increased
$7.0 million or 19.1% for the same period. Average apartment units increased
26.3% from 1996 to 1997. Details of the Company's apartment unit growth are set
forth below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average apartment units:
Total 22,727 13,918 11,022
Percent increase 63.3% 26.3% 23.6%
Apartment units:
Beginning of year 18,773 12,435 9,433
Acquired 5,054 6,506 3,153
Sold - (348) (223)
Completed developments 296 180 72
------ ------ -------
End of year 24,123 18,773 12,435
====== ====== =======
</TABLE>
Management fees and reimbursements increased $.6 million in 1998 and $3.2
million in 1997 due to revenue generated from third-party management contracts
which were acquired on February 28, 1997 as a result of the Property Manager
Transaction. Management fee revenue was generated for twelve months in 1998 and
ten months in 1997. (See Note D to the Consolidated Financial Statements for
additional details).
Property management fees paid to an affiliate decreased as a result of the
Property Manager Transaction in 1997 and the liquidation of the retail portfolio
in 1998 and 1997.
Property management operations, which includes salaries, benefits and
office related expenses of non-site employees involved in the management and
oversight of property operations, increased $2.1 million in 1998. Much of this
increase in operating costs was experienced in the Mid-Atlantic and Texas
regions where the majority of 1998 acquisitions occurred. Also contributing to
the increase was the impact of the Property Manager Transaction on February 28,
1997 as twelve months of expenses were incurred in 1998 compared to ten months
in 1997. Property management operations increased $4.3 million in 1997 as a
result of the Property Manager Transaction. These costs were offset by the
decrease in property management fees paid to an affiliate and the increase in
management fee revenue and expense reimbursements received from third-party
management contracts.
Interest expense increased in each of the last three years because the
Company has largely employed debt capital for acquisitions and development
activities. The following is an analysis of weighted average debt outstanding
and interest rates for each of the years presented (dollars in thousands):
-16-
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average
debt outstanding
Fixed rate $397,397 $244,597 $185,616
Variable rate 107,960 65,368 78,577
-------- -------- --------
Total $505,357 $309,965 $264,193
======== ======== ========
Weighted average
interest rates
Fixed rate 7.68% 7.74% 7.47%
Variable rate 6.77% 6.62% 6.73%
</TABLE>
In 1998 and 1997, average fixed rate debt increased approximately $153
million and $59 million, respectively, primarily due to debt which was assumed
in connection with the acquisitions of apartment communities.
The following represents total debt and weighted average cost of debt
(coupon interest rate plus amortization of financing costs) at December 31, 1998
and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997
---------------------------- ----------------------------
Balance Weighted Balance Weighted
Outstanding Average Cost Outstanding Average Cost
<S> <C> <C> <C> <C>
Fixed rate $413,953 7.96% $362,762 8.04%
Variable rate (1) 158,746 7.21% 18,048 6.98%
-------- --------
$572,699 $380,810
======== ========
</TABLE>
(1) The Company entered into a five-year interest rate swap agreement
with a bank in November, 1995. The swap contract is for a $40 million
notional contract fixing variable rate exposure on that amount at
6.06%.
Depreciation and amortization increased $22.5 million in 1998 and $13.1
million in 1997 due to an increased property asset base in both periods.
Amortization of workforce acquired associated with the Advisor Transaction
in 1996 and Property Manager Transaction in 1997 increased $5.0 million in 1998
and $6.9 million in 1997. The increase in 1998 was primarily due to twelve
months of amortization expenses incurred in 1998 compared to ten months in 1997.
General and administrative expenses increased $412,000 in 1998 primarily
due to increased employee salaries, benefits, administrative and office related
expenses incurred as a result of the acquisition of the Questar portfolio.
General and administrative expenses increased $1.4 million in 1997 due to a full
year of salary and benefit costs along with administrative and office expenses
associated with the workforce acquired through the Advisor Transaction in 1997
compared to ten months in 1996. In addition, due to the growth of the real
estate portfolio and the expansion of the investor base, the Company experienced
increased audit, legal and investor related expenses in 1998 and 1997.
Costs associated with evaluation of strategic alternatives represents
appraisal costs, investment banking fees, legal, accounting and consulting fees
related to the Company's preparation of a Plan of Liquidation and evaluation of
other strategic alternatives. See Note A to the Consolidated Financial
Statements for additional information.
Non-recurring charges of $442,000 recorded in 1996 represent costs
associated with the settlement of litigation on an asset sold in January 1994.
In 1995, non-recurring charges of $1.7 million related to the costs associated
with reorganizing as an UPREIT.
Costs associated with the Advisor Transaction of $2.4 million were
incurred in 1997 as the Company achieved certain share price benchmarks (See
Note C to the Consolidated Financial Statements) resulting in the issuance of
209,091 Units.
-17-
<PAGE>
Provisions for losses on real estate investments of $1.9 million in 1997
and $7.5 million in 1996 were incurred as the Company recorded valuation
provisions on its retail assets which represented the difference between
carrying value and estimated fair value less costs to sell.
Joint venture income (loss) recorded in 1997 and 1996 resulted from
provisions for losses recorded by the joint ventures of $10.7 million in 1997
and $9.0 million in 1996 which represented the difference between the carrying
value of the assets and estimated fair value less costs to sell. The Company's
pro-rata share of these provisions was $5.4 million in 1997 and $4.5 million in
1996.
Gain on sales of assets was $1.3 million in 1998 due to the sales of three
retail assets and one parcel of land. In 1997, the Company realized a gain of
$6.5 million from the sale of one multifamily asset and two retail assets which
were sold at their carrying values.
Extraordinary items for 1998, 1997 and 1996 represents termination fees
and write offs of deferred mortgage costs associated with the refinancing or
retirement of debt.
C. Funds from Operations (FFO) (adjusted for Operating Partnership Units)
Management and industry analysts generally consider Funds from Operations
("FFO"), to be an appropriate measure of the performance of an equity REIT,
along with net income and cash flows from operating activities, financing
activities and investing activities. The Company's FFO is presented to assist
investors in analyzing the Company's ongoing operating cash flows which support
dividends and securing capital expenditures. However, FFO should not be
considered by the reader as a substitute to net income as an indicator of the
Company's operating performance or to cash flows as a measure of liquidity. The
Company believes that in order to facilitate a clear understanding of the
operating results of the Company, FFO should be analyzed in conjunction with net
income (loss) as presented in the Consolidated Financial Statements and
information presented elsewhere. FFO is determined in accordance with a
resolution adopted by the Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT"), and is defined as net income (loss)
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. The methodology used by the
Company when calculating FFO may differ from that of other equity REIT's and,
therefore, may not be comparable to such other REIT's. In addition, FFO does not
represent amounts available for management's discretionary use for needed
capital replacement or expansion, debt service obligations or other commitments.
The following table presents the Company's FFO for the years ended
December 31: (dollars in thousands)
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Loss from operations before joint venture
income (loss), gains on sales
of assets, minority interest
and extraordinary items $ (12,285) $(12,037)
Joint venture net operating income 82 2,236
Amortization of intangible assets 13,032 8,043
Costs associated with
Advisor Transaction - 2,400
Depreciation 57,503 35,228
Provision for losses on
real estate investments - 1,850
Non-recurring charges 1,470 -
Income allocated to
preferred shareholders (6,158) (1,659)
--------- --------
Funds from Operations (basic) $ 53,644 $ 36,061
========= ========
Funds from Operations (diluted) $ 59,802 $ 37,720
========= ========
</TABLE>
-18-
<PAGE>
<TABLE>
<S> <C> <C>
Cash flows provided by (used for):
Operating activities $ 69,013 $ 38,215
Investing activities $(126,924) $(96,495)
Financing activities $ 60,419 $ 61,123
Weighted Average (basic):
Shares 36,684,985 27,099,522
Units 8,830,149 5,922,173
---------- ----------
Total 45,515,134 33,021,695
========== ==========
Weighted Average (diluted):
Shares 42,429,175 28,698,640
Units 9,453,098 6,162,365
---------- ----------
Total 51,882,273 34,861,005
========== ==========
</TABLE>
FFO increased in 1998 and in 1997 primarily due to improved operations
from the same-store apartment communities in addition to the factors discussed
previously in Results of Operations.
D. Net Operating Income
--------------------
The Company evaluates the performance of its multifamily properties based
upon net operating income ("NOI"). NOI is defined by the Company as rental
revenue less property operating expenses, including repairs and maintenance
and real estate taxes. Accordingly, NOI excludes non-property revenue and
expenses included in the determination of net income.
Same-Store Apartment Communities
- --------------------------------
The Company defines same-store apartment communities as those assets that
were owned and operated in each of the two most recent years. The Net Operating
Income ("NOI") of the 35 communities aggregating 12,528 units which are
considered same-store is summarized as follows (dollars in thousands, except for
average monthly rent):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1998 1997 Change
---- ---- ------
<S> <C> <C> <C>
Revenue $100,995 $95,929 5.3%
Expenses 39,830 39,609 .6%
-------- -------
Net Operating Income $ 61,165 $56,320 8.6%
======== =======
Capital Expenditures(1) $ 6,718 $ 4,085
Average occupancy 95.6% 94.1%
Average monthly rent
per unit $696 $675
</TABLE>
(1) Represents capital expenditures of a recurring nature which are
appropriately capitalizable.
Growth in same-store multifamily revenue was approximately 5.3% for the
twelve months ended December 31, 1998 when compared to the same period ended
December 31, 1997. Rent increases accounted for 3.1% of the growth while the
remaining revenue gain was generated from increased occupancy. Occupancy at
December 31, 1998 was 96.4% for same-store assets.
-19-
<PAGE>
E. Liquidity and Capital Resources
-------------------------------
The Company's net cash provided by operating activities increased $30.8
million in 1998 and $11.0 million in 1997 primarily due to net operating income
growth due to increased weighted average apartment units in 1998 and 1997.
Additionally, the Company's same-store multifamily communities generated an 8.6%
increase in net operating income in 1998.
Net cash used in investing activities increased $30.4 million in 1998 and
$60.1 million in 1997. The increase in 1998 was primarily due to increased
expenditures for acquisition and development of multifamily communities of $8.5
million. Additionally, as a result of the overall growth of the portfolio,
rehabilitative and recurring capital expenditures increased $18.3 million over
the prior year. Also contributing to the net increase in cash used in investing
activities was the decrease in proceeds received from the sales of properties
and joint venture assets of $14.3 million in 1998. The increase in 1997 was
primarily due to acquisitions of multifamily communities and development
activity of $61.4 million. These increases were partially offset by proceeds of
$11.5 million from sales of properties and joint venture investments and
proceeds from the payoff of mortgage loans.
The Company's net cash provided by financing activities decreased $.7
million in 1998. Borrowings, net of payments, increased $203.8 million. The
increased borrowings were offset by increased principal payments on mortgage
notes payable of $13.8 million, increased dividends and distributions of $19.6
million and decreased proceeds from preferred and common stock offerings of
$169.0 million. The Company's net cash provided by financing activities
increased $56.0 million in 1997 primarily due to net proceeds received from the
Company's preferred and common stock offerings of $169.0 million, offset by net
reductions of the Company's borrowings of $77.8 million.
Cash flows from operations, debt financing and sales of assets are the
primary sources of liquidity employed by the Company. In addition, in 1997, the
Company raised capital through a private placement of preferred stock and a
public offering of common stock, the proceeds of which were used to acquire
multifamily properties and to paydown variable rate debt. Operating cash flows
are earmarked for the payment of dividends as well as capital expenditures of a
recurring nature. Debt financing, proceeds from asset sales and issuance of
stock and Units have historically been used to finance the acquisition,
renovation, rehabilitation and development of apartment communities.
The Company manages both interest rate risk and maturity risk. Through
the use of an interest rate swap agreement, the Company has hedged interest rate
risk on 25.2% of its outstanding variable rate debt as of December 31, 1998.
Additionally, the Company has spread its maturities on long-term debt and had
weighted average maturities of 13.9 years as of December 31, 1998.
In each of the previous three years, the Company paid between 81% and 86%
of FFO in common dividends, retaining the balance for recurring capital
expenditures and working capital. The Company expects to increase both FFO and
common dividends in the future but will strive to gradually reduce the payout
ratio so as to utilize more internally generated funds for growth. On February
11, 1999, the Board approved a dividend of $.25 per share payable on May 15,
1999 to the shareholders of record on May 1, 1999.
The Company has a policy to maintain leverage at or below 50% of
reasonably estimated value of assets. By employing moderate leverage ratios, the
Company can continue to generate sufficient cash flows to operate its business
as well as sustain dividends to shareholders.
The Company plans to use equity capital, in the form of OP Units, common
stock or preferred stock when the Company identifies the opportunities to invest
the proceeds in assets that the Company expects will increase shareholder
returns.
The Company has adequate sources of liquidity to meet its current cash
flow requirements, including dividends and debt service. In order to fund
ongoing renovation, rehabilitation and development activities, the Company has
at its disposal unadvanced
-20-
<PAGE>
commitments under credit facilities, and if necessary, could generate net
proceeds from the sale of certain assets.
F. Business Conditions/Litigation
------------------------------
Changes in the national and regional economic climates, changes in local
real estate conditions, such as competition from other multifamily housing,
single family housing and increased development activity, increased operating
costs, changes in zoning, building, environmental, rent control and other laws
and regulations, the costs of compliance with current and future laws, changes
in real property taxes and unusual occurrences (such as earthquakes and floods)
and other factors beyond the control of the Company may adversely affect the
income from, and value of, the Company's properties.
The Company believes that favorable economic conditions exist in
substantially all of its real estate markets. For the Company's same-store
apartment communities, physical occupancy was 96.4% as of December 31, 1998.
Physical occupancy for the total multifamily portfolio, including recently
acquired assets, was 95.3% at December 31, 1998. In addition, the Company has
rental rates at its properties that are competitive in their respective markets.
The Company expects solid performance from its real estate assets in the future;
however, no assurances can be made in this regard.
The Company is also involved in legal actions and claims in the ordinary
course of business. It is the opinion of management and its legal counsel, that
such litigation and claims should be resolved without material effect on the
Company's financial position.
G. Year 2000
---------
The Year 2000 compliance issue concerns the inability of computerized
information systems to accurately calculate, store or use a date after 1999.
This could result in a system failure or miscalculations causing disruptions of
operations. The Year 2000 issue affects virtually all companies and all
organizations. The Company has conducted an assessment of its core internal and
external computer information systems and has taken the further necessary steps
to understand the nature and extent of the work required to make its systems
Year 2000 compliant in those situations in which the Company is required to do
so.
In this regard, the Company began a computer systems project in 1997 to
significantly upgrade its existing hardware and software. The Company completed
the testing and conversion of the financial accounting and property operating
systems in February, 1998. As a result, the Company has generated operating
efficiencies and believes it has remedied the programming issues associated with
the Year 2000. The Company incurred hardware costs as well as consulting and
other expenses related to infrastructure and facilities enhancements necessary
to complete the upgrade and prepare for the Year 2000. The Company's cost of the
systems conversion was approximately $600,000 and has been capitalized and is
being amortized over five years.
The Company is currently in the process of identifying, evaluating and
remedying its Year 2000 compliance issues with respect to its non-financial
systems, such as computer controlled elevators, boilers, chillers or other
miscellaneous systems. The Company has completed its Year 2000 compliance
initiatives at some of its properties and is in the process of completing these
initiatives at others. Based on its identification and assessment efforts to
date, the Company believes that certain of the computer equipment and software
it currently uses will require modification or replacement. However, the Company
does not believe that the future efforts to achieve its Year 2000 compliance
initiatives will result in material cost to the Company or significantly
interrupt services or operations.
The Company is in the process of evaluating the potential adverse impact
that could result from the failure of material third-party service providers
(including but not limited to its banks and telecommunications providers) and
significant vendors to be Year 2000 compliant. No estimate can be made at this
time as to the impact of the readiness of such third parties. However, if any of
the third party service providers
-21-
<PAGE>
ceases to conduct business due to Year 2000 related problems, the Company
expects to be able to contract with alternate providers without experiencing any
material adverse effect on the Company's financial condition and results of
operations.
Management does not believe that the Year 2000 problems will have a
material adverse effect on the Company's financial condition or results of
operations. Such belief is based on our analysis of the risks to the Company
related to its potential Year 2000 problems and its assessment of the Year 2000
problems of our third party service providers. In any event, the Company expects
to perform an analysis of the operational problems and costs (including loss of
revenues) that would be reasonably likely to result, in a worst case scenario;
from the failure by the Company and certain third party service providers to
achieve Year 2000 compliance on a timely basis. To date, a contingency plan has
not been developed for dealing with the most reasonably likely worst case
scenario, however, the Company currently plans to complete such analysis and
contingency planning.
H. Recently Issued Accounting Standards
------------------------------------
Financial Accounting Standards Board Statement No. 131 ("FAS 131")
"Disclosures about Segments of an Enterprise and Related Information"
establishes standards for disclosing measures for profit or loss and total
assets for each reportable segment. FAS 131 is effective for fiscal years
beginning after December 15, 1997. Financial Accounting Standards Board
Statement No. 132 ("FAS 132") "Employers' Capital Disclosures about Pensions and
Other Postretirement Benefits" is effective for fiscal years beginning after
December 15, 1997, although earlier application is encouraged. FAS 132
establishes standards related to the disclosure requirements for pensions and
other postretirement benefits. Financial Accounting Standards Board Statement
No. 133 ("FAS 133") "Accounting for Derivatives" is effective for fiscal years
beginning after June 15, 1999. FAS 133 establishes standards related to the
accounting and disclosure requirements of derivative financial instruments.
Effective March 19, 1998, the Company has adopted the Emerging Issues Task
Force ruling 97-11 ("EITF 97-11") entitled "Accounting for Real Estate Property
Acquisitions". EITF 97-11 provides that real estate companies must expense, as
incurred, the internal costs of identifying and acquiring operating property.
The Company implemented FAS 131 and FAS 132 in 1998 and will adopt FAS 133
in the year 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------- ----------------------------------------------------------
The table below provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates, including interest rate swaps and debt obligations.
For fixed rate debt obligations, the table presents principal cash flows
and related weighted average interest rates by expected maturity dates. For
variable rate debt obligations, the table presents principal cash flows by
expected maturity date and contracted interest rates as of the report date. For
the interest rate swap, the table presents notional amount and interest rate by
the expected (contractual) maturity date. Notional amounts are used to calculate
the contractual payments to be exchanged under the contract. The variable
interest rate represents the contractual LIBOR rate as of the reporting date.
<TABLE>
<CAPTION>
December 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------
Expected Maturity Date
----------------------------------------------------------------------------------------------
There- Face Fair
1999 2000 2001 2002 2003 After Value Value
---- ---- ---- ---- ---- ----- ----- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt obligations
Long-term debt:
Fixed rate - - 75,560 16,900 24,619 150,649 413,953 413,953
Average interest
rate - - 8.40% 6.41% 7.39% 7.71%
</TABLE>
-22-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable rate
bond financing - - - - 4,436 6,500 12,283 12,283
Average interest
rate - - - - 5.66% 4.79%
Lines of credit 11,363 135,100 - - - - 146,463 146,463
Average interest
rate 6.88% 6.84% - - - -
Interest rate
derivatives
Interest rate swap:
Notional amount - 40,000 - - - -
Pay rate - 6.06% - - - -
Receive rate - 5.40% - - - -
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -------
See Appendix A of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- ------
None.
-23-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------
The Company's organizational documents provide that the number of
directors constituting the Board shall be fixed by resolution duly adopted by
the Board and that the Board shall be divided into three classes as nearly equal
in number as possible. The term of the class one directors expires at the annual
meeting of shareholders of the Company to be held in 2000, the term of the class
two directors expires at the annual meeting of shareholders of the Company to be
held in 2001, and the term of the class three directors expires at the annual
meeting of shareholders of the Company to be held in 1999. The directors elected
at each annual meeting will serve for a term of three years and until their
successors are duly elected and qualified, with one class to be elected each
year at the annual meeting of shareholders. Holders of Preferred Stock, voting
as a separate class, are entitled to elect one director to the Board of
Directors. Such director will be a class three director whose term expires in
1999. The Board in nominating future directors will maintain a majority of
Independent Directors.
The directors and executive officers of the Company as of March 5, 1999
were as follows:
<TABLE>
<CAPTION>
Date Initially
Name and Age Class Offices Held Elected
------------ ----- ------------ --------------
<S> <C> <C> <C>
Douglas Krupp (52) 3 Chairman of the Board February 8, 1996
and Director
David Marshall (51) 1 President, Chief Executive
Officer and Director March 1, 1996
*J. Paul Finnegan (74) 1 Director October 17, 1990
*Charles N. Goldberg (57) 3 Director October 17, 1990
*E. Robert Roskind (54) 2 Director October 17, 1990
*David M. deWilde (58) 1 Director March 8, 1993
*Terrance R. Ahern (43) 2 Director October 9, 1997
*Paul D. Kazilionis (41) 3 Director October 9, 1997
*Arthur P. Solomon (59) 2 Director October 9, 1997
Ridge Frew (50) Executive Vice President and
Chief Operating Officer February 28, 1997
Marianne Pritchard (49) Executive Vice President and
Chief Financial Officer August 15, 1991
David Olney (38) Executive Vice President and
Chief Investment Officer March 1, 1996
Dennis Suarez (45) Senior Vice President March 1, 1996
Kenneth J. Richard (43) Senior Vice President and
Chief Accounting Officer May 13, 1997
James Jackson (64) Vice President February 28, 1997
Scott D. Spelfogel (38) Secretary May 7, 1991
</TABLE>
*Independent Directors
Douglas Krupp co-founded and serves as Co-Chairman and Chief Executive
Officer of The Berkshire Group, an integrated real estate financial services
firm engaged in real estate acquisition, investment sponsorship, mortgage
banking, venture capital investing and financial management. Mr. Krupp has held
the position of Co-Chairman since The Berkshire Group was established as The
Krupp Companies in 1969 and he has served as the Chief Executive Officer since
1992. Mr. Krupp is a Trustee of Krupp Government Income Trust and Krupp
Government Income Trust II, and a member of the Board of Trustees at Brigham &
Women's Hospital. He is a graduate of Bryant College where he received an
honorary Doctor of Science in Business Administration in 1989 and was elected
trustee in 1990.
David Marshall was elected President of the Company on March 5, 1996 and
Chief Executive Officer on February 28, 1997. He was President of Berkshire
Realty
-24-
<PAGE>
Affiliates, the former advisor to the Company and a member of The
Berkshire Group from January, 1995 until March, 1996. Before joining The
Berkshire Group in July, 1986, Mr. Marshall was President of Resource Savings
Association. Prior to that, Mr. Marshall served as a Vice President of Citicorp
Real Estate, Inc. He holds a B.S. degree from Michigan State University and a
M.B.A. degree from the University of Michigan.
J. Paul Finnegan retired as a partner of Coopers & Lybrand, LLP in 1987.
Since then, he has been engaged in business as a consultant, a director and
arbitrator. Mr. Finnegan holds a B.A. degree from Harvard College, a J.D. degree
from Boston College Law School and an A.S.A. degree from Bentley College. Mr.
Finnegan currently serves as a Trustee of Krupp Government Income Trust and as a
Trustee of Krupp Government Income Trust II. He is also currently a Director at
Scituate Federal Savings Bank. Mr. Finnegan is a Certified Public Accountant and
an attorney.
Charles N. Goldberg is of counsel to the law firm of Broocks, Baker &
Lange, L.L.P. Prior to joining Broocks, Baker & Lange, L.L.P., Mr. Goldberg was
a partner in the law firm of Hirsch & Westheimer from March of 1996 to December
of 1997. Prior to Hirsch & Westheimer, he was the Managing Partner of Goldberg
Brown, Attorneys at Law from 1980 to March of 1996. He currently serves as a
Trustee of Krupp Government Income Trust and Krupp Government Income Trust II.
He received a B.B.A. degree and a J.D. degree from the University of Texas. He
is a member of the State Bar of Texas and is admitted to practice before the
U.S. Court of Appeals, Fifth Circuit and U.S. District Court, Southern District
of Texas.
E. Robert Roskind is the Chairman and Co-Chief Executive Officer of
Lexington Corporate Properties, a self-administered REIT, the shares of which
are listed on the NYSE. Mr. Roskind has served in this capacity since October
1993. Mr. Roskind is also the Managing Partner of The LCP Group, a real estate
investment firm based in New York, the predecessor of which he co-founded in
1974. He currently serves as a trustee of Krupp Government Income Trust and
Krupp Government Income Trust II and Chairman of the Board of Trustees of
Lexington Corporate Properties. He holds a B.A. degree from the University of
Pennsylvania and a J.D. degree from Columbia Law School. He has been a member of
the New York Bar since 1970.
David M. deWilde has been a Managing Partner of LAI Worldwide, an
executive search firm headquartered in New York City, since January 1998. Prior
to that he was Chief Executive Officer of Chartwell Partners International,
Inc., an executive search firm headquartered in San Francisco, which was founded
by Mr. deWilde in 1989. Previously, Mr. deWilde was Managing Director of Boyden
International, Inc. Mr. deWilde is currently on the Board of Directors of
Silicon Valley Bancshares. Mr. deWilde was Executive Vice President for Policy
and Planning of the Federal National Mortgage Association from 1981 until 1983.
His prior public service roles included President of the Government National
Mortgage Association, Deputy Commissioner of the Federal Housing Administration
and Deputy Assistant Secretary of the Department of Housing and Urban
Development. Mr. deWilde's private sector background includes investment banking
experience both as Managing Director of Lepercq de Neuflize & Co. from 1977
until 1981, and with Lehman Brothers, Inc., and legal experience. He holds an
A.B. degree from Dartmouth College, a L.L.B. degree from the University of
Virginia and a M.S. degree in Management from Stanford University.
Terrance R. Ahern is a co-founder and principal of The Townsend Group, an
institutional real estate consulting firm formed in 1986 which represents
primarily tax-exempt clients such as public and private pension plans,
endowment, foundation and multi-manager investments. Mr. Ahern is a member of
the Board of Directors of the Pension Real Estate Association (PREA). He was
formerly a member of the Board of Governors of the National Association of Real
Estate Investment Trusts (NAREIT). Prior to founding The Townsend Group, Mr.
Ahern was a Vice President of a New York based real estate investment firm and
was engaged in the private practice of law. Mr. Ahern received a B.A. and J.D.
from Cleveland State University.
Paul D. Kazilionis is a managing principal and a co-founder of Westbrook
Partners, L.L.C., an investment advisor to institutional investors. Prior to
co-founding Westbrook in March 1994, Mr. Kazilionis spent 12 years at Morgan
Stanley ultimately serving as Managing Director of Morgan Stanley Realty and
President of the general
-25-
<PAGE>
partner of the Morgan Stanley Real Estate Fund responsible for Morgan Stanley
principal investing in real estate. Mr. Kazilionis received a B.A. degree from
Colby College in 1979 and a M.B.A. degree from the Amos Tuck School of Business
Administration in 1982.
Arthur P. Solomon is a Managing Director of Lazard Freres & Co. LLC and
has been head of the firm's Real Estate Group since 1989. Previously, Mr.
Solomon was a Managing Director and head of real estate investment banking at
Drexel Burnham Lambert from 1985 to 1989. Before that, he was Chief Executive
Officer of the predecessor of The Berkshire Group from 1983 to 1985 and
Executive Vice President and Chief Financial Officer of the Federal National
Mortgage Association from 1981 to 1983. Mr. Solomon also was a tenured faculty
member at Massachusetts Institute of Technology specializing in urban economics,
housing and finance, and at the same time served as the Executive Director of
the Harvard-MIT Joint Center for Urban Studies. He served on the President's
Task Force on Domestic and Intergovernmental Affairs during the Johnson
Administration. He holds a B.A. from Brown University, an M.A. from Trinity
College and a Ph.D. in Economics from Harvard University.
Ridge B. Frew is the Executive Vice President and Chief Operating Officer
for the Company and is responsible for the management of the Company's
multifamily property portfolio located primarily in the Mid-Atlantic and
Southeast regions of the United States, Florida and Texas. Prior to that, he was
a Divisional Vice President with Berkshire Property Management. Before joining
Berkshire Property Management in April, 1992, Mr. Frew was President and Chief
Executive Officer of McKinley Properties, responsible for the management and
disposition of over 14,000 residential units and five million square feet of
commercial space located in 16 states. Prior to that, he served as Vice
President of Olind Jenni Properties and Director of Property Management for
Nevada Savings and Loan. Mr. Frew received his B.A. degree from the University
of Nevada.
Marianne Pritchard is the Executive Vice President and Chief Financial
Officer of the Company. Prior to joining the Company, she was Senior Vice
President and Chief Financial Officer of Berkshire Realty Affiliates, the
advisor and property manager for the Company and several affiliated real estate
investment and mortgage companies. Prior to that, she was Vice-President and
Controller of Liberty Real Estate Group, a subsidiary of Liberty Mutual
Insurance Company from July 1989 to August 1991. She received her B.B.A. degree
in Accounting from the University of Texas. She is a Certified Public
Accountant.
David J. Olney is the Executive Vice President and Chief Investment
Officer with responsibility for all acquisitions, property sales, finance and
other asset management activities for the Company. Previously, he held a similar
position with The Berkshire Group and has held several positions within The
Berkshire Group since April, 1986. Mr. Olney received a B.S. degree specializing
in Finance from Bryant College and a M.B.A. degree from Babson College.
Dennis Suarez has been Senior Vice President of Development since March 1,
1996. Prior to being elected to this position on March 1, 1996, he served in a
similar position with Berkshire Multifamily Development Corporation, a member of
The Berkshire Group, and was responsible for all development activities. Prior
to joining Berkshire Multifamily Development Corporation in January, 1994, he
was Vice President of Construction for Lane Management, Realty Construction
Corp. He earned Bachelors degrees in Architecture and Building Construction from
the University of Florida, and a B.A. degree in Interior Design from Southern
College.
Kenneth J. Richard is the Senior Vice President of Finance and Accounting
and Chief Accounting Officer for the Company. Prior to his joining the Company
in 1997, he was Vice President and Treasurer for The Beacon Companies, a
developer, owner and manager of commercial properties, from 1994 to 1997. Prior
to joining The Beacon Companies, Mr. Richard was Vice President and Chief
Financial Officer of The Codman Company, Inc., a real estate brokerage and
management firm in Boston, from 1991 to 1994. Mr. Richard holds a B.S. degree in
Business Administration from Northeastern University. Mr. Richard is a Certified
Public Accountant.
-26-
<PAGE>
James Jackson has been the Vice President of Human Resources for the
Company since February 28, 1997. Prior to being elected to this position, he
held a similar position with The Berkshire Group since March, 1987. Prior to
that, he held the positions of Vice President of Human Resources for Helix
Technology and GSX Corporation. He received an A.B. degree from Brown
University, a M.S. degree from Union College, and a J.D. degree from Harvard Law
School. He is admitted to the bar in Illinois, Massachusetts and Florida.
Scott D. Spelfogel is the Secretary of the Company. He is also the Senior
Vice President and General Counsel to The Berkshire Group. Before joining The
Berkshire Group in November 1988, he was in private practice in Boston. He
received a B.S. degree in Business Administration from Boston University, a J.D.
degree from Syracuse University's College of Law, and a L.L.M. degree in
Taxation from Boston University Law School. He is admitted to the bar in
Massachusetts and New York.
There are no family relationships amongst the directors and executive
officers.
-27-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table provides compensation information for the Company's
Chief Executive Officer and the four most highly compensated Executive Officers
other than the Chief Executive Officer (the "Named Executive Officers") whose
salary and bonus exceeded $100,000 for the years ended December 31, 1998, 1997
and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term All Other
Compensation Compensation
Annual Compensation (1) Awards ($)(2)
--------------------------------------------------- ------------ ------------
Other Securities
Name and Bonus Annual Underlying
Principal Position Year Salary($) ($)(2) Compensation (3) Options(#)
------------------ ---- --------- ------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
David Marshall 1998 344,053 165,750 50,000 210,000 4,045
President, Chief 1997 325,000 198,120(5) 100,000 - 4,221
Executive Officer 1996 272,500 113,100 - 200,000 -
And Director (4)
Ridge Frew 1998 195,845 66,211 25,000 - 2,790
Executive Vice 1997 152,290 55,500 - 60,000 1,740
President and Chief 1996 N/A N/A N/A N/A N/A
Operating Officer (6)
Marianne Pritchard 1998 191,399 74,000 25,000 - 1,000
Executive Vice 1997 160,804 81,000 - 21,000 1,000
President and Chief 1996 131,623 46,158 - 40,000 -
Financial Officer
David Olney 1998 157,558 172,510 25,000 - 3,750
Executive Vice 1997 150,000 115,500 - 15,000 2,902
President of Acquisition 1996 125,685 83,260 - 40,000 -
and Chief
Investment
Officer
Stephen Gorn 1998 285,577 - - - -
President of Mid- 1997 27,500 - - - -
Atlantic Division (7) 1996 N/A N/A N/A N/A N/A
</TABLE>
(1) The Annual Compensation amounts for 1996, for all officers other than Mr.
Frew and Mr. Gorn reflect ten months of compensation due to the Company
becoming self-administered on March 1, 1996. Prior to March 1, 1996, all of
the Executive Officers of the Company were employees of the Advisor and were
compensated for their services (including services provided to the Company)
by the Advisor. Therefore, the Executive Officers did not receive any direct
remuneration from the Company, including options, stock appreciation rights,
or rights under any long-term incentive plan. See Note 6, below, with
respect to Mr. Frew and Note 7 with respect to Mr. Gorn.
(2) Includes matching contributions made by the Company under its Supplemental
Executive Retirement Plan and 401(k) Plan. Mr. Marshall's amount also
includes $596 representing the amount paid for split-dollar life insurance
premiums.
(3) Represents forgiveness of the principal amount of the Stock Purchase Loans
made to Mr. Marshall on February 28, 1997 and Messrs. Frew and Olney and Ms.
Pritchard on January 2, 1998. (See Note P to the Consolidated Financial
Statements for additional details related to the Stock Purchase Loans).
(4) Mr. Marshall was appointed as the Chief Executive Officer on February 28,
1997, therefore compensation information prior to that date reflects his
compensation while serving as President only.
(5) Includes $3,120 representing a bonus payment in lieu of payment of term life
insurance premiums.
(6) Mr. Frew's compensation only reflects the period from March 1, 1997 through
December 31, 1998. Prior to March 1, 1997, Mr. Frew was an employee of the
company that performed property management services (the "Property Manager")
for the Company and was compensated for his services (including services
provided to the Company) by the Property Manager. Therefore, Mr. Frew did
not receive any direct remuneration from the Company, including options,
stock appreciation rights, or rights under any long-term incentive plan
prior to March 1, 1997.
-28-
<PAGE>
(7) Mr. Gorn's compensation only reflects the period from November 14, 1997, his
date of hire, through December 31, 1998. Mr. Gorn did not receive any direct
remuneration from the Company, including options, stock appreciation rights,
or rights under any long-term incentive plan prior to November 14, 1997. Mr.
Gorn's employment with the Company was terminated on February 26, 1999.
The Company has entered into employment agreements with the Chief
Executive Officer and the Named Executive Officers as stated below.
The employment agreements for Mr. Marshall and Ms. Pritchard commenced on
March 1, 1996 and were to continue until December, 31, 1998. In September, 1998,
Mr. Marshall's and Ms. Pritchard's agreements were amended to provide for
increased severance benefits in the event of a "change of control" as defined in
the agreements. The terms of the agreements were automatically extended,
pursuant to the provisions of the agreements, until December 31, 1999. The
amended agreements provide for a minimum annual base salary of $331,500 and
$185,000, respectively. Such salaries may be increased at the sole discretion of
the Board of Directors. Pursuant to the terms of the amended agreements, if
either of the employment agreements are terminated by the Company other than for
cause, the employee is entitled to receive all accrued but unpaid salary. In
addition, certain termination payments are required. Mr. Marshall's agreement
provides for eighteen monthly payments of one-twelfth of the base salary in
effect at the date of termination and one-twelfth of the target bonus for the
year in which the termination occurs (the "Monthly Severance Payments"), and Ms.
Pritchard's agreement provides for nine Monthly Severance Payments. In the event
of termination due to a change of control of ownership of the Company, Mr.
Marshall's agreement provides for a lump-sum severance payment equal to
thirty-six times the Monthly Severance Payment and Ms. Pritchard's agreement
provides for a lump-sum severance payment equal to twenty-four times the Monthly
Severance Payment.
The Company entered into employment agreements with Messrs. Olney and Frew
commencing on March 1, 1997 and continuing through December 31, 1998. In
September, 1998, Mr. Olney's and Mr. Frew's agreements were amended to provide
for increased severance benefits in the event of a "change of control" as
defined in the agreements. The terms of the agreements were automatically
extended, pursuant to the provisions of the agreements, until December 31, 1999.
The amended agreements provide for minimum annual base salaries of not less than
$153,000 for Mr. Olney and $188,700 for Mr. Frew. Such salaries may be increased
by the Board of Directors in its sole discretion. If either of the employment
agreements are terminated by the Company other than for cause, the employee is
entitled to receive all accrued but unpaid salary. In addition, certain
termination payments are required. Each agreement provides for nine Monthly
Severance Payments and in the event of termination due to a change of control of
ownership of the Company, each agreement provides for a lump-sum severance
payment equal to twenty-four times the Monthly Severance Payment.
Pursuant to the Questar Transaction, the Company entered into a five-year
employment agreement with Stephen Gorn which commenced on November 14, 1997 and
provided for annual base salary of $275,000. Further, upon termination the
agreement provided for payments in the amount of five years pay reduced by any
salary payments previously paid. In February, 1999, Mr. Gorn's employment with
the Company was terminated and the Company paid Mr. Gorn a payment of $1,002,955
representing five years pay reduced by salary previously paid.
-29-
<PAGE>
The following table provides option information for the Company's Chief
Executive Officer and the top four Executive Officers as of December 31, 1998.
No options have been exercised by the Executive Officers as of December 31,
1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
For Option Term (1)
Individual Grants (in thousands)
--------------------------------------------------------------------- ---------------------------
% of Total
Options
Number of Granted to
Securities Employees
Underlying in Fiscal Exercise Expiration
Name Options Year Price Date 5%($) 10%($)
- ---- ---------- ---------- -------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
David Marshall 97,400 18% 11.88 2/12/08 728 1,844
112,600 21% 11.88 5/21/08 829 2,111
Ridge Frew - N/A N/A N/A N/A N/A
Marianne Pritchard - N/A N/A N/A N/A N/A
David Olney - N/A N/A N/A N/A N/A
Stephen Gorn - N/A N/A N/A N/A N/A
</TABLE>
(1) Values calculated using 5% and 10% annual rates of appreciation of stock
price over the option term less original exercise price.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options at Options at
Fiscal Year- Fiscal Year-
Shares Value End (#) End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- ---- ------------ -------- ------------- -------------
<S> <C> <C> <C> <C>
David Marshall 0 0 312,600/97,400 0/0
Ridge Frew 0 0 36,000/24,000 0/0
Marianne Pritchard 0 0 47,000/14,000 0/0
David Olney 0 0 45,000/10,000 0/0
Stephen Gorn 0 0 0 0/0
</TABLE>
Independent Directors are entitled to receive compensation from the Company
for serving as Directors at the rate of $25,000 per year, subject to increases
with the prior approval of the Board of Directors. During 1998, all directors
received $25,000 for their services. During 1997, Directors deWilde, Roskind,
Finnegan, and Goldberg, each received $25,000 for their services. Directors
Ahern, Kazilionis and Solomon received $6,250 for their services as they were
elected on October 9, 1997 and therefore, did not serve a full year on the
Board. During 1996, 1995, 1994 and 1993, each Independent Director received
$25,000 for his services, except for Mr. deWilde, who was elected during 1993
and received $18,750 during 1993.
On August 14, 1997, the shareholders approved the adoption of the Berkshire
Realty Company, Inc. Directors Retainer Fee Plan (the "Fee Plan") which allows
non-employee directors of the Company to elect to receive all or part of their
annual compensation in cash or in shares of common stock. The maximum number of
shares of common stock that can be issued pursuant to the Fee Plan is 40,000. In
1998, two directors elected to receive their annual compensation in shares of
common stock. In 1997, all directors received their annual retainer fee in cash
on a quarterly basis.
-30-
<PAGE>
Pursuant to the Berkshire Realty Company Inc. Amended and Restated Stock
Option Plan (the "Amended Stock Plan"), each non-employee director receives
initial and annual stock option grants in recognition of their service as a
director and if applicable, as the chair or a member of a committee of the
Board.
On May 21, 1998, Messrs. de Wilde, Finnegan, Goldberg, and Roskind were
granted stock options in share amounts of 6,000, 6,000, 4,000 and 5,000,
respectively. On May 13, 1997, Messrs. deWilde, Finnegan, Goldberg and Roskind
were granted stock options in share amounts of 5,000, 6,000, 4,000, and 5,000,
respectively. On November 13, 1997, Messrs. Ahern, Kazilionis and Solomon were
granted stock options in the share amounts of 6,000, 5,000, and 5,000,
respectively.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------
The following table sets forth certain information, as of March 5, 1999,
with respect to the beneficial ownership of shares of Common Stock and Preferred
Stock by (i) each person known to the Company to beneficially own more than 5%
of the outstanding shares of Common Stock or Preferred Stock; (ii) the Directors
of the Company; (iii) the Chief Executive Officer of the Company and the four
most highly compensated executive officers (other than the Chief Executive
Officer) whose total annual salary and bonus exceeded $100,000 for the fiscal
year ended December 31, 1998; and (iv) all current directors and executive
officers of the Company as a group.
-31-
<PAGE>
<TABLE>
<CAPTION>
TITLE OF CLASS NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE
BENEFICIAL OWNER (1) BENEFICIAL INTEREST (2) OF CLASS (3)
- --------------------------------------------------------------------------------------------------------
PREFERRED STOCK
- ---------------
<S> <C> <C> <C>
Preferred Stock Cudd & Co. 188,552 Shares (4) 6.9%
599 Lexington Avenue
New York, NY 10022
Preferred Stock Paul D. Kazilionis 2,337,000 Shares (4)(5) 85.4%
Preferred Stock Westbrook Berkshire 254,117 Shares (4) 9.3%
Co-Holdings, L.L.C.
599 Lexington Avenue
Suite 3800
New York, NY 10022
Preferred Stock Westbrook Berkshire 2,082,883 Shares (4) 76.1%
Holdings, L.L.C.
599 Lexington Avenue
Suite 3800
New York, NY 10022
Preferred Stock All Directors and
Executive Officers
as a group (17 people) 2,337,000 Shares (4)(5) 85.4%
COMMON STOCK
- ------------
Common Stock Terrance Ahern 0 Shares (6)
Common Stock The Berkshire Companies 3,209,091 Shares (7) 8%
Limited Partnership
Common Stock Blackstone Real Estate 5,881,369 Shares (8) 14%
Acquisitions III L.L.C.
345 Park Avenue
New York, NY 10154
Common Stock Blackstone Real Estate 5,881,369 Shares (8) 14%
Advisors III L.P.
345 Park Avenue
New York, NY 10154
Common Stock BRE Advisors III L.L.C. 5,881,369 Shares (8) 14%
345 Park Avenue
New York, NY 10154
Common Stock David M. deWilde 21,800 Shares (9) (6)
Common Stock Paul Finnegan 22,000 Shares (10) (6)
Common Stock Ridge Frew 91,036 Shares (11) (6)
Common Stock Charles Goldberg 18,000 Shares (12) (6)
Common Stock Goldman, Sachs & Co. 5,881,369 Shares (13) 14%
85 Broad Street
New York, NY 10004
Common Stock The Goldman Sachs Group, 5,881,369 Shares (13) 14%
L.P.
85 Broad Street
New York, NY 10004
Common Stock Stephen Gorn 357,382 Shares (14) (6)
Common Stock Gregory J. Hartman 5,688,107 Shares(15) 13.2%
345 California Street
Suite 3450
San Francisco, CA 94104
Common Stock Paul Kazilionis 5,688,107 Shares (15)(16) 13.2%
Common Stock KGP-1, Incorporated 3,744,066 Shares (17) 9.3%
Common Stock KGP-2, Incorporated 3,744,066 Shares (18) 9.3%
Common Stock Douglas Krupp 5,866,369 Shares (19) 14%
Common Stock George Krupp 5,871,269 Shares (20) 14%
Common Stock David Marshall 409,747 Shares (21) 1.1%
Common Stock Morgan Stanley Dean 1,995,300 Shares (22) 5.3%
Witter & Co.
1585 Broadway
New York, NY 10036
Common Stock Morgan Stanley Dean Witter 1,958,700 Shares (22) 5.2%
Investment Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Common Stock David Olney 95,674 Shares (23) (6)
</TABLE>
-32-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Common Stock Jonathan H. Paul 5,688,107 Shares (15) 13.2%
599 Lexington Avenue
Suite 3800
New York, NY 10022
Common Stock Peter G. Peterson 5,881,369 Shares (8) 14%
345 Park Avenue
New York, NY 10154
Common Stock Marianne Pritchard 98,228 Shares (24) (6)
Common Stock E. Robert Roskind 38,000 Shares (25) (6)
Common Stock Stephen A. Schwarzman 5,881,369 Shares (8) 14%
345 Park Avenue
New York, NY 10154
Common Stock Arthur Solomon 0 (6)
Common Stock William H. Walton III 5,688,107 Shares (15) 13.2%
599 Lexington Avenue
Suite 3800
New York, NY 10022
Common Stock Westbrook Berkshire 5,688,107 Shares (15) 13.2%
Co-Holdings, L.L.C.
599 Lexington Avenue
Suite 3800
New York, NY 10022
Common Stock Westbrook Berkshire 5,688,107 Shares (15) 13.2%
Holdings, L.L.C.
599 Lexington Avenue
Suite 3800
New York, NY 10022
Common Stock Westbrook Real Estate 5,688,107 Shares (15) 13.2%
Co-Investment
Partnership II, L.P.
599 Lexington Avenue
Suite 3800
New York, NY 10022
Common Stock Westbrook Real Estate 5,688,107 Shares (15) 13.2%
Fund II, L.P.
599 Lexington Avenue
Suite 3800
New York, NY 10022
Common Stock Westbrook Real Estate 5,688,107 Shares (15) 13.2%
Partners, L.L.C.
599 Lexington Avenue
Suite 3800
New York, NY 10022
Common Stock Westbrook Real Estate 5,688,107 Shares (15) 13.2%
Partners Management II, L.L.C.
599 Lexington Avenue
Suite 3800
New York, NY 10022
Common Stock WH Advisors, L.L.C. XI 5,881,369 Shares (13) 14%
85 Broad Street
New York, NY 10004
Common Stock Whitehall Street Real 5,881,369 Shares (13) 14%
Estate Limited Partnership XI
85 Broad Street
New York, NY 10004
Common Stock All Directors and
Executive Officers
as a group (17 people) 12,853,331 Shares (26) 26.4%
</TABLE>
(1) The address of each person, except as noted, is c/o Berkshire Realty
Company, Inc., One Beacon Street, Suite 1550, Boston, Massachusetts 02108.
(2) Excepted as indicated in the other notes to this table for each
beneficial owner, information relating to beneficial ownership is based upon
information furnished by each person using "beneficial ownership" concepts set
forth in rules of the Securities and Exchange Commission (the "SEC") under
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Under those rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares "voting power" which includes the power to
vote or to direct the voting of such security, or "investment
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power," which includes the power to dispose or to direct the disposition of such
security. The person is also deemed to be a beneficial owner of any security of
which that person has a right to acquire beneficial ownership (such as by
exercise of options) within 60 days after March 5, 1999. Under such rules, more
than one person may be deemed to be a beneficial owner of the same securities,
and a person may be deemed to be a beneficial owner of securities as to which he
or she may disclaim any beneficial interest. Except as indicated in other notes
to this table, directors and executive officers possessed sole voting and
investment power with respect to all shares of Common Stock and Preferred Stock
referred to in the table.
(3) Any Common Stock not outstanding which is subject to options or
conversion privileges which the beneficial owner had the right to exercise as of
March 5, 1999 or within 60 days thereof shall be deemed outstanding for purposes
of computing the percentage of Common Stock owned by such beneficial owner but
shall not be deemed to be outstanding for the purpose of computing the
percentage of outstanding Common Stock owned by any other beneficial owner.
However, for purposes of determining the percentage of Common Stock owned by the
Directors and Officers as a group, any Common Stock not outstanding which is
subject to options or conversion privileges which a member of the group had the
right to exercise as of March 5, 1999 or within 60 days thereafter shall be
deemed outstanding for purposes of computing the percentage of ownership of the
group.
(4) Information with respect to the Preferred Stock held by Cudd & Co.,
Westbrook Berkshire Co-Holdings, L.L.C. ("Co-Holdings"), and Westbrook Berkshire
Holdings, L.L.C. ("Holdings") is based on the Company's stock ledger records.
(5) Mr. Kazilionis is an indirect beneficial owner of the 2,082,883 shares
of Preferred Stock held by Holdings and the 254,117 shares of Preferred Stock
held by Co-Holdings, by virtue of being a managing principal of Westbrook Real
Estate Partners, L.L.C. ("WREP"), an affiliate of Holdings and Co-Holdings. Mr.
Kazilionis has shared voting and investment powers for these shares and
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
(6) The amount owned does not exceed one percent of the Common Stock of the
Company outstanding as of March 5, 1999.
(7) According to a joint filing made by The Berkshire Companies Limited
Partnership ("BCLP"), Douglas Krupp, George Krupp, KGP-1, Incorporated ("KGP-1")
and KGP-2, Incorporated ("KGP-2") (collectively, the "Krupp Affiliates") on a
Schedule 13D filed with the SEC on March 4, 1999 (the "Krupp Schedule 13D"),
BCLP claims to have sole voting and sole dispositive power over 3,209,091 shares
of Common Stock by virtue of their record ownership of 3,209,091 Operating
Partnership Units ("OP Units") in BRI OP Limited Partnership (the "Operating
Partnership"), the operating partnership of which the Company is a special
limited partner and whose general partner is a wholly-owned subsidiary of the
Company, which are convertible on a one-for-one basis for shares of the
Company's Common Stock or cash, at the election of the Company. According to the
Krupp Schedule 13D, BCLP disclaims beneficial ownership of Common Stock issuable
upon the conversion of OP Units because the Company may elect to substitute cash
in lieu of issuing such Common Stock.
(8) According to a joint filing made by Blackstone Real Estate Acquisitions
III L.L.C., Blackstone Real Estate Advisors III L.P., BRE Advisors III L.L.C.,
Peter G. Peterson, and Stephen A. Schwarzman (collectively, the "Blackstone
Affiliates") on Schedule 13D filed with the SEC on March 4, 1999 (the
"Blackstone 13D") and a Form 3 filed with the SEC on March 4, 1999 (the
"Blackstone Form 3"), the Blackstone Affiliates, together with the Whitehall
Affiliates (as defined in Note 13 below) and the Krupp Affiliates, formed Aptco,
LLC ("Aptco") for the purpose of submitting a merger proposal to the Company
pursuant to which, among other things, Aptco would acquire the Company.
According to the Blackstone 13D, as a result of this proposal, the Blackstone
Affiliates, together with the Whitehall Affiliates and the Krupp Affiliates may
be deemed to constitute a "group" within the meaning of Section 13(d) of the
Exchange Act, and the Blackstone Affiliates may be deemed to have acquired
beneficial ownership of the shares of Common Stock of the Company owned or
deemed to be beneficially owned by the Krupp Affiliates. According to the
Blackstone 13D and the
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Blackstone Form 3, the Blackstone Affiliates do not affirm the existence of a
group for the purpose of Section 13(d) of the Exchange Act or for any other
purpose, and the Blackstone Affiliates disclaim beneficial ownership of and any
pecuniary interest in any shares of Common Stock, including those beneficially
owned by the Krupp Affiliates.
(9) Mr. deWilde directly owns 2,800 shares of Common Stock. In addition, Mr.
deWilde has the right to acquire 19,000 shares of Common Stock pursuant to
Options.
(10) Mr. Finnegan directly owns 700 shares of Common Stock. He disclaims
beneficial ownership of 300 shares of Common Stock owned by his wife. In
addition, Mr. Finnegan has the right to acquire 21,000 shares of Common Stock
pursuant to Options.
(11) Mr. Frew directly owns 43,036 shares of Common Stock. In addition, Mr.
Frew has the right to acquire 48,000 shares of Common Stock pursuant to Options.
(12) Mr. Goldberg owns no shares of Common Stock directly. Mr. Goldberg has
the right to acquire 18,000 shares of Common Stock pursuant to Options.
(13) According to a joint filing made by The Goldman Sachs Group, L.P.
("GSG"), Whitehall Street Real Estate Limited Partnership XI ("Whitehall"), WH
Advisors, L.L.C. XI ("WH Advisors") and Goldman, Sachs & Co. ("GS&Co.")
(collectively, the "Whitehall Affiliates") on Schedule 13D filed with the SEC on
March 4, 1999 (the "Whitehall 13D") and a Form 3 filed with the SEC on March 4,
1999 (the "Whitehall Form 3"), the Whitehall Affiliates, together with the
Blackstone Affiliates and the Krupp Affiliates, formed Aptco, LLC ("Aptco") for
the purpose of submitting a merger proposal to the Company pursuant to which,
among other things, Aptco would acquire the Company. The Whitehall 13D states
that as a result of this proposal, the Whitehall Affiliates, together with the
Blackstone Affiliates and the Krupp Affiliates may be deemed to constitute a
"group" within the meaning of Section 13(d) of the Exchange Act, and the
Whitehall Affiliates may be deemed to have acquired beneficial ownership of the
shares of Common Stock of the Company owned or deemed to be beneficially owned
by the Krupp Affiliates. According to the Whitehall 13D and the Whitehall Form
3, the Whitehall Affiliates do not affirm the existence of a group for the
purpose of Section 13(d) of the Exchange Act or for any other purpose, and the
Whitehall Affiliates disclaim beneficial ownership of and any pecuniary interest
in any shares of Common Stock, including those beneficially owned by the Krupp
Affiliates.
Further, the Whitehall 13D and the Whitehall Form 3 state that as of
February 22, 1999, each of GSG and GS&Co. may be deemed to beneficially own, for
Section 13(d) purposes, 27,208 shares of Common Stock held in client accounts
with respect to which GS&Co. or employees of GS&Co. have voting or investment
discretion, or both ("GS&Co. Managed Accounts"). According to the Whitehall 13 D
and the Whitehall Form 3, each of GSG and GS&Co. disclaims beneficial ownership
of Common Stock held in GS&Co. Managed Accounts, and neither GSG nor GS&Co. has
a "pecuniary interest" in such Common Stock. The Whitehall 13D and the Whitehall
Form 3 states that GSG is the general partner of and owns a 99% interest in
GS&Co. which is the investment manager of Whitehall.
(14) Mr. Gorn owns 138,960 shares of Common Stock and directly owns 218,422
OP Units in the Operating Partnership.
(15) According to a joint filing made by WREP, Westbrook Real Estate
Partners Management II, L.L.C. ("WREM II"), WREF II, Westbrook Real Estate
Co-Investment Partnership II, L.P. ("WRECIP II"), Holdings, Co-Holdings, Gregory
J. Hartman, Paul D. Kazilionis, Jonathan H. Paul and William H. Walton, III
(collectively, the "Westbrook Affiliates") on Schedule 13D made with the SEC on
February 25, 1999 (the "Westbrook Schedule 13D"), each of the Westbrook
Affiliates has shared voting power over 5,688,107 shares of Common Stock and
dispositive power over 4,857,547 shares of Common Stock. Each Westbrook
Affiliate, except Co-Holdings, disclaims beneficial ownership of the Co-Holdings
Conversion Shares (as defined in the Westbrook 13D). Each Westbrook Affiliate,
except Holdings, disclaims ownership of the Holdings Conversion Shares (as
defined in the Westbrook 13D).
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<PAGE>
(16) According to information provided to the Company by Mr. Kazilionis, he
owns no shares of Common Stock directly and he is the indirect beneficial owner
of the 2,082,883 shares of Preferred Stock held of record by Holdings and
254,117 shares of Preferred Stock held of record by Co-Holdings, by virtue of
being a managing principal of WREP, an affiliate of Holdings and Co-Holdings.
Mr. Kazilionis has shared voting and investment powers for these shares.
According to the Company's records, as of September 19, 1998, these shares of
Preferred Stock became convertible into shares of Common Stock based on the
conversion ratio in effect at the time of conversion. As of March 5, 1999,
Holdings has the right to acquire 4,323,232 shares of Common Stock in exchange
for its shares of Preferred Stock and Co-Holdings has the right to acquire
527,445 shares of Common Stock in exchange for its shares of Preferred Stock
based on a conversion ratio of 2.0756.
(17) According to the Krupp Schedule 13D, KGP-1 claims to have shared voting
and shared dispositive power over 3,744,066 shares of Common Stock consisting of
(i) 3,209,091 OP Units in the Operating Partnership owned of record by BCLP,
which are convertible on a one-for-one basis for shares of the Company's Common
Stock, or cash at the election of the Company, and over which KGP-1 has shared
voting power and shared dispositive power; and (ii) 534,975 OP Units in the
Operating Partnership owned of record by GN Limited Partnership which are
convertible on a one-for-one basis for shares of the Company's Common Stock, or
cash at the election of the Company, and over which KGP-1 has shared voting
power and shared dispositive power. According to the Krupp Schedule 13D, KGP-1
disclaims beneficial ownership of Common Stock issuable upon the conversion of
OP Units because the Company may elect to substitute cash in lieu of issuing
such Common Stock.
(18) According to the Krupp Schedule 13D, KGP-2 claims to have shared voting
and shared dispositive power over 3,744,066 shares of Common Stock consisting of
(i) 3,209,091 OP Units in the Operating Partnership owned of record by BCLP,
which are convertible on a one-for-one basis for shares of the Company's Common
Stock, or cash at the election of the Company, and over which KGP-2 has shared
voting power and shared dispositive power; and (ii) 534,975 OP Units in the
Operating Partnership owned of record by GN Limited Partnership which are
convertible on a one-for-one basis for shares of the Company's Common Stock, or
cash at the election of the Company, and over which KGP-2 has shared voting
power and shared dispositive power. According to the Krupp Schedule 13D, KGP-2
disclaims beneficial ownership of Common Stock issuable upon the conversion of
OP Units because the Company may elect to substitute cash in lieu of issuing
such Common Stock.
(19) According to the Krupp Schedule 13D, Douglas Krupp claims to have sole
voting and sole dispositive power over 10,100 shares of Common Stock of which he
is the direct beneficial owner. According to the Krupp Schedule 13D, Mr. Krupp
claims to have shared voting and shared dispositive power over 5,856,269 shares
of Common Stock consisting of (i) 512,203 shares of Common Stock owned of record
by Berkshire Realty Advisors Limited Partnership, as to which Mr. Krupp has
shared voting and shared dispositive power; (ii) 534,975 OP Units in the
Operating Partnership owned of record by GN Limited Partnership which are
convertible on a one-for-one basis for shares of the Company's Common Stock or
cash, at the election of the Company, and over which Mr. Krupp has shared voting
power and shared dispositive power; (iii) 1,600,000 OP Units in the Operating
Partnership owned of record by Turtle Creek Associates Limited Partnership which
are convertible on a one-for-one basis for shares of the Company's Common Stock,
or cash at the election of the Company, and over which Mr. Krupp has shared
voting power and shared dispositive power; and (iv) 3,209,091 OP Units in the
Operating Partnership owned of record by BCLP, which are convertible on a
one-for-one basis for shares of the Company's Common Stock, or cash at the
election of the Company, and over which Mr. Krupp has shared voting power and
shared dispositive power. According to the Krupp 13D, Douglas Krupp disclaims
beneficial ownership of Common Stock issuable upon the conversion of OP Units
because the Company may elect to substitute cash in lieu of issuing such Common
Stock. Also stated in the Krupp 13D, although Mr. Krupp may be deemed to
beneficially own 15,950 shares of Common Stock owned of record by Judy Krupp,
Richard Krupp and Alex Krupp such shares were excluded from the table and,
pursuant to Rule 13d-4 of the Exchange Act, the filing of this statement shall
not be construed as an admission that Douglas Krupp beneficially owns such
shares.
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<PAGE>
(20) According to the Krupp Schedule 13D, George Krupp claims to have sole
voting and sole dispositive power over 15,000 shares of Common Stock of which he
is the direct beneficial owner. According to the Krupp Schedule 13D, Mr. Krupp
claims to have shared voting and shared dispositive power over 5,856,269 shares
of Common Stock consisting of (i) 512,203 shares of Common Stock owned of record
by Berkshire Realty Advisors Limited Partnership, as to which Mr. Krupp has
shared voting and shared dispositive power; (ii) 534,975 OP Units in the
Operating Partnership owned of record by GN Limited Partnership which are
convertible on a one-for-one basis for shares of the Company's Common Stock or
cash, at the election of the Company, and over which Mr. Krupp has shared voting
power and shared dispositive power; (iii) 1,600,000 OP Units in the Operating
Partnership owned of record by Turtle Creek Associates Limited Partnership which
are convertible on a one-for-one basis for shares of the Company's Common Stock,
or cash at the election of the Company, and over which Mr. Krupp has shared
voting power and shared dispositive power; and (iv) 3,209,091 OP Units in the
Operating Partnership owned of record by BCLP, which are convertible on a
one-for-one basis for shares of the Company's Common Stock, or cash at the
election of the Company, and over which Mr. Krupp has shared voting power and
shared dispositive power. According to the Krupp 13D, George Krupp disclaims
beneficial ownership of Common Stock issuable upon the conversion of OP Units
because the Company may elect to substitute cash in lieu of issuing such Common
Stock. Also stated in the Krupp 13D, although Mr. Krupp may be deemed to
beneficially own 26,160 shares of Common Stock owned of record by Elizabeth
Krupp, Daniel Krupp and Michael Krupp such shares were excluded from the table
and, pursuant to Rule 13d-4 of the Exchange Act, the filing of this statement
shall not be construed as an admission that George Krupp beneficially owns such
shares.
(21) Mr. Marshall directly owns 90,804 shares of Common Stock. He disclaims
beneficial ownership of 6,343 shares of Common Stock owned by various members of
his family. In addition, Mr. Marshall has the right to acquire 312,600 shares of
Common Stock pursuant to Options.
(22) According to a joint filing made by Morgan Stanley Dean Witter & Co.
("MSDW") and Morgan Stanley Dean Witter Investment Management Inc. ("MSDWI") on
Schedule 13G filed with the SEC on February 8, 1999, MSDW has shared voting and
dispositive power over 1,995,300 shares of Common Stock and MSDWI has shared
voting and shared dispositive power over 1,958,700 shares of Common Stock. In
said filing, MSDW and MSDWI further state that they are Investment Advisers
registered under Section 203 of the Investment Advisers Act of 1940 and that
MSDWI is a wholly owned subsidiary of MSDW. According to the filing, MSDWI
manages accounts on a discretionary basis and said accounts have the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from, the sale of such securities. The filing further states that no such
account holds more than 5% of the class.
(23) Mr. Olney directly owns 45,674 shares of Common Stock. In addition, Mr.
Olney has the right to acquire 50,000 shares of Common Stock pursuant to
Options.
(24) Ms. Pritchard directly owns 44,228 shares of Common Stock. In addition,
Ms. Pritchard has the right to acquire 54,000 shares of Common Stock pursuant to
Options.
(25) Mr. Roskind directly owns 20,000 shares of Common Stock. In addition,
Mr. Roskind has the right to acquire 18,000 shares of Common Stock pursuant to
Options.
(26) All Directors and Executive Officers as a group directly or indirectly
own 919,136 shares of Common Stock. In addition, all Directors and Officers as a
group have the right to acquire shares of Common Stock pursuant to 683,600
Options. All Directors and Executive Officers as a group, directly or indirectly
own 5,562,488 OP Units. Typically, holders of OP Units acquire conversion rights
one year and ten days from the date of issuance whereupon the OP Units are
redeemable on a one-for-one basis for shares of Common Stock or at the Company's
election, for cash. As of March 5, 1999, 5,562,488 of these OP Units have
acquired conversion rights or will acquire such rights within 60 days
thereafter. All Directors and Executive Officers as a group, directly or
indirectly own 2,082,883 shares of Preferred Stock held by Holdings and the
254,117 shares of Preferred Stock held by Co-Holdings, by virtue of Mr.
Kazilionis' position as a managing principal of WREP. According to the Westbrook
Schedule 13D, Mr. Kazilionis has shared dispositive power over 5,688,107 shares
of Common Stock. Accordingly, all Directors and Executive Officers have shared
voting and dispositive power over 5,688,107 shares of Common Stock.
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<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires Directors and Executive Officers of the Company, and
persons who own more than 10% of the issued and outstanding shares of Common
Stock, to file reports of beneficial ownership with the Securities and Exchange
Commission (the "Commission"). Directors, Executive Officers and greater than
10% stockholders are required by Commission regulation to furnish the Company
copies of all Section 16(a) forms they file.
Based on a review of the copies of the forms furnished to the Company or
representations by reporting persons, all of the filing requirements applicable
to its Executive Officers, Directors and greater than 10% stockholders were met
for the year ended December 31, 1998 except for the late filing of a Form 4
report with respect to a transaction in late 1997 for E. Robert Roskind, and the
late filing of a Form 5 report for David de Wilde that was originally timely
filed, however the registrant's name was inadvertently omitted from the filing
and a corrected filing was not provided to the Commission until late 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------
Douglas Krupp, by virtue of indirect ownership interests in The Berkshire
Companies Limited Partnership and its affiliates ("BCLP"), is deemed to have
direct or indirect material interests in certain transactions.
The Company receives management fees and reimbursements associated with
third-party management contracts which are primarily with partnerships
affiliated with Mr. Krupp. The Company received management fees and
reimbursements of approximately $3,238,000 related to affiliated third-party
management contracts for the year ended December 31, 1998.
The Company has an agreement with BCLP whereby each party will provide
certain administrative services for the other party. Pursuant to this agreement,
BCLP provides services related to computer systems support, legal services, and
investor records support and the Company provides human resources services,
insurance and real estate tax support. During the year ended December 31, 1998,
the net amount of fees paid or accrued to BCLP was $1,302,462.
Stephen Gorn, by virtue of his indirect ownership interest in GGC, L.L.C.
("GGC"), is deemed to have direct or indirect material interests in a
non-negotiable promissory note in the amount of $7,500,000 that was issued by
GGC to the Company on November 14, 1997. This note requires interest payments at
an annual rate of 11.39% commencing December 1, 1997, and continuing until the
outstanding balance is paid in full. A principal payment in the amount of
$3,750,000, together with all accrued and unpaid interest and other charges
thereunder, will be due and payable on the third anniversary of the Funding
Date. A portion of the Units and Shares received by the members of GGC, as a
result of the Questar Transaction have been pledged as collateral for the
promissory note. The remaining unpaid principal balance and accrued and unpaid
interest and other charges will be due and payable on the fifth anniversary of
the Funding Date. The Company recorded interest income of approximately $854,000
related to the promissory note for the year ended December 31, 1998. The largest
outstanding amount of indebtedness on the promissory note was $7,500,000 from
January 1, 1998 until February 5, 1999 when a pre-payment of $3,750,000 was made
reducing the outstanding balance of the promissory note to $4,000,000.
As President and Chief Executive Officer of Questar Builders, Inc., Stephen
Gorn is deemed to have a direct or indirect material interest in the Company's
acquisition of Granite Run Apartments from Questar Builders, Inc., on January 7,
1999 for $25.5 million pursuant to the terms of the development contribution
agreement entered into by the Company and Questar Builders, Inc.
Mr. Gorn is also deemed to have an indirect or direct material interest in
the Development Acquisition Agreement entered into by Questar Builders, Inc. and
the Company pursuant to which the Company has an exclusive right to acquire all
apartment
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<PAGE>
communities developed by Questar Builders, Inc. which meet the Company's
acquisition and development criteria. Questar Builders, Inc. will receive a
development fee of 7% of the total development cost per property acquired by the
Company.
Mr. Gorn is also deemed to have direct or indirect material interest in a
five year lease that the Company entered into with an affiliate of Mr. Gorn on
November 14, 1997 for 6,900 square feet of space at an annual gross rent of
approximately $140,000 which the Company incurred as rent expense for the year
ended December 31, 1998.
The Company entered into separate five-year employment agreements with
Stephen Gorn, his brother-in-law, John Colvin and a five year consulting
agreement with his father, Morton Gorn. Each of these agreements commenced on
November 14, 1997 and were terminated on February 26, 1999. These agreements
provided for annual base salaries of $275,000 and $125,000 and a consulting fee
of $50,000 respectively. The agreements provided for payments for each
individual in the amount of five years pay reduced by any salary payments
previously paid.
As noted above, on February 26, 1999, the Company terminated these
agreements and made the required payments to Messrs. Stephen Gorn, John Colvin
and Morton Gorn in the amounts of $1,002,955, $453,432, and $187,307
respectively.
Mr. Marshall is indebted to the Company pursuant to a $1 million Stock
Purchase Loan approved by the Board of Directors on February 28, 1997. On March
4, 1997, the loan proceeds were used to purchase 86,956 Shares of the Company's
common stock at $11.50 per Share. The terms of the loan provide for, among other
things, an interest rate of 7.8% per year payable quarterly and an annual
forgiveness feature of 5% of the original principal so long as Mr. Marshall is
employed by the Company. Additional annual forgiveness of up to another 5% may
be granted if certain Company performance measures are met. The maximum
forgiveness in one year is 10%. If Mr. Marshall terminates his employment, the
loan is due and payable six months from termination. However, in the event of
change of control of the Company, as defined in the loan agreement, any then
outstanding principal and interest due shall be forgiven. In 1998, $50,000 of
the principal amount of the loan was forgiven, resulting in an unpaid principal
balance of $850,000 as of December 31, 1998.
On December 9, 1997, the Board of Directors approved three additional Stock
Purchase Loans, each in the amount of $500,000 to Marianne Pritchard, David
Olney and Ridge Frew to be effective as of January 2, 1998. The loan proceeds
were used to purchase 126,984 shares of the Company's Common Stock. The terms of
the loans are similar to those of the President's Stock Purchase Loan. In 1998,
$25,000 of the principal amount of each loan was forgiven, resulting in an
unpaid principal balance of $475,000 on each loan as of December 31, 1998.
On March 4, 1999, Douglas Krupp filed a joint statement with BCLP, KGP-1,
KGP-2 and George Krupp (collectively the "Krupp Affiliates") on Schedule 13D
with the SEC which stated that on February 22, 1999, BCLP together with the
Whitehall Affiliates and the Blackstone Affiliates, formed Aptco, LLC ("Aptco"),
for the purpose of submitting a merger proposal in the form of a letter (the
"Offer Letter") to the Company pursuant to which, among other things, Aptco
would acquire the Company and holders of Common Stock would receive cash in
exchange for their shares. According to the Schedule 13D, Aptco made a proposal
with respect to a transaction in which (i) the Company would merge (the "Company
Merger") with and into Aptco and (ii) a subsidiary of Aptco ("Aptco Sub") would
merge with and into BRI OP Limited Partnership. According to the 13D, pursuant
to the proposed terms of the Company Merger, all outstanding Common Stock not
held by Aptco or Aptco Sub (other than Dissenting shares) would be converted
into $11.05 per share in cash (the "Cash Price"), and all outstanding shares of
the Company's Series 1997-A Convertible Preferred Stock (the "Preferred Stock"),
(other than dissenting shares) would be converted into an amount per share in
cash equal to the "change of control preference" specified in the Company's
certificate of designation in respect of the Preferred Stock. According to the
Schedule 13D, Aptco's proposal expired by its terms at 5:00 p.m. on March 1,
1999 and the Krupp Affiliates reserve the right to change their plans and
intentions at any time, as they deem appropriate, and may or may not submit a
revised proposal or extend the expiration date of the proposal contained in the
Offer Letter.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
- --------
(a) 1. Financial Statements - see Index to Consolidated Financial
Statements, Schedules, and Summary Quarterly Financial
Information included under Item 8, Appendix A, on page F-2 of
this report.
2. Financial Statement Schedule - Consolidated Financial
Statement Schedule to the Consolidated Financial Statements
are included under Item 8, Appendix A on pages F-37 through
F-43. Certain other schedules are omitted as they are not
applicable or not required or because the information is
provided in the Consolidated Financial Statements or the Notes
thereto.
(b) Exhibits:
Number and Description
Under Regulation S-K
--------------------
The following reflects all applicable Exhibits required under Item 601 of
Regulation S-K:
(3) Articles of Incorporation and By-Laws.
3.1 Restated Certificate of Incorporation of the Company [Exhibit
3.1 to the Company's Registration Statement on Form S-4 (File
No. 33-37592)].*
3.2 Certificate of Amendment to Restated Certificate of
Incorporation of the Company [Exhibit 3.11 to Post-Effective
Amendment No. 1 to the Company's Registration Statement on
Form S-4 (File No. 33-37592)].*
3.3 Bylaws as amended of Berkshire Realty Company, Inc.*
3.4 Bylaws of the Company, as amended on February 4, 1993.
[Exhibit 3.3 to Company's Annual Report on Form 10-K for the
year ended December 31, 1993 (File No. 10-10660)].*
3.5 Bylaws of Berkshire Realty Company, Inc., as amended on
February 28, 1996. [Exhibit 3.4 to Company's Annual Report on
Form 10-K for the year ended December 31, 1995 (File No.
1-10660)].*
(4) Instruments defining the rights of security holders, including
indentures.
Common Stock
------------
4.1 Berkshire Realty Company, Inc. Certificate of Common Stock.
[Exhibit 4.1 to Company's Annual Report on Form 10-K for the
year ended December 31, 1994 (File No. 10-10660)].*
Preferred Stock
---------------
4.2 Certificate of Designation designating 2,737,000 shares of
Preferred Stock of 2,737,000 shares of Series 1997-A
Convertible Preferred Stock (par value $0.01 per share) dated
October 31, 1997.+
4.3 Stock Purchase Agreement among Berkshire Realty Company,
Inc., Westbrook Real Estate Fund II, L.P. and Westbrook
Berkshire Holdings, L.L.C. dated as of September 19, 1997.*
-40-
<PAGE>
4.4 Exchange and Amendment Agreement among Berkshire Realty
Company, Inc., Westbrook Berkshire Holdings, L.L.C. and
Morgan Stanley Asset Management, Inc., as attorney in fact
for certain clients, dated as of September 30, 1997.*
4.5 Registration Rights Agreement between Berkshire Realty
Company, Inc. and Westbrook Berkshire Holdings, L.L.C.*
(10) Material Contracts
------------------
Credit Agreement
----------------
10.1 Revolving Credit Agreement among the Company, BRI OP Limited
Partnership, certain guarantors and BankBoston, N.A. and
Other Banks which may become parties to this agreement and
BankBoston, N.A. as Agent dated as of January 30, 1998. +
10.2 Amendment No. 1 of Revolving Credit Agreement among the
Company, BRI OP Limited Partnership, certain guarantors and
BankBoston, N.A. and Other Banks which may become parties to
this agreement and BankBoston, N.A. as Agent dated as of
April 15, 1998. +
10.3 Amendment No. 2 of Revolving Credit Agreement among the
Company, BRI OP Limited Partnership, certain guarantors and
BankBoston, N.A. and Other Banks which may become parties to
this agreement and BankBoston, N.A. as Agent dated as of July
21, 1998. +
10.4 Master Credit Facility Agreement by and among BRI OP Limited
Partnership, Berkshire Realty Company, Inc., BRI River Oaks
Limited Partnership and Washington Mortgage Financial Group,
LTD., dated November 17, 1995. [Exhibit 10.18 to Company's
Annual Report on Form 10-K for the year ended December 31,
1995 (File No. 1-10660)].*
10.5 Exhibits to the Master Credit Facility Agreement among BRI OP
Limited Partnership, Berkshire Realty Company, Inc., BRI
River Oaks Limited Partnership and Washington Mortgage
Financial Group, LTD, dated November 17, 1995. [Exhibit 10.19
to Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (File No. 1-10660)].*
10.6 First Amendment to Master Credit Facility Agreement among BRI
OP L.P., BRI River Oaks L.P., BRI Texas Apartments L.P. and
Hidden Oaks Partnership and Washington Mortgage Financial
Group, LTD and Federal National Mortgage Association as of
September 1, 1996. [Exhibit 10.5 to Company's Form 10-Q for
the quarter ended September 30, 1996 (File No. 1-10660)].*
10.7 Second Amendment to Master Credit Facility Agreement among
BRI OP L.P., the Company, BRI River Oaks L.P., BRI Hidden
Oaks Partnership, BRI Texas Apartments L.P. and Washington
Mortgage Financial Group, LTD and Fannie Mae as of March 1,
1997.+
10.8 Third Amendment to Master Credit Facility Agreement among BRI
OP L.P., the Company, BRI River Oaks L.P., BRI Hidden Oaks
Partnership, BRI Texas Apartments L.P. and Washington
Mortgage Financial Group, LTD and Fannie Mae as of March 1,
1997.+
10.9 Interest Rate Swap Master Agreement among BRI OP Limited
Partnership and The First National Bank of Boston, dated
October 31, 1995. [Exhibit 10.51 to Company's Annual Report
on Form 10-K for the year ended December 31, 1995 (File No.
1-10660)].*
10.10 Schedule to the Interest Rate Swap Master Agreement among BRI
OP Limited Partnership and The First National Bank of Boston,
dated October 31, 1995. [Exhibit 10.52 to Company's Annual
Report on Form 10-K for the year ended December 31, 1995
(File No. 1-10660)].*
-41-
<PAGE>
Employment Agreements
---------------------
10.11 Amendment No. 2 to Employment and Non Competition Agreement -
David F. Marshall [Exhibit 10.1 to Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998 (File
No. 1-10660)].*
10.12 Amendment No. 2 to Employment and Non Competition Agreement -
Marianne Pritchard [Exhibit 10.2 to Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998
(File No. 1-10660)].*
10.13 Amendment No. 2 to Employment and Non Competition Agreement -
David Olney [Exhibit 10.3 to Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (File No.
1-10660)].*
10.14 Amendment No. 2 to Employment and Non Competition Agreement -
Ridge Frew [Exhibit 10.4 to Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (File No.
1-10660)].*
10.15 Amendment No. 1 to Employment and Non Competition Agreement -
Dennis Suarez [Exhibit 10.5 to Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (File No.
1-10660)].*
10.16 Employment and Non Competition Agreement - James W. Jackson
[Exhibit 10.6 to Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 (File No. 1-10660)].*
10.17 Amendment No. 1 to Employment and Non Competition Agreement -
Marianne Pritchard [Exhibit 10.8 to Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998
(File No. 1-10660)].*
10.18 Amendment No. 1 to Employment and Non Competition Agreement -
David Olney [Exhibit 10.9 to Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (File No.
1-10660)].*
10.19 Amendment No. 1 to Employment and Non Competition Agreement -
Ridge Frew [Exhibit 10.10 to Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (File No.
1-10660)].*
10.20 Amendment No. 1 to Employment and Non Competition Agreement -
David F. Marshall [Exhibit 10.11 to Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998
(File No. 1-10660)].*
10.21 Employment and Non Competition Agreement - David F. Marshall
[Exhibit 10.12 to Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 (File No. 1-10660)].*
10.22 Employment and Non Competition Agreement - Marianne Pritchard
[Exhibit 10.13 to Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 (File No. 1-10660)].*
10.23 Employment and Non Competition Agreement - David Olney
[Exhibit 10.14 to Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 (File No. 1-10660)].*
-42-
<PAGE>
10.24 Employment and Non Competition Agreement - Ridge Frew
[Exhibit 10.15 to Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 (File No. 1-10660)].*
10.25 Employment and Non Competition Agreement - Dennis Suarez
[Exhibit 10.16 to Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 (File No. 1-10660)].*
Severance Plans
---------------
10.26 Severance Benefits Plan established by the Company and BRI OP
Limited Partnership effective May 26, 1998. [Exhibit 10.7 to
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998 (File No. 1-10660)].*
10.27 Severance Benefits Plan - Summary Plan Description - Exempt
Employees [Exhibit 10.17 to Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (File No.
1-10660)].*
10.28 Severance Benefits Plan - Summary Plan Description -
Non-Exempt Employees [Exhibit 10.18 to Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998
(File No. 1-10660)].*
10.29 Severance Benefits Plan - Summary Plan Description - Vice
Presidents or Higher in Acquisitions [Exhibit 10.19 to
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 (File No. 1-10660)].*
10.30 Severance Benefits Plan - Summary Plan Description - Vice
Presidents or Higher in Administration or Property Management
Departments [Exhibit 10.20 to Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (File No.
1-10660)].*
Other
-----
21.1 Subsidiaries of the Registrant +
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants, dated March 19, 1999.+
99.1 Documents incorporated by reference - "Risk Factors" from
pages 5 through 17 of the Company's Registration Statement on
Form S-3, which was filed with the SEC on November 23, 1998,
setting forth the information under the caption "Risk
Factors" *
Financial Data Schedules
------------------------
27.1 Financial Data Schedule - December 31, 1998.+
* Incorporated by reference.
+ Filed herein.
(b) Reports on Form 8-K
-------------------
On October 30, 1998, the Company filed a Current Report on
Form 8-K, dated October 30, 1998, including certain financial
statements pursuant to Rule 3-14 of Regulation S-X relating to
the acquisition of the real estate properties comprising the
Company's Intercapital Portfolio and the Company's Cooper
Portfolio.
On March 5, 1999, the Company filed a Current Report on Form
8-K, dated March 4, 1999, announcing that the Company had
received several offers to acquire the Company.
-43-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 19th day of
March, 1999.
BERKSHIRE REALTY COMPANY, INC.
By: /s/ Douglas Krupp
------------------------------------------
Douglas Krupp, Chairman of the Board and
Director of Berkshire Realty Company, Inc.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated, on the 19th day of March, 1999.
<TABLE>
<CAPTION>
Signatures Title(s)
- ---------- --------
<S> <C>
/s/ David Marshall President, Chief Executive Officer and
- -------------------------- Director of Berkshire Realty Company, Inc.
David Marshall (Principal Executive Officer)
/s/ Marianne Pritchard Executive Vice President and Chief Financial
- -------------------------- Officer of Berkshire Realty Company, Inc.
Marianne Pritchard (Principal Financial Officer)
/s/ Kenneth J. Richard Senior Vice President and Chief Accounting
- -------------------------- Officer of Berkshire Realty Company, Inc.
Kenneth J. Richard (Principal Accounting Officer)
J. Paul Finnegan Director of Berkshire Realty Company, Inc.
- --------------------------
J. Paul Finnegan
/s/ Charles N. Goldberg Director of Berkshire Realty Company, Inc.
- --------------------------
Charles N. Goldberg
/s/ E. Robert Roskind Director of Berkshire Realty Company, Inc.
- --------------------------
E. Robert Roskind
/s/ David M. deWilde Director of Berkshire Realty Company, Inc.
- --------------------------
David M. deWilde
/s/ Terrance R. Ahern Director of Berkshire Realty Company, Inc.
- --------------------------
Terrance R. Ahern
/s/ Paul D. Kazilionis Director of Berkshire Realty Company, Inc.
- --------------------------
Paul D. Kazilionis
/s/ Arthur P. Solomon Director of Berkshire Realty Company, Inc.
- --------------------------
Arthur P. Solomon
</TABLE>
-44-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 19th day of
March, 1999.
BERKSHIRE REALTY COMPANY, INC.
By: _________________________________________
Douglas Krupp, Chairman of the Board and
Director of Berkshire Realty Company, Inc.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated, on the 19th day of March, 1999.
<TABLE>
<CAPTION>
Signatures Title(s)
- ---------- --------
<S> <C>
- -------------------------- President, Chief Executive Officer and
David Marshall Director of Berkshire Realty Company, Inc.
(Principal Executive Officer)
- -------------------------- Executive Vice President and Chief Financial
Marianne Pritchard Officer of Berkshire Realty Company, Inc.
(Principal Financial Officer)
- -------------------------- Senior Vice President and Chief Accounting
Kenneth J. Richard Officer of Berkshire Realty Company, Inc.
(Principal Accounting Officer)
- -------------------------- Director of Berkshire Realty Company, Inc.
J. Paul Finnegan
- -------------------------- Director of Berkshire Realty Company, Inc.
Charles N. Goldberg
- -------------------------- Director of Berkshire Realty Company, Inc.
E. Robert Roskind
- -------------------------- Director of Berkshire Realty Company, Inc.
David M. deWilde
- -------------------------- Director of Berkshire Realty Company, Inc.
Terrance R. Ahern
- -------------------------- Director of Berkshire Realty Company, Inc.
Paul D. Kazilionis
- -------------------------- Director of Berkshire Realty Company, Inc.
Arthur P. Solomon
</TABLE>
-45-
<PAGE>
PART II
APPENDIX A
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
-----------
CONSOLIDATED FINANCIAL STATEMENTS, SCHEDULES AND
SUMMARY QUARTERLY FINANCIAL INFORMATION
ITEM 8 of FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1998
F-1
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS, SCHEDULES AND
SUMMARY QUARTERLY FINANCIAL INFORMATION
<TABLE>
<S> <C>
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1998 and 1997 F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996 F-5 - F-6
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 1998, 1997 and 1996 F-7 - F-8
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 F-9 - F-11
Notes to Consolidated Financial Statements F-12 - F-36
Schedule III - Real Estate and Accumulated Depreciation F-37 - F-43
Summary Quarterly Financial Information (Unaudited) F-44
</TABLE>
All other schedules are omitted as they are not applicable or not required, or
the information is provided in the consolidated financial statements or the
notes thereto.
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
Berkshire Realty Company, Inc. and Subsidiaries:
In our opinion, the consolidated financial statements and the financial
statement schedule listed in the accompanying index present fairly, in all
material respects, the financial position of Berkshire Realty Company, Inc. and
Subsidiaries (the "Company") at December 31, 1998 and December 31, 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
January 25, 1999, except
for Note W, for which the
date is March 5, 1999
F-3
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
-----------
ASSETS
<TABLE>
<CAPTION>
1998 1997
-------------- ------------
<S> <C> <C>
Real estate assets: (Note F)
Multifamily apartment communities, net
of accumulated depreciation $ 919,486,703 $715,696,151
Land and construction-in-progress 10,974,377 15,185,969
Land held for future development 5,657,038 5,818,105
Mortgage loan receivable, net
of purchase discounts (Note H) 2,376,227 2,323,285
Investments in unconsolidated joint
ventures (Note G) - 15,618,657
Retail centers held for sale, net
of accumulated depreciation - 14,404,782
-------------- ------------
Total real estate assets 938,494,345 769,046,949
Cash and cash equivalents 12,366,880 9,859,110
Mortgage-backed securities, net ("MBS") (Note I) 4,936,979 7,511,789
Note receivable (Note J) 7,500,000 7,500,000
Escrows 16,305,255 15,088,587
Deferred expenses and other assets 19,854,353 14,932,272
Workforce and other intangible assets,
net of accumulated amortization of
$22,195,388 and 9,163,194, respectively
(Notes C and D) 9,449,030 22,481,224
-------------- ------------
Total assets $1,008,906,842 $846,419,931
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable (Note M) $ 426,236,427 $368,810,004
Credit agreement (Note K) 135,100,000 12,000,000
Construction loan (Note L) 11,362,891 316,786
Deposits and prepaid rents 8,309,738 4,888,022
Accrued real estate taxes, insurance, other
liabilities and accounts payable (Note Q) 25,218,826 17,073,179
-------------- ------------
Total liabilities 606,227,882 403,087,991
-------------- ------------
Minority interest in Operating
Partnership (Note N) 69,661,451 75,137,066
Commitments and contingencies (Notes E and Q) - -
Shareholders' equity:
Preferred stock ("Preferred Shares"),
$0.01 par value; 60,000,000 shares
authorized, 2,737,000 shares issued (Note U) 27,370 27,370
Common stock ("Shares"), $0.01 par value;
140,000,000 Shares authorized and
37,219,897 and 36,841,098 Shares issued,
respectively (Note U) 372,199 368,411
Additional paid-in capital 375,186,299 394,838,797
Accumulated deficit (38,550,284) (24,396,629)
Loans receivable - officers (Note P) (2,275,000) (900,000)
Less common stock in treasury at cost
(506,497 Shares) (1,743,075) (1,743,075)
-------------- ------------
Total shareholders' equity 333,017,509 368,194,874
-------------- ------------
Total liabilities and shareholders' equity $1,008,906,842 $846,419,931
============== ============
</TABLE>
The accompanying Notes are an integral
part of the Consolidated Financial Statements.
F-4
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS For the Years
Ended December 31, 1998, 1997 and 1996
-----------
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Rental $175,965,070 $109,973,608 $ 89,450,647
Management fees and
reimbursements (Note D) 3,709,023 3,157,516 -
Interest from mortgage loan and
note receivable (Notes H and J) 1,190,985 608,825 1,876,519
Interest from MBS (Note I) 573,923 765,196 942,191
Other interest 1,345,996 993,917 732,309
------------ ------------ ------------
Total revenue 182,784,997 115,499,062 93,001,666
------------ ------------ ------------
Expenses:
Property operating (Note O) 40,916,441 25,646,048 21,424,717
Repairs and maintenance 12,157,839 8,064,849 6,647,344
Real estate taxes 16,832,011 10,042,100 8,653,898
Property management fees to an
affiliate (Note D) 15,304 902,931 4,324,843
Property management operations 7,689,765 5,564,851 1,302,352
Interest (Notes K, L and M) 38,801,288 24,005,605 20,500,533
Depreciation and amortization 57,794,479 35,272,775 29,050,960
Amortization of workforce
acquired (Notes C and D) 13,032,194 8,042,554 1,120,640
General and administrative
(Notes C and O) 5,476,948 5,065,015 3,632,078
State and corporate franchise taxes 174,205 334,003 367,563
Professional fees 709,297 345,234 254,000
Costs associated with evaluation
of strategic alternatives 1,470,236 - -
Non-recurring charges - - 441,783
Costs associated with
Advisor Transaction (Note C) - 2,400,000 -
Provision for losses on real
estate investments - 1,850,000 7,500,000
Asset management fees to an
affiliate (Note C) - - 392,636
------------ ------------ ------------
Total expenses 195,070,007 127,535,965 105,613,347
------------ ------------ ------------
Loss from operations before joint
venture income (loss), gains
on sales of assets, minority
interest and extraordinary items (12,285,010) (12,036,903) (12,611,681)
Joint venture income (loss) 132,454 (4,910,021) (3,008,587)
Gains on sales of assets, net 1,264,920 6,454,717 58,263
Minority interest in
Operating Partnership (Note N) 3,369,786 2,153,506 1,403,000
------------ ------------ ------------
Loss before extraordinary items (7,517,850) (8,338,701) (14,159,005)
Extraordinary items, net of
minority interest (Note M) (477,555) (90,345) (149,272)
------------ ------------ ------------
Net loss (7,995,405) (8,429,046) (14,308,277)
Income allocated to preferred
shareholders (6,158,250) (1,659,306) -
------------ ------------ ------------
Net loss allocated to
common shareholders $(14,153,655) $(10,088,352) $(14,308,277)
============ ============ ============
</TABLE>
Continued
F-5
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
For the Years Ended December 31, 1998, 1997 and 1996
-----------
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
Earnings per common share (basic and diluted)(Note R):
<S> <C> <C> <C>
Net loss allocated to common
shareholders before
extraordinary items $ (.37) $ (.37) $ (.56)
====== ====== ======
Extraordinary items, net $ (.02) $ - $ -
====== ====== ======
Net loss allocated to common
shareholders $ (.39) $ (.37) $ (.56)
====== ====== ======
Weighted average shares 36,684,985 27,099,522 25,393,147
========== ========== ==========
</TABLE>
The accompanying Notes are an integral part of the
Consolidated Financial Statements.
F-6
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1998, 1997 and 1996
-----------
<TABLE>
<CAPTION>
Series 1997-A Convertible Additional
Preferred Stock at par Common Stock at par Paid-in Capital
---------------------- ------------------- ---------------
Shares Amount Shares Amount
---------------------- --------------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 - - 25,392,951 258,994 262,271,698
Net loss - - - - -
Proceeds from the
exercise of
stock warrants - - 417 4 5,880
Non-employee stock
option grants - - - - 22,584
Common dividends - - - - (22,853,892)
--------- ------- ---------- -------- ------------
Balance,
December 31, 1996 - - 25,393,368 258,998 239,446,270
Net loss - - - - -
Issuance of
Preferred Shares
(Note U) 2,737,000 27,370 - - 65,849,295
Preferred dividends
Non-employee stock
option grants (Note P) - - - - 22,584
Issuance of Common
Shares (Note U) - - 10,403,919 104,040 107,704,970
Conversion of Units to
Common Shares (Note N) - - 448,863 4,489 4,246,715
Stock purchase
loan, net (Note P) - - 86,956 869 999,131
Proceeds from the
exercise of
stock warrants - - 1,495 15 17,611
Common dividends - - - - (23,447,779)
--------- ------- ---------- -------- ------------
Balance,
December 31, 1997 2,737,000 $27,370 36,334,601 $368,411 $394,838,797
</TABLE>
<TABLE>
<CAPTION>
Loans
Accumulated Receivable- Treasury
Deficit Officers Stock at cost Total
------- -------- ------------- -----
<S> <C> <C> <C> <C>
Balance,
December 31, 1995 - - (1,743,075) 260,787,617
Net loss (14,308,277) - - (14,308,277)
Proceeds from the
exercise of
stock warrants - - - 5,884
Non-employee stock
option grants - - - 22,584
Common dividends - - - (22,853,892)
----------- --------- ----------- ------------
-
Balance,
December 31, 1996 (14,308,277) - (1,743,075) 223,653,916
Net loss (8,429,046) - - (8,429,046)
Issuance of
Preferred Shares
(Note U) - - - 65,876,665
Preferred dividends (1,659,306) (1,659,306)
Non-employee stock
option grants (Note P) - - - 22,584
Issuance of Common
Shares (Note U) - - - 107,809,010
Conversion of Units to
Common Shares (Note N) - - - 4,251,204
Stock purchase
loan, net (Note P) - (900,000) - 100,000
Proceeds from the
exercise of
stock warrants - - - 17,626
Common dividends - - - (23,447,779)
------------ --------- ----------- ------------
Balance,
December 31, 1997 $(24,396,629) $(900,000) $(1,743,075) $368,194,874
</TABLE>
Continued
F-7
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (continued)
For the Years Ended December 31, 1998, 1997 and 1996
-----------
<TABLE>
<CAPTION>
Series 1997-A Convertible Additional
Preferred Stock at par Common Stock at par Paid-in Capital
---------------------- ------------------- ---------------
Shares Amount Shares Amount
---------------------- -------------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1997 2,737,000 $27,370 36,334,601 $368,411 $394,838,797
Net Loss - - - - -
Preferred dividends - - - - -
Stock issuance costs - - - - (407,746)
Conversion of Units
to Common Shares - - 53,887 539 526,244
Non-employee stock
option grants (Note P) - - - - 9,000
Shares issued in
satisfaction of
note payable - - 189,332 1,893 2,128,107
Stock purchase loans,
net (Note P) - - 126,984 1,270 1,498,730
Proceeds from the
exercise of
stock warrants - - 8,596 86 101,261
Common dividends - - - - (35,226,070)
Adjustment for Minority
Interest ownership of
Operating Partnership
(Note N) - - - - 11,717,976
--------- ------- ---------- -------- -------------
Balance,
December 31, 1998 2,737,000 $27,370 36,713,400 $372,199 $375,186,299
========= ======= ========== ======== ============
</TABLE>
<TABLE>
<CAPTION>
Loans
Accumulated Receivable- Treasury
Deficit Officers Stock at cost Total
------- -------------- ------------- -------
<S> <C> <C> <C> <C>
Balance,
December 31, 1997 $(24,396,629) $(900,000) $(1,743,075) $368,194,874
Net Loss (7,995,405) - - (7,995,405)
Preferred dividends (6,158,250) - - (6,158,250)
Stock issuance costs - - - (407,746)
Conversion of Units
to Common Shares - - - 526,783
Non-employee stock
option grants (Note P) - - - 9,000
Shares issued in
satisfaction of
note payable - - - 2,130,000
Stock purchase loans,
net (Note P) - (1,375,000) - 125,000
Proceeds from the
exercise of
stock warrants - - - 101,347
Common dividends - - - (35,226,070)
Adjustment for Minority
Interest ownership of
Operating Partnership
(Note N) - - - 11,717,976
------------ ----------- ----------- ------------
Balance,
December 31, 1998 $(38,550,284) $(2,275,000) $(1,743,075) $333,017,509
============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part
of the Consolidated Financial Statements.
F-8
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
-----------
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (7,995,405) $ (8,429,046) $(14,308,277)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Depreciation and amortization 57,794,479 35,272,775 29,050,960
Amortization of workforce and
other intangible assets 13,032,194 8,042,554 1,120,640
Costs associated with Advisor
Transaction - 2,400,000 -
Provision for losses on real
estate investments - 1,850,000 7,500,000
Joint venture (income) loss (132,454) 4,910,021 3,008,587
Distributions received from
joint venture earnings 132,454 - -
Gains on sales of assets (1,264,920) (6,454,717) (58,263)
Non-employee stock options 9,000 22,584 22,584
Stock purchase loan forgiveness 125,000 100,000 -
Amortization of purchase discounts (155,647) (144,558) (511,976)
Minority interest in
Operating Partnership (3,369,786) (2,153,506) (1,403,000)
Write-off of deferred
financing costs 422,490 24,828 149,272
Amortization of deferred
financing costs 1,581,824 1,427,429 1,052,283
Increase in escrows and
other assets (3,663,714) (4,242,387) (2,470,167)
Increase in accrued real estate
taxes, other liabilities
and accounts payable 9,075,647 3,145,212 3,952,223
Increase in deposits and
prepaid rents 3,421,716 2,444,306 399,924
------------ ------------ ------------
Net cash provided by
operating activities 69,012,878 38,215,495 27,504,790
------------ ------------ ------------
Cash flows from investing activities:
Costs to acquire properties (104,161,523) (96,589,327) (37,894,563)
Land acquisition and
construction-in-progress (17,161,563) (16,207,482) (13,512,645)
Proceeds from sales of properties 17,179,783 38,415,017 19,580,079
Recurring capital expenditures (6,865,814) (4,569,573) (4,397,131)
Rehabilitation and non-recurring
capital expenditures (31,605,291) (15,642,973) (15,900,996)
Notes receivable - (7,500,000) -
Distributions from the sale of
joint venture asset, net 14,883,968 7,945,667 -
Distributions received from joint
ventures in excess of earnings 641,697 1,481,615 2,644,533
Contributions to joint venture - (2,150,000) -
Proceeds from the payoff of
mortgage loans - - 15,324,802
Principal collections on MBS 2,594,961 1,733,674 2,360,929
Principal collections on mortgage loans 82,554 1,903,007 1,039,898
Escrows established at acquisition
of properties (2,512,774) (4,755,629) (5,189,961)
Cost to acquire workforce and
intangible assets - (559,239) (447,679)
------------ ------------ ------------
Net cash used for
investing activities (126,924,002) (96,495,243) (36,392,734)
------------ ------------ ------------
</TABLE>
Continued
F-9
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the Years Ended December 31, 1998, 1997 and 1996
-----------
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ --------
<S> <C> <C> <C>
Cash flows from financing activities:
Advances under credit agreements 123,100,000 19,400,000 48,970,000
Advances under construction loan 11,046,105 316,786 -
Payments on credit agreements - (80,115,000) (8,050,000)
Payment on repurchase agreement - (9,300,000) (1,650,000)
Payment of financing costs (2,371,101) (501,934) (1,222,170)
Prepayment of mortgage notes payable (17,433,697) - -
Principal payments on mortgage notes
payable (4,142,897) (7,760,525) (8,591,947)
Proceeds from the issuance
of preferred stock, net of
discounts and offering costs - 65,876,665 -
Proceeds from issuance of
common stock, net of discounts
and offering costs (407,746) 103,109,010 -
Proceeds from the exercise of stock
warrants 101,347 17,626 5,884
Dividends to preferred shareholders (6,158,250) (1,659,306) -
Dividends to common shareholders (35,226,070) (23,447,779) (22,853,892)
Distributions to minority unitholders (8,088,797) (4,812,638) (1,846,688)
----------- ----------- -----------
Net cash provided by
financing activities 60,418,894 61,122,905 4,761,187
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 2,507,770 2,843,157 (4,126,757)
Cash and cash equivalents, beginning
of year 9,859,110 7,015,953 11,142,710
----------- ----------- -----------
Cash and cash equivalents, end
of year $12,366,880 $ 9,859,110 $ 7,015,953
=========== =========== ===========
Supplemental cash flow disclosure:
Cash paid for interest during year $40,175,873 $24,327,983 $20,143,571
=========== =========== ===========
Interest capitalized during year $ 1,469,078 $ 777,159 $ 514,258
=========== =========== ===========
</TABLE>
Continued
F-10
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the Years Ended December 31, 1998, 1997 and 1996
-----------
Supplemental disclosure of non-cash investing and financing activities:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Property acquisitions $(201,505,018) $(304,798,057) $(112,964,195)
Debt assumed in property
acquisitions 79,003,017 165,549,922 53,196,934
Units issued for property
acquisitions (Notes E and F) 18,340,478 29,728,045 21,872,698
Shares issued for property
acquisitions (Note E) - 4,700,000 -
Joint venture distribution
of property, net - 8,230,763 -
------------- ------------ ------------
Cash to acquire property $(104,161,523) $(96,589,327) $(37,894,563)
============= ============ ============
Units issued for workforce and
other intangible assets
acquired (Notes C and D) $ - $ 17,637,500 $ 13,000,000
============= ============ ============
Units issued for Advisor
benchmarks (Note C) $ - $ 2,400,000 $ -
============= ============ ============
Conversion of Units to Shares $ 526,783 $ 4,251,204 $ -
============= ============ ============
Shares issued for stock
purchase loans $ 1,500,000 $ 1,000,000 $ -
============= ============ ============
Shares issued in satisfaction
of note payable $ 2,130,000 $ - $ -
============= ============ ============
Reclassification of construction
in progress to multifamily
apartment complexes $ 20,116,588 $ 1,571,216 $ 10,888,961
============= ============ ============
</TABLE>
The accompanying Notes are an integral
part of the Consolidated Financial Statements.
F-11
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------
A. Organization
------------
Berkshire Realty Company, Inc. and Subsidiaries (the "Company") was formed
on April 26, 1990 by filing a certificate of incorporation in the State of
Delaware. The Company commenced operations on June 27, 1991, as an equity
real estate investment trust ("REIT"). The principal business of the
Company is the acquisition, renovation, rehabilitation, development and
operation of multifamily apartment communities located in Florida, Texas
and the Mid-Atlantic and Southeast regions of the United States.
The Company was restructured to an umbrella partnership real estate
investment trust ("UPREIT") on May 1, 1995, when the Company's assets,
subject to liabilities, were transferred to a newly formed subsidiary
("Operating Partnership") of which the Company is a Special Limited Partner
and owns 100% of the stock of Berkshire Apartments, Inc., the general
partner. Upon transfer of its net assets, the Company was issued 25,392,452
units of the Operating Partnership ("Units") which was equal to the number
of shares outstanding on May 1, 1995.
In connection with the organization of the Operating Partnership, on May 1,
1995, an affiliate of Berkshire Realty Advisors Limited Partnership, the
Company's former advisor, contributed $5,000 and River Oaks Apartments,
subject to mortgage debt of $5.4 million, at a valuation of $10,500,000.
The seller received 534,975 Units in the Operating Partnership ("Minority
Interest") valued at $9.50 per Unit or $5.1 million, in exchange for its
interest in the property.
On March 1, 1996, the Company became self-administered when it acquired the
assembled workforce and other assets of Berkshire Realty Advisors Limited
Partnership (the "Advisor"), an affiliate of a director of the Company,
which provided advisory and development services to the Company (the
"Advisor Transaction"). In exchange for the assets acquired the Company
issued 1.3 million Units of the Operating Partnership. The transaction was
valued at $13 million, which together with related costs, was recorded as
an intangible asset associated with the workforce acquired. If certain
share price benchmarks are achieved during a six-year period, $7.2 million
of additional Units may be issued. During 1997, the $11.00 and $12.00 share
price benchmarks were achieved and an additional 209,091 Units were issued
at a value of $2.4 million. (See Note C to the Consolidated Financial
Statements).
Property management services for the Company's multifamily assets were
performed by an affiliate of certain directors and officers of the Company
until February 28, 1997 when the Company acquired the established workforce
and other assets of the affiliated company for 1.7 million Units (the
"Property Manager" or "Property Manager Transaction"). The transaction was
valued at $17.6 million (based on a $10.375 share price) and was recorded
on the balance sheet of the Company as an intangible asset associated with
the third-party property management contracts and the acquisition of a
workforce.
At the time of the acquisition, the Property Manager managed 57 apartment
communities, including the Company's 35 assets, and employed approximately
85 professionals, excluding site employees. As a result of this
transaction, the Company ceased payment of management fees and
reimbursements to the affiliate for the management operations of its
multifamily portfolio. In addition, the Company acquired 22 third-party
management contracts, primarily with partnerships affiliated with certain
directors and officers of the Company, which generate management fee and
reimbursement revenue. (See Note D to the Consolidated Financial
Statements).
Continued
F-12
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
A. Organization - Continued
------------
In addition to the three transactions mentioned above, the Company has
utilized its UPREIT structure to acquire an additional 39 multifamily
communities since 1995. All UPREIT transactions have increased the
ownership of the Operating Partnership by minority unitholders ("Minority
Interest") to 20.8% at December 31, 1998, which included a 14.0% ownership
by companies affiliated with a director and officers of the Company. The
Company directly or indirectly owned the remaining 79.2% of the Operating
Partnership. The Company has several wholly-owned qualifying REIT
subsidiaries which were formed in connection with the UPREIT transaction or
for financing purposes and are consolidated in the accompanying financial
statements.
The Company is authorized to issue up to 140,000,000 shares of common
stock, $0.01 par value per share ("Shares"). The Company is also authorized
to issue up to 60,000,000 shares of preferred stock, $0.01 par value, which
may be issued in multiple classes or series ("Preferred Shares"). The Board
is authorized to determine the rights, preferences and privileges of the
preferred stock including the number of shares constituting any such series
and the designation thereof, without any further vote or action by the
shareholders. The Company's outstanding Shares are publicly traded on the
New York Stock Exchange under the symbol "BRI".
The Company has an infinite life; however, the Company's Certificate of
Incorporation, as amended, required the Company's Board of Directors (the
"Board") to prepare and submit a Plan of Liquidation to the Shareholders on
or before December 31, 1998, together with a recommendation by its Board of
Directors whether to adopt or reject the Plan of Liquidation. The Plan of
Liquidation will become effective only if approved by shareholders holding
a majority of the shares outstanding at the time of the vote.
In May, 1998, the Company began the process of evaluating its strategic
alternatives which included the potential sale or merger of the Company or
the adoption of a Plan of Liquidation.
On December 31, 1998, the Company filed proxy materials related to a Plan
of Liquidation with the Securities and Exchange Commission. Included in the
proxy was a recommendation by the Board of Directors that shareholders vote
against approval of the Plan of Liquidation because, in the opinion of the
Board, other alternatives available to the Company would likely produce
greater value for the shareholders.
In the first quarter of 1999, as a result of the process initiated by the
Board, the Company received several offers to acquire the Company. Among
these offers was one from a group that included Douglas Krupp, the Chairman
of the Board of the Company, to acquire the Company at a price of $11.05
per share of Common Stock. A special committee of disinterested directors
established by the Board to review and negotiate these offers advised this
group that the price of $11.05 per share was insufficient. This group
subsequently revised its offer to $12.05 per share of Common Stock. The
special committee of the Board is continuing to review and negotiate the
offers the Company received. There can be no assurance that any of these
offers will result in the consummation of the sale of the Company.
Continued
F-13
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
B. Significant Accounting Policies
-------------------------------
Basis of Presentation
---------------------
The accompanying Consolidated Financial Statements include the consolidated
accounts of the Company, the Operating Partnership and the subsidiaries of
the Company and the Operating Partnership.
All significant intercompany balances have been eliminated in consolidation.
The Consolidated Financial Statements of the Company have been adjusted for
the minority interest of unitholders in the Operating Partnership.
Estimates and Assumptions
-------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of and disclosure related to assets and
liabilities, contingent assets and liabilities and revenues and expenses.
Actual results could differ from those estimates.
Cash and Cash Equivalents
-------------------------
The Company includes all short-term investments with maturities of three
months or less at the date of acquisition in cash and cash equivalents. The
carrying value of these investments approximated market at December 31, 1998
and 1997.
The Company invests its cash primarily in money market funds with commercial
banks. The Company has not experienced any losses to date on its invested
cash.
Escrows
-------
Escrows include amounts established pursuant to certain debt agreements for
real estate taxes, insurance and capital improvements.
Real Estate Assets and Depreciation
-----------------------------------
Expenditures related to the acquisition, improvement and development of real
estate assets are capitalized at cost. Upon acquisition of a real estate
asset, expenditures to remedy deferred maintenance and renovation costs are
capitalized. Ordinary repairs and maintenance are expensed as incurred.
Depreciation
------------
Depreciation is computed by using the straight-line method over the estimated
useful lives of the related assets as follows:
Buildings 25 years
Building and land improvements 5 to 25 years
Appliances, carpeting and equipment 3 to 8 years
Interest Expense and Real Estate Tax Capitalization for Development Assets
--------------------------------------------------------------------------
Interest expense and real estate taxes incurred during the construction
period of assets under development are capitalized until buildings are
placed in service as evidenced by certificates of occupancy.
Continued
F-14
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
B. Significant Accounting Policies - Continued
-------------------------------
Amortization of Workforce and Other Intangible Assets
-----------------------------------------------------
Amortization of the intangible assets acquired related to the Advisor
Transaction and Property Manager Transaction is calculated using the
straight-line basis over a period of three to four years.
Impairment of Long-Lived Assets
-------------------------------
Real estate assets and equipment are stated at depreciated cost. Pursuant
to Statement of Financial Accounting Standards Opinion No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of", impairment losses are recorded on long-lived assets used in
operations on a property by property basis, when events and circumstances
indicate that the assets might be impaired and the estimated undiscounted
cash flows to be generated by those assets are less than the carrying
amount of those assets. Upon determination that an impairment has occurred,
those assets shall be reduced to fair value less estimated costs to sell.
Investments in Unconsolidated Joint Ventures
--------------------------------------------
Investments in Joint Ventures were accounted for using the equity method of
accounting as the respective Partnership Agreements required a majority
vote for all major decisions regarding the Joint Ventures. Under the equity
method of accounting, the Company's share of income (loss) of the Joint
Ventures is included in the Company's net income (loss).
MBS
---
MBS are held for long-term investment and therefore are carried at
amortized cost. Premiums or discounts are amortized over the life of the
underlying securities using the effective yield method. The Company has the
intention and ability to hold these to maturity.
Mortgage Loan Receivable
------------------------
Discounts on the mortgage loan, net of acquisition costs, are amortized
into income over the remaining life of the related loan using the effective
yield method, based on management's estimate of the current facts and
circumstances and the ultimate ability to collect such loan.
Rental Revenue
--------------
Residential and commercial leases require the payment of base rent monthly
in advance. Rental revenues are recorded on the accrual basis. Commercial
leases generally contain provisions for additional rent based on a
percentage of tenant sales and other provisions which are also recorded on
the accrual basis, but are billed in arrears. Minimum rental revenue from
long-term commercial leases is recognized on a straight-line basis over the
life of the related lease.
Segment Reporting
-----------------
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 131 ("FAS 131"), "Disclosures about Segments of an Enterprise and
Related Information." FAS 131 supersedes Statement of Financial Accounting
Standards No. 14, "Financial Reporting for Segments of a Business
Enterprise", replacing the "industry segment" approach with a "management"
approach. The management approach designates the internal reporting used
by management for making operating decisions and assessing performance as
the source of the Company's segment.
Continued
F-15
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
B. Significant Accounting Policies - Continued
-------------------------------
Deferred Expenses
-----------------
Costs associated with debt financings are capitalized and amortized to
interest expense over the term of the related agreement using a method
which approximates the effective interest method.
Interest Rate Swap Agreement
----------------------------
Swap receipts and payments under interest rate swap agreements designated
as a hedge are recognized as adjustments to interest expense in the
Consolidated Statements of Operations. Settlement payments or receipts on
terminated interest rate swap agreements are deferred and amortized over
the remaining original period of the swap, as long as the hedged borrowing
is still outstanding. Settlement payments or receipts on terminated
interest rate swap agreements, if any, would be reflected as financing
activities in the Consolidated Statements of Cash Flows.
Income Taxes
------------
The Company has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended, and believes it will continue to meet all such
qualifications. Accordingly, the Company will not be subject to federal
income taxes on amounts distributed to shareholders provided that it
distributes annually at least 95% of its REIT taxable income and meets
certain other requirements for qualifying as a REIT. Therefore, no
provision for federal income taxes has been recorded in the Consolidated
Financial Statements. However, the Company is subject to certain state
income taxes and certain state net worth taxes which have been recorded in
the Consolidated Statements of Operations.
Earnings Per Share
------------------
In accordance with the Statement of Financial Accounting Standards No. 128
("FAS No. 128"), the Company presents both basic and diluted earnings per
share ("EPS"). Basic EPS excludes dilution and is computed by dividing net
income available to common stockholders by the weighted average number of
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock, where such exercise
or conversion would result in a lower EPS amount.
Strategic Alternatives and Non-Recurring Charges
------------------------------------------------
The Company considers costs associated with evaluation of strategic
alternatives and non-recurring charges to be costs incurred specific to
significant non-recurring events that materially distort the comparative
measurement of the Company's performance.
Extraordinary Items
-------------------
Extraordinary items represent the effect resulting from the early
settlement of certain debt obligations, including related deferred
financing costs, prepayment penalties, yield maintenance payments and
other related items.
Continued
F-16
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
B. Significant Accounting Policies - Continued
-------------------------------
Reclassifications
-----------------
Certain prior year balances have been reclassified to conform with current
year consolidated financial statement presentation.
C. The Advisor Transaction
-----------------------
On February 28, 1996, the Board of Directors, acting on the recommendation
of a Special Committee comprised solely of Independent Directors, approved
the acquisition, via contribution, of the existing workforce and other
assets of the Advisor in exchange for 1.3 million Units which had a value
of $13 million. The total acquisition price, including professional fees
and expenses, has been recorded on the Company's balance sheet as
intangible assets associated with the workforce acquired and is being
amortized on a straight-line method over a three-year period.
The Board's actions were initiated to increase cash flows and to align the
organization of the Company to be consistent with the structure preferred
by institutional investors, rating agencies and market analysts.
Additional Units, up to a total of $7.2 million, may be issued during a
six-year period if certain share price benchmarks are achieved. The
benchmarks will be satisfied if the share price of the Company's common
stock is equal to or greater than the benchmark for any fifteen days
during any twenty consecutive trading days. There are six share price
benchmarks beginning at $11.00 and increasing by $1.00 each up to a
maximum of $16.00. Upon satisfaction of each benchmark, Units equal to
$1.2 million will be issued. The Company achieved share price benchmarks
of $11.00 on March 19, 1997 and $12.00 on October 9, 1997 and issued
109,091 and 100,000 Units, respectively, on those dates. The value of
additional Units issued during 1997 was $2.4 million and was recorded as
an expense in the Consolidated Statements of Operations. As of December
31, 1998, 209,091 additional Units have been issued as a result of
achieving the share price benchmarks.
The contribution was completed on March 1, 1996. As of that date, all
charges and expenses associated with the Advisory Services Agreement
ceased and the Company became a "self-administered" REIT. The Company
began incurring general and administrative expenses for its acquired
management staff including salaries, benefits, and other overhead
expenses.
D. Property Manager Transaction
----------------------------
On February 26, 1997, the Board of Directors, acting on the recommendation
of a Special Committee comprised solely of Independent Directors, approved
the acquisition of the workforce and other assets of the Property Manager
which provided multifamily property management services to the Company
("Property Manager"). The Property Manager was contributed on February 28,
1997 in exchange for 1.7 million Units which had a value of approximately
$17.6 million.
At the time of the contribution, the Property Manager managed 57 apartment
communities, including the Company's 35 assets, and employed approximately
85 professionals, excluding site employees. As a result of this
transaction, the Company ceased payment of management fees and
reimbursements for the management operations of its multifamily portfolio.
In addition, the Company acquired 22 third-party management contracts
which generate management fee and reimbursement
Continued
F-17
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
D. Property Manager Transaction - Continued
----------------------------
revenue. Those contracts are primarily with partnerships affiliated with
a director of the Company.
The Board's actions were initiated to reduce the costs associated with the
operations of the multifamily portfolio, to generate revenue from
third-party fee management contracts and to align the organization of the
Company to be consistent with the structure preferred by institutional
investors, rating agencies and market analysts.
The value of the assets acquired was determined by evaluating the future
cash flows attributable to the third-party management contracts as well as
the immediate operating efficiencies obtained through the acquisition of a
cohesive assembled workforce. Accordingly, the value of the transaction
was allocated to intangible assets associated with third-party management
contracts and the workforce acquired. The Company recorded intangible
assets of $4.4 million based on discounted cash flows from third-party
property management contracts and $13.2 million based on the value of
intangible assets associated with the workforce acquired. The acquisition
price is being amortized on a straight-line method over a three to four
year period.
E. Questar Transaction
-------------------
On November 14, 1997, the Company consummated a transaction with the
Questar Companies ("Questar") whereby it acquired eighteen apartment
communities (3,699 units) (the "Questar Transaction"). The total purchase
price of $171.4 million was funded through the assumption of $128.7
million in debt, the issuance of $19.9 million in Units, $4.7 million in
common stock and cash of $18.1 million. The Company also contracted to
purchase four apartment communities which were under development at the
time of the transaction, and entered into a Development Acquisition
Agreement with Questar Builders, Inc. which gave the Company the exclusive
right to acquire all apartment communities developed by Questar Builders,
Inc.
On December 15, 1997, the Company acquired Liriope Apartments, an 84-unit
apartment community located in Belcamp, Maryland, for approximately $7.6
million under the contractual arrangement with Questar. Subsequent to
December 31, 1998, the Company acquired Granite Run which represented the
second development property the Company had contracted to acquire from
Questar Builders, Inc. (See Note F for additional information).
F. Real Estate Properties
----------------------
As of December 31, 1998, the Company had investments in 81 multifamily
apartment communities in eight states consisting of 24,123 apartment
units.
The following summarizes the carrying value of the Company's multifamily
apartment communities and retail centers held for sale in 1997 which were
sold in 1998 (dollars in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
---- ----
<S> <C> <C>
Land $ 151,282 $109,063
Buildings and improvements 768,270 629,649
Appliances, carpeting and equipment 169,812 120,669
--------- --------
Total multifamily and retail property 1,089,364 859,381
Accumulated depreciation (169,878) (129,280)
--------- --------
$ 919,486 $730,101
========= ========
</TABLE>
F-18
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
Acquisitions
------------
On January 21, 1998, the Company acquired Berkshire Springs Apartments
(formerly known as Countrywood), a 208-unit apartment community located in
Dallas, Texas, for $6.75 million. The Company paid cash of $2.0 million,
assumed debt of $4.0 million and issued $720,000 of Operating Partnership
Units. The debt agreement requires monthly principal and interest payments
based on an interest rate of 7.875% along with monthly funding of real
estate tax escrows.
On February 4, and April 9, 1998, the Company acquired six apartment
communities for approximately $81.2 million. The Company paid cash of
approximately $58.9 million, issued $8.0 million of Operating Partnership
Units and assumed debt of $14.3 million. The debt agreements require
monthly principal and interest payments based on interest rates of 8.51%
along with monthly funding of real estate tax escrows. The apartment
communities acquired are summarized as follows:
<TABLE>
<CAPTION>
Number
Property Name Location of Units
------------- -------- --------
<S> <C> <C>
Bluffs of Berkshire (formerly known Austin, TX 382
as The Bluffs)
Berkshire Hills (formerly known Austin, TX 238
as Pinto Ridge)
Carlyle Place San Antonio, TX 184
Yorktown Houston, TX 563
6200 Gessner Houston, TX 659
Berkshire Crossings (formerly Houston, TX 240
known as The Lodge) -----
2,266
=====
</TABLE>
Continued
F-19
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------
F. Real Estate Properties - Continued
On February 12, 1998, the Company acquired Olde Forge, a 144-unit townhome
community located in Baltimore, Maryland, for $7.3 million. The Company
assumed bond debt of approximately $5.8 million and issued $1.5 million of
Operating Partnership Units. The debt agreement requires monthly principal
and interest payments based on an all inclusive fixed interest rate of
7.055% along with monthly funding of real estate tax escrows.
On February 26, 1998, the Company acquired Arbor Keys (formerly known as
Seven Winds), a 232-unit garden style apartment community located in
Tamarac, Florida, for $9.6 million. The Company paid cash of $7.8 million
and issued $1.8 million of Operating Partnership Units.
On March 14, 1998, the Company acquired Lynn Lake Apartments, an 809-unit
apartment property located in St. Petersburg, Florida which consists of 688
garden-style apartments and 121 townhomes, for $23.0 million. The Company
paid cash of $2.4 million, assumed tax-exempt bond debt of $14.4 million
and issued $6.2 million of Operating Partnership Units. One of the bond
agreements requires monthly principal and interest payments based on a
fixed interest rate of 7.06% along with monthly funding of real estate tax
escrows. The other bond agreement requires interest only payments at an all
inclusive variable rate of 5.07% as of December 31, 1998.
On June 18, 1998, the Company acquired Oaks of Marymont, a 319-unit
apartment community located in San Antonio, Texas, for $11.4 million in
cash.
On July 8, 1998, the Company acquired four apartment communities in
Atlanta, Georgia for approximately $59.7 million. The Company assumed $40.4
million of first mortgage debt and paid cash of $19.3 million. The debt
agreements require monthly principal and interest payments based on
interest rates ranging from 8.04% to 8.60% along with the monthly funding
of real estate tax escrows. The apartment communities acquired are
summarized as follows:
<TABLE>
<CAPTION>
Number
Property Name of Units
------------- --------
<S> <C>
Essex House 120
Highlands at Briarcliff 140
Pines at Dunwoody 389
River Parkway 427
------
1,076
</TABLE>
Development
-----------
In 1998, the Company completed construction of Berkshires at Crooked Creek,
a 296-unit apartment community in Durham, North Carolina. The project was
completed for a total cost of approximately $20.1 million. The cost of the
completed development property has been included in multifamily apartment
communities on the Consolidated Balance Sheet as of December 31, 1998.
In December, 1997, the Company purchased a 60 acre parcel of land in
Atlanta, Georgia for approximately $5.8 million for the development of two
multifamily phases, the first of which was Berkshires at Deerfield, a 478
unit apartment community. Construction began in the third quarter of 1998
and is expected to be completed in October, 2000 at an estimated cost of
$34.9 million. As of December 31, 1998, approximately $7.3 million of
construction costs had been incurred.
Continued
F-20
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------
F. Real Estate Properties - Continued
----------------------
On April 29, 1998, the Company acquired 12.6 acres located near Clemson,
South Carolina for approximately $571,000. Construction of Berkshire
Commons, a 177-unit student housing development, began in the third
quarter of 1998 and is expected to be completed in August, 1999 at an
estimated cost of $14.1 million. As of December 31, 1998, approximately
$3.7 million of construction costs had been incurred.
The Company also owns two other parcels of land located in Greenville,
South Carolina. Development plans are under consideration for these sites.
As of December 31, 1998, the Company was contractually obligated to
acquire three additional properties from Questar Builders, Inc. which were
in various stages of development. The developments are summarized as
follows:
<TABLE>
<CAPTION>
Planned Estimated Expected
Apartment Total Acquisition
Property Location Units Investment Date
- -------- -------- ----- ---------- ------------
(in thousands)
<S> <C> <C> <C>
Granite Run (a) Baltimore, MD 264 $25,500 January, 1999
The Courts of
Avalon Pikesville, MD 258 34,700 December, 1999
Excalibur at Pikesville, MD 147 24,200 March, 2000
Avalon --- -------
Total 669 $84,400
=== =======
</TABLE>
(a) On January 7, 1999, the Company acquired Granite Run for
approximately $25.5 million.
On November 14, 1997, the Company entered into a Development Acquisition
Agreement with Questar Builders, Inc. which granted the Company an
exclusive right to acquire all apartment projects developed in the
Mid-Atlantic Region by Questar Builders, Inc. which meet the Company's
acquisition and development criteria.
Dispositions
------------
On January 5, 1998, the Company sold Tara Crossing, a 235,781 square foot
retail center located in Jonesboro, Georgia, for approximately $9.5
million. The property had a depreciated cost basis of approximately $9.2
million which, after closing costs, resulted in a loss on sale of
approximately $10,000.
On January 30, 1998, the Company sold College Plaza, an 83,962 square foot
retail center in Fort Myers, Florida, for approximately $6 million. The
property had a depreciated cost basis of approximately $5.2 million which,
after closing costs, resulted in a gain on sale of approximately $516,000.
Also on January 30, 1998, the Company and its joint venture partner sold
Spring Valley Marketplace, a 320,686 square foot retail center located in
Spring Valley, New York, for approximately $29.6 million. The Company's
share of the gain recorded by the joint venture on the sale totaled
approximately $50,000.
On May 13, 1998, the Company sold a parcel of land located in Dallas,
Texas, for approximately $2 million which resulted in a gain of
approximately $543,000.
Continued
F-21
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------------
G. Investments in Unconsolidated Joint Ventures
--------------------------------------------
The Company had a 50% interest in Brookwood Village Joint Venture and a
50.1% interest in Spring Valley Partnership (collectively, the "Joint
Ventures") as of December 31, 1996. On January 30, 1998, the Company and
its joint venture partner sold Spring Valley Marketplace. (See Note F for
additional details). On May 13, 1997, Brookwood Village Joint Venture
exchanged Brookwood Village Mall for two multifamily properties, Berkshire
West and Sunchase, and cash. Brookwood Village Joint Venture recognized a
loss on the exchange of approximately $722,000, the Company's pro rata
share of which was approximately $361,000.
Condensed combined financial statements for the Joint Ventures are as
follows:
CONDENSED COMBINED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
------
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Property $ - $ 54,036,202
Less accumulated depreciation - (24,936,202)
------------ ------------
Total real estate asset - 29,100,000
Other assets - 2,897,655
------------ ------------
Total assets $ - $ 31,997,655
============ ============
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Liabilities $ - $ 711,270
----------- ------------
Partners' equity:
The Company - 15,618,657
Joint venture partner - 15,667,728
----------- ------------
Total partners' equity - 31,286,385
----------- ------------
Total liabilities and partners' equity $ - $ 31,997,655
=========== ============
</TABLE>
CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
Revenue $ 540,486 $ 9,221,901 $ 13,118,356
Property operating expenses (376,778) (4,756,376) (6,214,033)
Depreciation - (2,798,220) (3,925,146)
Provision for loss - (10,749,529) (9,000,000)
Gain (loss) on sale 100,672 (721,760) -
----------- ----------- ------------
Net income (loss) $ 264,380 $(9,803,984) $ (6,020,823)
=========== =========== ============
Allocation of net income (loss):
The Company $ 132,454 $(4,910,021) $ (3,008,587)
Joint venture partner 131,926 (4,893,963) (3,012,236)
----------- ----------- ------------
$ 264,380 $(9,803,984) $ (6,020,823)
=========== =========== ============
</TABLE>
Continued
F-22
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------
G. Investments in Unconsolidated Joint Ventures - Continued
--------------------------------------------
Pursuant to Statement of Financial Accounting Standards Opinion No. 121
"Accounting for the Improvement of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" impairment losses were recognized on the
Company's joint venture assets. In 1997, Brookwood Village and Spring
Valley recorded provisions for losses of $1,472,096 and $9,277,433,
respectively, which represented the difference between carrying value and
estimated fair value less costs to sell. In 1996, Brookwood Village
recorded a provision for loss of $9,000,000.
H. Mortgage Loan Receivable
------------------------
The Company held a mortgage loan which had a carrying value of
approximately $2,376,000 and $2,323,000 as of December 31, 1998 and 1997,
respectively. The mortgage loan is collateralized by a 120-unit apartment
complex in Palm Bay, Florida and requires monthly principal and interest
payments of $23,518 based on a 23-year amortization and a 7% interest
rate. The mortgage loan matures January 27, 2002 when a balloon payment of
$2,552,673 will be due. The principal balance of the mortgage loan was
approximately $2,857,000 and $2,939,000 at December 31, 1998 and 1997,
respectively.
I. Mortgage-Backed Securities (MBS)
--------------------------------
At December 31, 1998, the Company's MBS portfolio had an approximate
market value of $5,271,000 with unrealized gains of approximately
$334,000. The market value of the MBS portfolio at December 31, 1997 was
approximately $8,012,000 with unrealized gains of approximately $500,000.
At December 31, 1998 and 1997, the cost basis of the MBS portfolio was
approximately $4,937,000 and $7,512,000 with a face value of approximately
$4,965,000 and $7,561,000, respectively. The portfolio consists of Federal
Home Loan Mortgage Corporation securities with coupon rates ranging from
8.0% to 9.75% per annum maturing in the years 2008 through 2021 and a
Federal National Mortgage Association security with a coupon rate of 9%
per annum maturing in 2024.
J. Note Receivable
---------------
On November 14, 1997 ("Funding Date"), a promissory note in the amount of
$7,500,000 was issued by GGC, L.L.C. ("GGC"), an affiliate of an officer
of the Company, to the Company as a result of the Questar Transaction. The
note requires interest payments at an annual rate of 11.39% commencing on
December 1, 1997, and continuing until the outstanding balance is paid in
full. A principal payment in the amount of $3,750,000, together with all
accrued interest and other charges, will be due and payable on November
14, 2000. The remaining principal balance and accrued interest and other
charges will be due and payable on November 14, 2002. Units and Shares
received by the borrowers as a result of the Questar Transaction totaling
$9.375 million have been pledged as collateral for the promissory note.
Subsequent to December 31, 1998, GGC paid down $3.5 million of the
outstanding principal balance and $4.375 million of collateral was
released.
K. Credit Agreement
----------------
As of December 31, 1998, the Company had a credit agreement with nine
participating commercial banks for a $180 million unsecured revolving line
of credit, at interest rates which ranged between 120 and 130 basis points
over LIBOR ("Credit Agreement"). The following summarizes the Company's
borrowings on the Credit Agreement as of December 31, 1998:
Continued
F-23
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------------
K. Credit Agreement - Continued
---------------
<TABLE>
<CAPTION>
Contract Contract
Borrowings Start Date End Date Interest Rate Amount
---------- ---------- -------- ------------- ------
<S> <C> <C> <C> <C>
LIBOR contract 12/14/98 01/13/99 6.8625% $36,100,000
LIBOR contract 12/09/98 01/08/99 6.8313% 99,000,000
-----------
Subtotal $135,100,000
============
</TABLE>
Subsequent to December 31, 1998, the Company borrowed an additional $38.0
million and repriced all borrowings on the Credit Agreement at interest
rates that ranged from 6.2688% to 6.2375% with contract end dates that
ranged from April 1, 1999 to April 15, 1999.
As of December 31, 1997, the Company had a credit agreement with two
commercial banks with a maximum commitment of $49.5 million. The Company's
borrowings under the credit agreement totaled $12.0 million and had a
contract interest rate of 7.125% at December 31, 1997. This agreement was
replaced by the Credit Agreement discussed above.
In November, 1995, the Company entered into a five-year interest rate swap
contract with a bank as counterparty in order to hedge against variable
interest rate debt. Pursuant to the swap contract, the Company will pay
6.06% on a $40 million notional amount and will receive LIBOR (based on 90
day contracts).
The weighted average interest rate for the Company's variable rate credit
agreements was 6.972% for the year ended December 31, 1998.
The Credit Agreement requires the Company to be in compliance with certain
debt covenants. Three of the more restrictive covenants include the
requirement to maintain interest coverage ratio of 2 to 1, a debt service
coverage ratio of 1.75 to 1 and total liabilities to total assets of not
more than 55%. The Company believes it was in compliance with all
covenants as of December 31, 1998.
L. Construction Loan
-----------------
The Company has a construction loan commitment of $13.1 million to fund
the development Berkshires at Crooked Creek ("Construction Loan"). The
agreement requires monthly interest payments at a variable rate set at 150
basis points over LIBOR. The outstanding principal balance will be due
June 30, 1999. As of December 31, 1998, the Company's borrowings on the
Construction Loan totaled $11,362,891 and had interest rates that ranged
from 6.8125% to 7.0625% with contract end dates of January 14, 1999 and
February 16, 1999.
Subsequent to December 31, 1998, the Company repriced all borrowings on
the Construction Loan at an interest rate of 6.4375% with a contract end
date of April 16, 1999.
M. Mortgage Notes Payable
----------------------
The Company has a borrowing arrangement with the Federal National Mortgage
Association ("FNMA"). The original commitment for this interest-only
borrowing arrangement, which was collateralized by multifamily assets, was
for a maximum amount of $100 million, of which $63,345,000 was a fixed
amount with fixed interest rates ("Fixed") and $36,655,000 was a revolving
component which had a variable interest rate. On August 7, 1998, the
Company terminated the $36,655,000 the revolving component and incurred
termination fees and increased amortization expense of $561,453 as a
result.
Continued
F-24
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
---------------
M. Mortgage Notes Payable - Continued
----------------------
At December 31, 1998 and 1997, the outstanding amounts under the borrowing
arrangement with FNMA were as follows:
<TABLE>
<CAPTION>
Maturity
Dates Interest Rate Amount
--------- ------------- ------
<S> <C> <C>
11/20/05 6.997% $50,000,000
9/20/03 7.540% 13,345,000
-----------
$63,345,000
===========
</TABLE>
At December 31, 1998, the apartment communities pledged as collateral
under the borrowing arrangement with FNMA were as follows:
<TABLE>
<CAPTION>
Apartment Communities Location
--------------------- --------
<S> <C>
Brookfield Trace Mauldin, SC
Brookwood Valley Mauldin, SC
Cumberland Cove Raleigh, NC
Indigo on Forest Dallas, TX
The Oaks Mauldin, SC
Pleasant Woods Dallas, TX
River Oaks Houston, TX
</TABLE>
The following table sets forth certain information regarding the other mortgage
notes payable and related collateral at December 31, 1998:
<TABLE>
<CAPTION>
Principal Balance
Apartment Interest Maturity Balance
Communities Location Rate Date as of 12/31/98
----------- -------- ---- ---- --------------
<S> <C> <C> <C> <C>
Fixed Rate
Westchester West Silver Spring, MD 8.25% 2/1/2001 $10,954,587
Altamonte Bay Club Altamonte Springs, FL 8.34% 4/1/2001 3,967,079
Huntington Chase Norcross, GA 8.34% 4/1/2001 7,924,926
Newport Tampa, FL 8.34% 4/1/2001 3,598,079
The Timbers Charlotte, NC 8.34% 4/1/2001 6,365,833
The Avalon on Abernathy Atlanta, GA 8.45% 6/1/2001 5,327,543
East Lake Village Charlotte, NC 8.45% 6/1/2001 2,803,970
Southpointe at Massapequa Massapequa, NY 8.45% 6/1/2001 4,953,680
6200 Gessner Houston, TX 8.51% 6/1/2001 9,791,214
Berkshire Crossing Houston, TX 8.51% 6/1/2001 4,458,429
Huntington Downs Greenville, SC 8.45% 7/1/2001 8,677,496
The Lakes of Jacaranda Plantation, FL 8.45% 7/1/2001 7,750,773
Berkshire West Winter Garden, FL 7.45% 11/1/2003 5,479,391
Lynn Lake St. Petersburg, FL 7.06% 12/1/2003 7,807,877
Berkshire Springs Dallas, TX 7.88% 2/1/2004 3,937,481
Kings Crossing Kingwood, TX 8.45% 7/1/2005 8,655,350
Kingwood Lakes Kingwood, TX 8.45% 7/1/2005 8,274,895
Golf Side Fort Worth, TX 7.70% 11/1/2005 5,622,531
River Parkway Atlanta, GA 8.60% 8/1/2006 17,100,677
Fairway Ridge Baltimore, MD 8.19% 12/1/2006 6,029,303
Kingswood I Baltimore, MD 8.12% 11/1/2006 5,930,818
Kingswood II Baltimore, MD 8.12% 11/1/2006 5,865,062
Warren Park Baltimore, MD 8.12% 11/1/2006 5,005,324
</TABLE>
F-25
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Hazelcrest Baltimore, MD 8.12% 11/1/2006 809,685
Heraldry Square Baltimore, MD 8.12% 11/1/2006 7,851,488
Essex House Atlanta, GA 8.04% 3/1/2007 5,044,437
Highlands at Briarcliff Atlanta, GA 8.04% 3/1/2007 5,266,758
Pines at Dunwoody Atlanta, GA 8.04% 3/1/2007 12,755,908
Jamestowne Baltimore, MD 7.21% 11/1/2008 5,558,306
Williston Baltimore, MD 7.23% 11/1/2008 1,796,904
Coventry Baltimore, MD 6.10% 4/1/2026 4,359,193
Courtleigh Baltimore, MD 5.95% 8/1/2028 11,655,312
The Estates Pikesville, MD 7.00% 9/1/2028 11,455,708
Calvert's Walk Belair, MD 7.15% 4/1/2029 14,090,273
Berkshire Towers Silver Spring, MD 7.63% 4/1/2029 34,823,122
Stratton Meadows Baltimore, MD 7.10% 2/1/2030 12,299,697
Arborview Belcamp, MD 7.38% 1/1/2034 16,509,218
Rollingwind Baltimore, MD 7.25% 9/1/2035 18,157,454
------------
Subtotal $318,715,781
============
</TABLE>
Continued
F-26
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------------
M. Mortgage Notes Payable - Continued
----------------------
<TABLE>
<CAPTION>
Apartment Interest Maturity Principal Balance
Communities Location Rate Date as of 12/31/98
----------- -------- ---- ---- --------------
<S> <C> <C> <C> <C>
Tax Exempt Bonds - fixed
Plantation Colony Plantation, FL 7.14% 9/1/2004 9,296,493
Park Colony and Hollywood, FL
Woodland Meadows Tamarac, FL 6.41% 4/1/2002 16,900,000
Olde Forge Baltimore, MD 6.43% 7/1/2026 5,695,712
------------
Subtotal $ 31,892,205
============
Tax Exempt Bonds - variable
Prescott Place II Dallas, TX 5.66%(1) 12/5/2003 $ 5,783,441
Lynn Lake St. Petersburg, FL 5.07%(2) 7/1/2011 6,500,000
------------
Subtotal $ 12,283,441
============
Total mortgage notes payable $426,236,427
============
</TABLE>
(1) This interest rate is calculated at 70% of the prime rate as
published by the lending institution and in effect on June 15
and December 15 to be effective for the six months thereafter.
(2) This interest rate is determined on a weekly basis by the
remarketing agent at the minimum interest rate necessary so
that the bonds could be sold at one hundred percent of the
principal amount plus accrued interest.
The aggregate scheduled principal amounts of long-term borrowings
due during the five years 1999 through 2003 and thereafter are
$4,615,579, $5,000,350, $78,043,672, $20,417,102, $26,615,964 and
$291,543,760, respectively.
In the event of a mortgage prepayment, certain mortgage agreements
may require a prepayment penalty.
N. Minority Interest
-----------------
Minority Interest represents the respective ownership percentage of
the Operating Partnership by unitholders other than the Company.
Ownership percentage is determined as the number of Units held by
the Minority Interest in relation to the total number of Units held
by the Minority Interest and the Company. Issuance of additional
Shares or Units changes the ownership interests of both the Minority
Interest and the Company. Such transactions and the proceeds
therefrom are treated as capital transactions and result in an
allocation between shareholders' equity and Minority Interest. The
Company made an allocation adjustment to account for the Minority
Interest ownership of the Operating Partnership as of December 31,
1998.
Holders of Units receive distributions per Unit equal to the
dividend per Share paid in respect of common stock of the Company.
At the option of the Operating Partnership, as specified in the
Partnership Agreement, Units may be either exchanged for an equal
number of Shares or redeemed for cash from the Operating
Partnership.
There were 9,667,248 and 7,199,661 Units held by minority
unitholders in the Operating Partnership as of December 31, 1998 and
1997, respectively.
Continued
F-27
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
O. Related Party Transactions
--------------------------
As a result of the Property Manager Transaction, the Company
receives property management fees and expense reimbursements
associated with the third-party management contracts acquired. These
contracts are primarily with partnerships affiliated with a director
of the Company. The Company earned approximately $3,238,000 and
$2,763,000 related to affiliated third-party management contracts
for the years ended December 31, 1998 and 1997, respectively.
As discussed in Note J, the Company has a promissory note receivable
with an affiliate of an officer of the Company. The Company recorded
interest income related to the promissory note receivable of
approximately $854,000 and $112,000 for the years ended December 31,
1998 and 1997, respectively. Subsequent to year end, the terms of
the promissory note were amended and the affiliate paid down $3.5
million of the outstanding principal balance.
As a result of the Questar Transaction, the Company executed a
five-year lease with an affiliate of an officer of the Company for
approximately 6,900 square feet of space at an annual gross rent of
approximately $140,000. The Company incurred rent expense related to
the lease agreement of approximately $140,000 and $18,000 for the
year ended December 31, 1998 and 1997, respectively.
As discussed in Note P, the Company has issued stock purchase loans
to the President and three executive officers of the Company. In
accordance with the provisions of the loans, $125,000 and $100,000
of loan principal was forgiven during 1998 and 1997, respectively.
The forgiven amount was recorded as an expense in the Consolidated
Statements of Operations. The Company recorded interest income on
the stock purchase loans of approximately $180,000 and $65,000 for
the years ended December 31, 1998 and 1997, respectively. The unpaid
principal balance of the loans was $2,275,000 and $900,000 as of
December 31, 1998 and 1997, respectively.
As a result of the acquisition of the Property Manager as described
in Note D, effective February 28, 1997, the Company terminated the
management contracts with an affiliate for services related to
multifamily property operations. The Company engaged an affiliate of
a director of the Company to manage its retail assets until January
30, 1998. The management contracts were terminated on January 30,
1998, as a result of the sale of the Company's remaining retail
assets.
The Company has an agreement with an affiliate of a director whereby
the affiliate and the Company have contracted to provide certain
administrative services on each other's behalf. Pursuant to the
agreement, the affiliate provides services related to management
information systems support, legal and investor records and the
Company provides human resources, insurance risk management and real
estate tax related services.
The following is a summary of fees and reimbursements paid or
accrued to affiliates for administrative and property management
services for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fees and reimbursements for
administrative services, net $1,302,462 $1,324,263 $ 740,273
Cost reimbursements related
to the operation of the $ 2,544 $ 254,615 $1,666,695
Company's properties
</TABLE>
Continued
F-28
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
P. Benefit Plans
--------------
Stock Option Plan
-----------------
The Board of Directors of the Company adopted the Berkshire Realty
Company, Inc. Amended and Restated Stock Option Plan (the "Plan") in
May, 1998. The Plan provides for grants to certain employees,
non-employee directors and consultants of the Company. Awards are
administered by the Compensation Committee which is comprised of at
least two independent directors appointed by the Board of the
Directors. There are 3,300,000 shares of common stock authorized for
non-qualified and incentive stock option grants under the Plan. The
Plan will continue in effect until all shares of common stock
subject to options have been acquired or until May 1, 2001,
whichever is earlier. However, unexercised options will continue in
effect after the termination of the Plan. Options currently granted
have a 0-3 year vesting period.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," effective for periods beginning after December 15,
1995. SFAS 123 requires that companies either recognize compensation
expense for grants of stock, stock options, and other equity
instruments based on fair value, or provide pro-forma disclosure of
net income and earnings per share, adjusted to reflect the effect of
compensation expenses, in the notes to the financial statements. The
Company adopted the disclosure provisions of SFAS 123 in 1998 and
1997 and has applied APB Opinion No. 25 and related Interpretations
in accounting for the Plan. Accordingly, compensation expense of
approximately $9,000, $22,000 and $22,000 was recognized for the
years ended December 31, 1998, 1997 and 1996, respectively, for the
options issued to a consultant of the Company. Had compensation
expense for the Plan been determined based on the fair value of all
the options calculated in accordance with SFAS 123, the Company's
net loss and earnings per share for the years ended December 31,
1998, 1997 and 1996 would have been adjusted to the pro-forma
amounts indicated below (unaudited):
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------------------------------------
Earnings Earnings Earnings
Net Loss Per Common Net Loss Per Common Net Loss Per Common
Per Common Share Per Common Share Per Common Share
-------------------------------------------------------------------------------------------
(Basic) (Basic) (Basic) (Basic) (Basic) (Basic)
<S> <C> <C> <C> <C> <C> <C>
As Reported $(14,153,655) $(.39) $(10,088,352) $(.37) $(14,308,277) $(.56)
Pro-Forma* $(14,487,111) $(.39) $(10,340,811) $(.38) $(14,745,759) $(.58)
</TABLE>
* The pro-forma effect of compensation costs determined using the
fair value based method are not indicative of future amounts.
The fair value of each option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted
average assumptions: for 1998 an expected life of 5.2 years, expected
volatility of 20%, a dividend yield of 8.1% and a risk free interest
rate of 5.57%; for 1997 an expected life of 4.7 years, expected
volatility of 17%, a dividend yield of 8.1% and a risk free interest
rate of 6.36%, and for 1996 an expected life of 3 years, expected
volatility of 20%, a dividend yield of 9.1% and a risk free interest
rate of 5.65%.
Continued
F-29
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------
P. Benefit Plans - Continued
-------------
A summary of the status of the Plan and changes during the year are
presented below:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
---------------------------------------- -------------------------------
Shares 1998 1997 1996 1998 1997 1996
------ --------- -------- -------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of the year 1,094,500 624,000 - 10.38 9.90 -
Granted 539,100 536,300 624,000 11.88 10.99 9.90
Exercised - - - - -
Forfeited/Expired (39,000) (65,800) - (11.69) (10.73) -
--------- --------- ------- ------ ------ -----
Outstanding at end of the year 1,594,600 1,094,500 624,000 $10.85 $10.38 $9.90
========= ========= ======= ====== ====== =====
Options exercisable at year-end 981,300 784,000 568,000 $10.45 $10.15 $9.86
======= ======= ======= ====== ====== =====
Weighted average fair value of
options granted during the year $1.04 $.86 $.74
===== ==== ====
</TABLE>
The following table summarizes information about options granted for
the following years:
<TABLE>
<CAPTION>
Remaining
Range of Options Contractual Weighted Average
Exercise Prices Granted Life Exercise Price
--------------- ------- ---- --------------
<S> <C> <C> <C> <C>
1998 $11.81-$11.88 539,100 9.1 years $11.88
1997 $10.75-$11.00 536,300 8.3 years $10.99
1996 $ 9.75-$10.25 624,000 7.4 years $ 9.90
</TABLE>
Stock Purchase Loans
--------------------
On February 28, 1997, the Board of Directors approved a $1 million
Stock Purchase Loan for the President and Chief Executive Officer of
the Company. On March 4, 1997, the loan proceeds were used to
purchase 86,956 shares of the Company's common stock at $11.50 per
share.
On January 2, 1998, the Board of Directors approved three additional
Stock Purchase Loans, each in the amount of $500,000, for three
executive officers of the Company. On January 2, 1998, the officers
purchased 126,984 shares of common stock at $11.81 per share using
the loan proceeds.
The terms of the loans provide for, among other things, interest
rates of 7.8% and 7.873% per year payable quarterly and an annual
forgiveness feature of 5% of the original principal so long as the
individual is employed. Additional annual forgiveness of up to
another 5% may be granted if certain Company performance measures
are met. The maximum forgiveness in any one year is 10%. If the
individual terminates his employment, the loan is due and payable
six months from the date of termination. However, in the event of a
change of control of the Company, as defined, any then outstanding
principal and interest due shall be forgiven.
Continued
F-30
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
Employee Retirement Savings Plan
--------------------------------
The Company implemented a defined contribution plan in 1996 pursuant
to Section 401(k) of the Internal Revenue Code which covers all
employees' contributions up to 3% of each employee's compensation,
not to exceed $1,000. Employees with one year or greater service are
eligible to participate in the defined contribution plan. Aggregate
contributions of approximately $166,000 and $97,000 were made for
the years ended December 31, 1998 and 1997, respectively.
Supplemental Executive Retirement Plan
--------------------------------------
The Company implemented a Supplemental Executive Retirement Plan
("SERP") in 1997 which provides certain of its executive employees
with supplemental retirement income and to offer those employees an
opportunity to elect to defer the receipt of compensation in order
to provide termination of employment and related benefits taxable
pursuant to Section 451 of the Internal Revenue Code of 1986, as
amended. The SERP provides for a Company match of 10% of the
employees' deferred compensation up to a maximum of 25% of each
individual employee's base salary. Aggregate contributions made by
the Company pursuant to the SERP were approximately $22,000 and
$25,000 for the years ended December 31, 1998 and 1997,
respectively.
Q. Commitments and Contingencies
-----------------------------
Litigation
----------
The Company is involved in legal actions and claims in the ordinary
course of its business. It is the opinion of management and its
legal counsel, that such litigation and claims should be resolved
without material effect on the Company's financial position or
results from operations.
Development
-----------
The estimated cost to complete Berkshires at Deerfield and Berkshire
Commons, the development projects in progress at year end, was
approximately $38.0 million as of December 31, 1998.
As discussed in Note F, the Company also has contracts to acquire
three properties from Questar Builders, Inc. which were in various
stages of development as of December 31, 1998.
Employment Agreements
---------------------
The Company has employment agreements with certain officers which
have expiration dates which range from December, 1998 to November,
2002. In the event any of the employment agreements are terminated,
certain termination and severance payments are required.
Leases
------
The Company has several lease agreements for its regional and
corporate office space. The leases have expiration dates which range
from December, 1999 to September, 2008 and require minimum lease
payments of $1,274,811, $979,429, $772,747, $780,180, $773,086, and
$3,277,714 during the five years 1999 through 2003 and thereafter,
respectively.
Continued
F-31
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------------
Q. Commitments and Contingencies - Continued
-----------------------------------------
Tax Compliance
--------------
The Company is currently in the process of addressing two matters
which pertain to compliance with certain REIT tax provisions. Both
matters relate to certain services being provided to tenants which
could be considered impermissible under certain Internal Revenue
Service regulations in 1997 and earlier years. It is management's
opinion, based on advice from its tax advisors, that the situation
will be satisfactorily resolved without any significant cost to the
Company, although there can be no assurance that this will be the
case.
R. Earnings Per Share
------------------
In accordance with Financial Accounting Standards Board Statement
No. 128, "Earnings Per Share", the Company has presented basic and
diluted net loss per share on the Consolidated Statement of
Operations. The basic and diluted net loss and weighted average
shares used in the calculations are presented below:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Net loss allocated to $(14,153,655) $(10,088,352) $(14,308,277)
common shareholders ============ ============ ============
(Numerator)
Weighted average shares 36,684,985 27,099,522 25,393,147
(Denominator) ============ ============ ============
</TABLE>
Options, preferred stock, warrants, and Units were not included in
the computation of diluted earnings per share for the years ended
December 31, 1998, 1997 and 1996 because the effects of these
securities were antidilutive in the computations.
S. Fair Value of Financial Instruments
-----------------------------------
The Company uses the following methods and assumptions to estimate
the fair value of each class of financial instrument:
Cash and cash equivalents
-------------------------
The carrying amount approximates the fair value due to the short
maturity of those instruments.
MBS
---
The Company estimates the fair value of MBS based on quoted market
prices. (See Note I).
Mortgage loan receivable
------------------------
The Company estimates the fair value of its mortgage loans using the
market value of the properties which collateralize such loans, if
available. Otherwise, fair value is estimated by discounting the
future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and the same
remaining maturities. Based on this analysis, the Company has
determined that the fair value of the mortgage loan approximates its
carrying value.
Continued
F-32
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
Note receivable
---------------
Due to the unique nature of the note receivable and its terms the
Company has determined that the fair value of the promissory note
approximates its carrying value.
Credit agreement
----------------
The carrying amount approximates the fair value due to the short
maturity of those instruments.
Interest rate swap agreement
----------------------------
The Company would be liable for $784,000 and $156,000 if the
interest rate swap agreement was terminated as of December 31, 1998
and 1997, respectively.
Mortgage notes payable
----------------------
Mortgage notes payable were valued by discounting cash flows
remaining to maturity using comparable treasury interest rates plus
current spreads. Based on this analysis, the Company has determined
that the fair value of these liabilities approximates carrying
value. Due to restrictions on transfers and prepayment, the Company
may be unable to refinance certain mortgage notes payable at such
calculated fair values.
T. Pro-Forma Results (Unaudited):
------------------------------
The following unaudited pro-forma operating results for the Company
have been prepared as if the 1998 and 1997 property acquisitions,
dispositions and equity offerings had occurred on January 1, 1997.
Unaudited pro-forma financial information is presented for
informational purposes only and may not be indicative of what the
actual results of operations of the Company would have been had the
events occurred as of January 1, 1997, nor does it purport to
represent the results of operations for future periods. (Dollars in
thousands except per Share amounts).
<TABLE>
<CAPTION>
For the Twelve Months Ended
----------------------------------
December 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
Revenue $192,187 $185,303
======== ========
Expenses $204,308 $194,544
======== ========
Net loss $(10,889) $(11,557)
======== ========
Net loss allocated to
common shareholders $(17,047) $(17,715)
======== ========
Net loss per weighted
average common share $(.46) $(.48)
===== =====
</TABLE>
U. Shareholders' Equity
--------------------
Preferred Stock
---------------
On September 25, 1997, the Company sold 2,737,000 shares of Series
1997-A Convertible Preferred Stock (the "Preferred Shares"), $.01
par value, to affiliates of Westbrook Partners, LLC at $25.00 per
share ("Stated Value").
Continued
F-33
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------
U. Shareholders' Equity - Continued
--------------------
Holders of Preferred Shares are entitled to receive, if declared by
the Board, preferential cumulative quarterly cash dividends, at the
greater of the rate of 9% per annum or the dividend payable on
shares of common stock. Each Preferred Share is convertible, at the
option of the holder beginning September 19, 1998, into 2.0756
shares of common stock, based on a conversion price of $12.04 per
share of common stock, subject to certain adjustments as defined in
the agreement.
The terms of the Preferred Shares provide that it will rank prior to
any other series of preferred stock, prior to common stock and prior
to any other class or series of capital stock of the Company with
respect to the payment of dividends, the right to redemption and the
distribution preference in the event of a change in ownership or the
liquidation, dissolution or winding up of the Company.
In certain instances, including a change of control of the Company
(as defined in the agreement), holders of the Preferred Shares will
be entitled to receive at their option either (i) an amount per
Preferred Share equal to 115% of the sum of the Stated Value and all
accrued and unpaid dividends or (ii) common stock on conversion of
their Preferred Shares.
The amount of cumulative preferred dividends accrued as of December
31, 1998 was approximately $787,000.
Common Stock Offering
---------------------
On November 10, 1997, the Company completed an offering of ten
million shares of common stock which provided net cash proceeds of
approximately $103.1 million. The Company used the proceeds to
finance the Questar Transaction, to repay variable rate debt and for
general corporate purposes.
Dividends to Shareholders
-------------------------
For federal income tax purposes, the following summarizes the tax
components of dividends paid in 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1998 1997 1996
----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Per Share:
Ordinary income $.32 33.0% $.21 23.3% $.44 48.9%
Non-taxable distributions .64 67.0% .71 76.7% .46 51.1%
---- ----- ---- ----- ---- -----
Total $.96 100% $.92 100% $.90 100%
==== ===== ==== ===== ==== =====
</TABLE>
Warrants
--------
On June 4, 1991 at a special meeting, the Unitholders of Krupp Cash
Plus-III Limited Partnership and Krupp Cash Plus-IV Limited
Partnership (collectively the "Participating Cash Plus
Partnerships") voted in favor of and agreed to participate in an
exchange (the "Exchange") with the Company. Subsequently, the
Company was named in a consolidated lawsuit filed as a class action
representing those Unitholders related to the Exchange transaction.
On August 3, 1994, the court approved a settlement which became
effective on September 6, 1994.
Continued
F-34
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
U. Shareholders' Equity - Continued
--------------------
The settlement agreement provided that the Company pay to the
plaintiff class $1.5 million and issue three million stock warrants.
Upon exercise, each warrant entitles the holder the right to acquire
one share of common stock of the Company. The warrants were
exercisable at an exercise price of $11.79 for a period of four
years ending on September 8, 1998. On September 8, 1998,
unexercised, outstanding warrants totaling 2,987,966 expired. As of
that date, 12,034 shares of common stock had been issued upon
exercise of warrants.
V. Segment Reporting
-----------------
The Company has adopted Statement of Financial Accounting Standards
No. 131 ("FAS 131"), "Disclosures about Segments of an Enterprise
and Related Information", which establishes standards for the way
that public business enterprises report information about operating
segments in annual financial statements and require that those
enterprises report selected information about operating segments in
interim reports issued to shareholders.
The Company operates and develops apartment communities in Florida,
Texas and the Mid-Atlantic and Southeast regions of the United
States which generated rental income through the leasing of
apartment units. The Company separately evaluates the performance of
each of its apartment communities. However, because each of the
apartment communities has similar economic characteristics,
facilities, services and tenants, the apartment communities have
been aggregated into a single real estate segment.
The Company evaluates performance based upon net operating income
("NOI") from the combined properties in the segment. NOI is defined
by the Company as rental revenue less property operating expenses,
including repairs and maintenance and real estate taxes.
Accordingly, NOI excludes non-property revenue and expenses included
in the determination of net income. NOI for the combined properties
in the segment for the years ended December 31, 1998, 1997 and 1996
was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Rental Revenue
Multifamily $175,961,701 $106,172,035 $81,711,677
Retail (a) 3,369 3,801,573 7,738,970
----------- ------------ -----------
Total 175,965,070 109,973,608 89,450,647
Operating Expenses
Multifamily 69,804,636 42,919,967 35,097,867
Retail (a) 101,655 833,030 1,628,092
----------- ------------ -----------
Total 69,906,291 43,752,997 36,725,959
----------- ------------ -----------
Net Operating Income $106,058,779 $ 66,220,611 $52,724,688
============ ============ ===========
</TABLE>
Continued
F-35
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------
V. Segment Reporting - Continued
The following is a reconciliation of net operating income to income
(loss) from operations before joint venture income (loss), gains on
sale of assets, minority interest and extraordinary items:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net Operating Income $106,058,779 $66,220,611 $52,724,688
Revenue:
Management fees and
reimbursements 3,709,023 3,157,516 -
Interest 3,110,904 2,367,938 3,551,019
Expenses:
Depreciation and
amortization (70,826,673) (43,315,329) (30,171,600)
General and
administrative (5,476,948) (5,065,015) (3,632,078)
Property management
operations (7,689,765) (5,564,851) (1,302,352)
Interest (38,801,288) (24,005,605) (20,500,533)
Property and asset
management fees (15,304) (902,931) (4,717,479)
Other (2,353,738) (4,929,237) (8,563,346)
----------- ----------- -----------
Loss from operations before joint
venture income (loss), gains on
sales of assets, minority interest and
extraordinary items $(12,285,010) $(12,036,903) $(12,611,681)
============ ============ ============
</TABLE>
(a) The Company completed the liquidation of the retail portfolio in
1998.
W. Subsequent Events
-----------------
On March 5, 1999, as a result of the process initiated by the Board,
the Company filed a Form 8-K dated March 4, 1999 announcing that it
received several offers to acquire the Company. Among these offers
was one from a group that included Douglas Krupp, the Chairman of
the Board of the Company, to acquire the Company at a price of
$11.05 per share of Common Stock. A special committee of
disinterested directors established by the Board to review and
negotiate these offers advised this group that the price of $11.05
per share was insufficient. This group revised its offer to $12.05
per share of Common Stock. The special committee of the Board is
continuing to review and negotiate the offers the Company received.
There can be no assurance that any of these offers will result in
the consummation of the sale of the Company.
F-36
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
SCHEDULE III - Real Estate and Accumulated Depreciation
December 31, 1998
<TABLE>
<CAPTION>
Costs Capitalized
-----------------
Subsequent to
Initial cost to Partnership Acquisition Gross Amounts Carried at End of Year
--------------------------- ----------- -------------------------------------------
Buildings Buildings Buildings
and and and
Description Land Improvements Improvements Land Improvements Total
- ------------------------- ----------- ------------ ------------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Residential
- -----------
Altamonte Bay Club
Altamonte Springs, Florida $ 485,599 $ 4,370,388 $ 1,130,617 $ 485,599 $ 5,501,005 $ 5,986,604
The Arbors at Breckinridge
Duluth, Georgia 3,260,533 23,377,361 1,390,922 3,260,533 24,768,283 28,028,816
Arbor Keys
Tamarac, Florida 1,073,205 9,658,843 1,042,721 1,073,205 10,701,564 11,774,769
Arborview
Belcamp, Maryland 1,868,730 16,900,376 364,926 1,868,730 17,265,302 19,134,032
The Avalon on Abernathy
Atlanta, Georgia 2,013,424 5,177,377 5,334,674 2,013,424 10,512,051 12,525,475
Benchmark
Irving, Texas 1,589,125 6,493,913 1,376,987 1,589,125 7,870,900 9,460,025
Berkshires of Addison
Addison, Texas 2,200,557 4,863,832 1,204,033 2,200,557 6,067,865 8,268,422
Berkshires at Crooked Creek
Durham, North Carolina 1,656,666 18,459,922 86,758 1,656,666 18,546,680 20,203,346
Berkshire Crossing
Houston, Texas 1,074,576 4,355,317 1,045,208 1,074,576 5,400,525 6,475,101
Berkshire Hills
Austin, Texas 983,942 8,855,477 803,890 983,942 9,659,367 10,643,309
Berkshire Springs
Dallas, Texas 3,147,218 3,778,879 1,450,256 3,147,218 5,229,135 8,376,353
Berkshire Towers
Silver Spring, Maryland 5,441,750 48,975,751 9,734,326 5,441,750 58,710,077 64,151,827
Berkshire West
Winter Garden, Florida 865,625 7,790,621 1,339,530 865,625 9,130,151 9,995,776
Bluffs of Berkshire
Austin, Texas 1,786,670 16,080,034 292,478 1,786,670 16,372,512 18,159,182
British Woods
Nashville, Tennessee 1,212,396 10,911,569 1,217,813 1,212,396 12,129,382 13,341,778
Brookfield Trace
Mauldin, South Carolina 1,679,106 15,578,731 459,106 1,679,106 16,037,837 17,716,943
</TABLE>
<TABLE>
<CAPTION>
Year
Accumulated Construction Date
Description Depreciation Completed Acquired
- ------------------------- ------------ ------------ --------
<S> <C> <C> <C>
Residential
- -----------
Altamonte Bay Club
Altamonte Springs, Florida $ 2,201,144 1984-1986 10/14/92
The Arbors at Breckinridge
Duluth, Georgia 6,999,984 1986-1989/ 12/17/93
1995
Arbor Keys
Tamarac, Florida 571,905 1974 02/27/98
Arborview
Belcamp, Maryland 1,177,632 1992 11/14/97
The Avalon on Abernathy
Atlanta, Georgia 3,426,862 1971 06/02/92
Benchmark
Irving, Texas 1,417,361 1982 06/27/96
Berkshires of Addison
Addison, Texas 562,046 1980 09/26/97
Berkshires at Crooked Creek
Durham, North Carolina 194,097 N/A 08/25/95
Berkshire Crossing
Houston, Texas 265,888 1977 04/09/98
Berkshire Hills
Austin, Texas 564,331 1986 02/04/98
Berkshire Springs
Dallas, Texas 311,485 1978 01/26/98
Berkshire Towers
Silver Spring, Maryland 10,115,887 1965-1969 05/14/96
Berkshire West
Winter Garden, Florida 956,269 1991 05/13/97
Bluffs of Berkshire
Austin, Texas 931,390 1996 01/29/98
British Woods
Nashville, Tennessee 2,587,798 1984 11/01/95
Brookfield Trace
Mauldin, South Carolina 2,733,539 1995 11/01/95
</TABLE>
F-37
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
SCHEDULE III - Real Estate and Accumulated Depreciation - Continued
December 31, 1998
<TABLE>
<CAPTION>
Costs Capitalized
-----------------
Subsequent to
Initial cost to Partnership Acquisition Gross Amounts Carried at End of Year
--------------------------- ----------- ------------------------------------------
Buildings Buildings Buildings
and and and
Description Land Improvements Improvements Land Improvements Total
- ------------------------- ----------- ------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Residential
- -----------
Brookwood Valley
Mauldin, South Carolina 972,241 8,863,448 707,558 972,241 9,571,006 10,543,247
Calvert's Walk
Belair, Maryland 1,548,125 14,022,664 480,642 1,548,125 14,503,306 16,051,431
Carlyle Place
San Antonio, Texas 878,453 9,115,321 199,913 878,453 9,315,234 10,193,687
The Channel
Glen Burnie, Maryland 1,194,666 4,731,257 1,136,204 1,194,666 5,867,461 7,062,127
Courtleigh
Baltimore, Maryland 1,400,059 12,691,366 702,594 1,400,059 13,393,960 14,794,019
The Cove
Glen Burnie, Maryland 1,348,446 5,924,724 1,048,677 1,348,446 6,973,401 8,321,847
Coventry
Baltimore, Maryland 604,447 5,479,602 317,982 604,447 5,797,584 6,402,031
Cumberland Cove
Raleigh, North Carolina 1,840,514 23,538,582 1,716,338 1,840,514 25,254,920 27,095,434
Diamond Ridge
Baltimore, Maryland 479,196 4,342,609 126,504 479,196 4,469,113 4,948,309
East Lake Village
Charlotte, North Carolina 531,629 4,784,665 2,787,039 531,629 7,571,704 8,103,333
Essex House
Atlanta, Georgia 782,908 7,046,174 214,239 782,908 7,260,413 8,043,321
The Estates
Pikesville, Maryland 1,352,064 12,168,571 327,024 1,352,064 12,495,595 13,847,659
Fairway Ridge
Baltimore, Maryland 712,766 6,414,891 963,056 712,766 7,377,947 8,090,713
6200 Gessner
Houston, Texas 5,149,916 7,053,676 1,387,666 5,149,916 8,441,342 13,591,258
Golf Side
Haltom City, Texas 1,444,701 6,989,048 1,249,070 1,444,701 8,238,118 9,682,819
Harper's Mill
Millersville, Maryland 1,228,134 6,857,013 888,930 1,228,134 7,745,943 8,974,077
</TABLE>
<TABLE>
<CAPTION>
Year
Accumulated Construction Date
Description Depreciation Completed Acquired
- ------------------------- ------------ ------------ --------
<S> <C> <C> <C>
Residential
- -----------
Brookwood Valley
Mauldin, South Carolina 2,394,422 1992 04/13/95
Calvert's Walk
Belair, Maryland 1,037,044 1988 11/14/97
Carlyle Place
San Antonio, Texas 522,875 1996 02/04/98
The Channel
Glen Burnie, Maryland 593,863 1981 07/22/97
Courtleigh
Baltimore, Maryland 958,144 1988 11/14/97
The Cove
Glen Burnie, Maryland 698,950 1976 07/22/97
Coventry
Baltimore, Maryland 414,773 1986 11/14/97
Cumberland Cove
Raleigh, North Carolina 7,321,644 1985/1995 12/19/91
Diamond Ridge
Baltimore, Maryland 318,089 1991 11/14/97
East Lake Village
Charlotte, North Carolina 2,939,641 1972 10/19/93
Essex House
Atlanta, Georgia 223,466 1974 07/08/98
The Estates
Pikesville, Maryland 883,784 1989 11/14/97
Fairway Ridge
Baltimore, Maryland 542,706 1966 11/14/97
6200 Gessner
Houston, Texas 445,570 1979 04/09/98
Golf Side
Haltom City, Texas 1,497,992 1980/1985 06/06/96
Harper's Mill
Millersville, Maryland 732,374 1978 07/22/97
</TABLE>
F-38
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
SCHEDULE III - Real Estate and Accumulated Depreciation - Continued
December 31, 1998
<TABLE>
<CAPTION>
Costs Capitalized
-----------------
Subsequent to
Initial cost to Partnership Acquisition Gross Amounts Carried at End of Year
--------------------------- ----------- -------------------------------------------
Buildings Buildings Buildings
and and and
Description Land Improvements Improvements Land Improvements Total
- ------------------------- ----------- ------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Residential
- -----------
Hazelcrest
Baltimore, Maryland 118,964 1,070,680 110,371 118,964 1,181,051 1,300,015
Heraldry Square
Baltimore, Maryland 1,008,285 9,074,559 767,026 1,008,285 9,841,585 10,849,870
Highlands at Briarcliff
Atlanta, Georgia 2,846,415 5,486,182 354,142 2,846,415 5,840,324 8,686,739
Highland Ridge
Nashville, Tennessee 720,695 6,486,261 1,774,194 720,695 8,260,455 8,981,150
Hilltop
Baltimore, Maryland 133,886 1,204,978 128,012 133,886 1,332,990 1,466,876
Hunter's Glen
Plano, Texas 1,465,565 8,655,738 1,860,141 1,465,565 10,515,879 11,981,444
Huntington Brook
Dallas, Texas 2,263,462 9,821,226 767,976 2,263,462 10,589,202 12,852,664
Huntington Chase
Norcross, Georgia 1,423,939 17,865,515 2,413,163 1,423,939 20,278,678 21,702,617
Huntington Downs
Greenville, South Carolina 791,173 18,091,240 2,012,246 791,173 20,103,486 20,894,659
Huntington Lakes
Dallas, Texas 2,781,864 15,317,450 658,134 2,781,864 15,975,584 18,757,448
Huntington Ridge
Irving, Texas 1,518,045 8,059,526 339,210 1,518,045 8,398,736 9,916,781
Indigo on Forest
Dallas, Texas 10,951,649 26,256,230 5,884,666 10,951,649 32,140,896 43,092,545
Jamestowne
Baltimore, Maryland 869,120 7,822,080 1,071,814 869,120 8,893,894 9,763,014
Kings Crossing
Houston, Texas 3,614,838 9,295,300 1,543,588 3,614,838 10,838,888 14,453,726
Kingwood Common I
Baltimore, Maryland 740,762 6,666,866 934,455 740,762 7,601,321 8,342,083
Kingwood Common II
Baltimore, Maryland 719,869 6,478,824 879,434 719,869 7,358,258 8,078,127
</TABLE>
<TABLE>
<CAPTION>
Year
Accumulated Construction Date
Description Depreciation Completed Acquired
- ------------------------- ------------ ------------ --------
<S> <C> <C> <C>
Residential
- -----------
Hazelcrest
Baltimore, Maryland 85,273 1965 11/14/97
Heraldry Square
Baltimore, Maryland 714,024 1974 11/14/97
Highlands at Briarcliff
Atlanta, Georgia 186,879 1969 07/08/98
Highland Ridge
Nashville, Tennessee 1,896,334 1972 11/01/95
Hilltop
Baltimore, Maryland 96,690 1965 11/14/97
Hunter's Glen
Plano, Texas 1,786,593 1979 07/30/96
Huntington Brook
Dallas, Texas 845,925 1984 09/26/97
Huntington Chase
Norcross, Georgia 6,013,344 1987/1996 07/07/93
Huntington Downs
Greenville, South Carolina 11,194,669 1986-1987 01/15/88
Huntington Lakes
Dallas, Texas 1,249,213 1984/1996 09/26/97
Huntington Ridge
Irving, Texas 663,477 1984 09/26/97
Indigo on Forest
Dallas, Texas 10,783,750 1984 08/31/94
Jamestowne
Baltimore, Maryland 634,236 1965 11/14/97
Kings Crossing
Houston, Texas 3,556,173 1983 03/23/93
Kingwood Common I
Baltimore, Maryland 549,239 1976 11/14/97
Kingwood Common II
Baltimore, Maryland 526,921 1979 11/14/97
</TABLE>
F-39
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
SCHEDULE III - Real Estate and Accumulated Depreciation - Continued
December 31, 1998
<TABLE>
<CAPTION>
Costs Capitalized
-----------------
Subsequent to
Initial cost to Partnership Acquisition Gross Amounts Carried at End of Year
--------------------------- ----------- ------------------------------------------
Buildings Buildings Buildings
and and and
Description Land Improvements Improvements Land Improvements Total
- ------------------------- ----------- ------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Residential
- -----------
Kingwood Lake
Houston, Texas 3,106,935 9,320,806 1,972,992 3,106,935 11,293,798 14,400,733
Lakes of Jacaranda
Plantation, Florida 3,060,000 17,818,748 1,195,987 3,060,000 19,014,735 22,074,735
The Lighthouse
Glen Burnie, Maryland 1,088,544 5,557,023 887,763 1,088,544 6,444,786 7,533,330
Liriope
Belcamp, Maryland 762,396 6,861,560 60,955 762,396 6,922,515 7,684,911
Lynn Lake
St. Petersburg, Florida 2,334,425 21,009,824 2,118,502 2,334,425 23,128,326 25,462,751
Newport
Tampa, Florida 486,478 4,378,303 2,679,285 486,478 7,057,588 7,544,066
The Oaks
Mauldin, South Carolina 1,509,268 6,522,462 541,200 1,509,268 7,063,662 8,572,930
Oaks of Marymont
San Antonio, Texas 3,613,328 7,857,554 792,858 3,613,328 8,650,412 12,263,740
Olde Forge
White Marsh, Maryland 747,090 6,723,808 385,133 747,090 7,108,941 7,856,031
Park Colony
Hollywood, Florida 1,888,641 16,997,765 1,512,615 1,888,641 18,510,380 20,399,021
The Pines at Dunwoody
Atlanta, Georgia 1,854,131 16,687,179 1,695,972 1,854,131 18,383,151 20,237,282
Plantation Colony
Plantation, Florida 1,341,571 12,074,143 1,063,675 1,341,571 13,137,818 14,479,389
Pleasant Woods
Dallas, Texas 1,714,157 4,336,521 1,095,713 1,714,157 5,432,234 7,146,391
Prescott Place
Mesquite, Texas 1,227,427 7,508,711 881,339 1,227,427 8,390,050 9,617,477
Prescott Place II
Mesquite, Texas 1,510,655 8,994,598 723,961 1,510,655 9,718,559 11,229,214
Providence
Dallas, Texas 1,240,238 5,525,927 1,292,361 1,240,238 6,818,288 8,058,526
Ridgeview Chase
Westminster, Maryland 1,224,841 11,023,561 335,791 1,224,841 11,359,352 12,584,193
</TABLE>
<TABLE>
<CAPTION>
Year
Accumulated Construction Date
Description Depreciation Completed Acquired
- ------------------------- ------------ ------------ --------
<S> <C> <C> <C>
Residential
- -----------
Kingwood Lake
Houston, Texas 3,736,749 1980 03/23/93
Lakes of Jacaranda
Plantation, Florida 8,712,671 1988-1989 03/30/90
The Lighthouse
Glen Burnie, Maryland 564,455 1982 09/22/97
Liriope
Belcamp, Maryland 426,512 1997 12/15/97
Lynn Lake
St. Petersburg, Florida 1,220,896 1983 03/11/98
Newport
Tampa, Florida 2,562,952 1985 10/14/92
The Oaks
Mauldin, South Carolina 3,228,428 1989 03/02/90
Oaks of Marymont
San Antonio, Texas 317,501 1975 06/18/98
Olde Forge
White Marsh, Maryland 396,966 1984 02/18/98
Park Colony
Hollywood, Florida 5,410,550 1987 07/13/94
The Pines at Dunwoody
Atlanta, Georgia 615,562 1973 07/08/98
Plantation Colony
Plantation, Florida 4,197,590 1984 12/01/93
Pleasant Woods
Dallas, Texas 1,042,855 1979 06/06/96
Prescott Place
Mesquite, Texas 1,500,847 1983 06/06/96
Prescott Place II
Mesquite, Texas 1,418,384 1984 11/12/96
Providence
Dallas, Texas 1,305,676 1980 06/26/96
Ridgeview Chase
Westminster, Maryland 804,447 1988 11/14/97
</TABLE>
F-40
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
SCHEDULE III - Real Estate and Accumulated Depreciation - Continued
December 31, 1998
<TABLE>
<CAPTION>
Costs Capitalized
-----------------
Subsequent to
Initial cost to Partnership Acquisition Gross Amounts Carried at End of Year
--------------------------- ----------- ------------------------------------
Buildings Buildings Buildings
and and and
Description Land Improvements Improvements Land Improvements Total
- ------------------------- ------------ ------------ ------------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Residential
- -----------
River Oaks
Houston, Texas 2,464,193 8,249,691 3,442,781 2,464,193 11,692,472 14,156,665
River Parkway
Atlanta, Georgia 2,464,739 22,182,651 705,008 2,464,739 22,887,659 25,352,398
Rolling Wind
Baltimore, Maryland 1,992,812 17,935,312 552,602 1,992,812 18,487,914 20,480,726
Roper Mountain Woods
Greenville, South Carolina 667,352 6,006,172 1,327,305 667,352 7,333,477 8,000,829
Southpointe at Massapequa
Massapequa, New York 874,448 7,870,033 1,337,072 874,448 9,207,105 10,081,553
Stoneledge Plantation
Greenville, South Carolina 934,388 8,898,048 1,159,945 934,388 10,057,993 10,992,381
Stratton Meadows
Baltimore, Maryland 1,484,025 13,356,232 538,768 1,484,025 13,895,000 15,379,025
Sunchase
Bradenton, Florida 530,647 4,775,819 799,484 530,647 5,575,303 6,105,950
Sweetwater Ranch
Richardson, Texas 3,391,413 17,313,174 321,028 3,391,413 17,634,202 21,025,615
The Timbers
Charlotte, North Carolina 965,823 8,692,408 1,106,252 965,823 9,798,660 10,764,483
Warren Park
Baltimore, Maryland 736,282 6,626,539 711,320 736,282 7,337,859 8,074,141
Westchester West
Silver Spring, Maryland 1,637,184 14,734,660 1,804,578 1,637,184 16,539,238 18,176,422
Williston
Baltimore, Maryland 277,987 2,501,884 259,413 277,987 2,761,297 3,039,284
Windover
Knoxville, Tennessee 890,613 8,015,515 3,502,901 890,613 11,518,416 12,409,029
Woodland Meadows
Tamarac, Florida 517,213 4,654,918 3,292,635 517,213 7,947,553 8,464,766
Yorktown
Houston, Texas 18,967,155 7,909,924 1,732,346 18,967,155 9,642,270 28,609,425
------------ ------------ ------------ ------------ ------------ --------------
Total Residential $151,282,317 $832,226,130 $105,855,793 $151,282,317 $938,081,923 $1,089,364,240
------------ ------------ ------------ ------------ ------------ --------------
</TABLE>
<TABLE>
<CAPTION>
Year
Accumulated Construction Date
Description Depreciation Completed Acquired
- ------------------------- ------------ ------------ --------
<S> <C> <C> <C>
Residential
- -----------
River Oaks
Houston, Texas 3,392,965 1966 05/01/95
River Parkway
Atlanta, Georgia 700,482 1973 07/08/98
Rolling Wind
Baltimore, Maryland 1,304,058 1995 11/14/97
Roper Mountain Woods
Greenville, South Carolina 4,094,158 1984 01/15/88
Southpointe at Massapequa
Massapequa, New York 3,602,914 1969 10/14/92
Stoneledge Plantation
Greenville, South Carolina 5,583,859 1986 01/15/88
Stratton Meadows
Baltimore, Maryland 987,324 1989 11/14/97
Sunchase
Bradenton, Florida 645,617 1987 05/13/97
Sweetwater Ranch
Richardson, Texas 1,374,629 1995 09/26/97
The Timbers
Charlotte, North Carolina 3,555,231 1989 03/22/93
Warren Park
Baltimore, Maryland 525,755 1964 11/14/97
Westchester West
Silver Spring, Maryland 2,203,247 1970-1972 01/01/97
Williston
Baltimore, Maryland 194,663 1967 11/14/97
Windover
Knoxville, Tennessee 2,829,709 1974 11/01/95
Woodland Meadows
Tamarac, Florida 3,519,536 1974 10/14/92
Yorktown
Houston, Texas 574,652 1979 02/04/98
------------
Total Residential $169,877,537
------------
</TABLE>
F-41
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
SCHEDULE III - Real Estate and Accumulated Depreciation - Continued
December 31, 1998
<TABLE>
<CAPTION>
Costs Capitalized
-----------------
Subsequent to
Initial cost to Partnership Acquisition Gross Amounts Carried at End of Year
--------------------------- ----------- -----------------------------------------
Buildings Buildings Buildings
and and and
Description Land Improvements Improvements Land Improvements Total
- ------------------------- ----------- ------------ ------------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Developments in progress
and land held for investment
or further developments:
Berkshire Commons
Clemson,South Carolina 596,279 - 3,087,392 596,279 3,087,392 3,683,671
Berkshires at Deerfield
Atlanta, Georgia 5,855,505 - 1,435,201 5,855,505 1,435,201 7,290,706
Garlington Road Land
Greenville, South Carolina 1,412,952 - 383,857 1,412,952 383,857 1,796,809
Inglesby Land
Greenville, South Carolina 3,067,257 - 792,972 3,067,257 792,972 3,860,229
------------ ------------ ------------ ------------ ------------ --------------
Total Land $ 10,931,993 $ - $ 5,699,422 $ 10,931,993 $ 5,699,422 $ 16,631,415
------------ ------------ ------------ ------------ ------------ --------------
Grand Total -
All Real Estate $162,214,310 $832,226,130 $111,555,215 $162,214,310 $943,781,345 $1,105,995,655
============ ============ ============ ============ ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Year
Accumulated Construction Date
Description Depreciation Completed Acquired
- ------------------------- ------------ ------------ --------
<S> <C> <C> <C>
Developments in progress and land held
for investment or further developments:
Berkshire Commons
Clemson,South Carolina - N/A 04/29/98
Berkshires at Deerfield
Atlanta, Georgia - N/A 12/17/97
Garlington Road Land
Greenville, South Carolina - N/A 06/10/96
Inglesby Land
Greenville, South Carolina - N/A 01/10/97
------------
Total Land -
------------
Grand Total -
All Real Estate $169,877,537
============
</TABLE>
Notes : The depreciable life of a residential property is 3-25 years.
The aggregate cost of the Company's real estate for federal income
tax purposes is approximately $895,335,000 million, and the
aggregate accumulated depreciation for federal income tax purposes
is approximately $85,615,000 million.
F-42
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, Continued
December 31, 1998
Reconciliation of Real Estate and Accumulated Depreciation for each of the three
years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- ------------ ------------
<S> <C> <C> <C>
Real Estate
- -----------
Balance, beginning of year $880,385,514 $585,795,316 $465,846,375
Acquisition and improvements 258,337,686 341,218,085 146,774,969
Sales and retirements (32,727,545) (46,627,887) (26,826,028)
-------------- ------------ ------------
Balance at December 31, $1,105,995,655 $880,385,514 $585,795,316
============== ============ ============
Accumulated Depreciation
- ------------------------
Balance, beginning of year $ 129,280,507 $106,869,507 $ 77,641,555
Depreciation expense 57,502,706 35,228,587 29,032,162
Provision for losses - 1,850,000 7,500,000
Sales and retirements (16,905,676) (14,667,587) (7,304,210)
-------------- ------------ ------------
Balance at December 31, $ 169,877,537 $129,280,507 $106,869,507
============== ============ ============
</TABLE>
F-43
<PAGE>
SUMMARY QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
The consolidated results of operations of the Company for the quarters ended
March 31, June 30, September 30 and December 31, 1998 and 1997 are as follows:
(Dollars in thousands, except per Share amounts)
- ------------------------------------------------
<TABLE>
<CAPTION>
March 31, June 30,
------------------------- --------------------------
1998 1997 1998 1997
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenue $41,015 $25,403 $44,112 $26,685
========== ========== ========== ==========
Loss from operations (1,664) (2,502) (2,195) (745)
Joint venture income (loss) 52 (351) 81 (157)
Gains (losses) on sales of investments 513 6,433 874 71
Minority interest 471 (685) 553 206
---------- ---------- ---------- ----------
Income before extraordinary item (628) 2,895 (687) (625)
---------- ---------- ---------- ----------
Extraordinary items - - (95) -
---------- ---------- ---------- ----------
Net income (loss) $(628) $2,895 $(782) $(625)
========== ========== ========== ==========
Income allocated to
preferred shareholders (1,540) - (1,557) -
---------- ---------- ---------- ----------
Net income (loss) allocated
to common shareholders (2,168) 2,895 (2,339) (625)
========== ========== ========== ==========
Net income (loss) per
weighted average share $(.06) $.11 $(.06) $(.02)
========== ========== ========== ==========
Dividends paid per share $.2325 $.2250 $.2425 $.2250
========== ========== ========== ==========
Weighted average shares 36,615,474 25,420,444 36,738,176 25,480,709
========== ========== ========== ==========
outstanding
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
------------------------- --------------------------
1998 1997 1998 1997
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenue $48,461 $28,416 $49,197 $34,995
========== ========== ========== ==========
Loss from operations (3,816) (5,078) (4,610) (3,712)
Joint venture income (loss) - 131 - (4,533)
Gains (losses) on sales of investments (21) - (101) (93)
Minority interest 1,076 896 1,270 1,780
---------- ---------- ---------- ----------
Income before extraordinary item (2,761) (4,051) (3,441) (6,558)
Extraordinary items (383) (90) - -
---------- ---------- ---------- ----------
Net income (loss) $(3,144) $(4,141) $(3,441) $(6,558)
========== ========== ========== ==========
Income allocated to
Preferred shareholders (1,522) (85) (1,540) (1,574)
---------- ---------- ---------- ----------
Net income (loss) allocated
to common shareholders (4,666) (4,226) (4,981) (8,132)
========== ========== ========== ==========
Net income (loss) per
weighted average share $(.13) $(.16) $(.14) $(.26)
========== ========== ========== ==========
Dividends paid per share $.2425 $.2325 $.2425 $.2325
========== ========== ========== ==========
Weighted average shares
outstanding 36,707,533 25,738,248 36,711,488 31,704,588
========== ========== ========== ==========
</TABLE>
F-44
BERKSHIRE REALTY COMPANY, INC.
CERTIFICATE OF DESIGNATION
Designating 2,737,000 shares of Preferred Stock
as 2,737,000 shares of
SERIES 1997-A CONVERTIBLE PREFERRED STOCK
(par value $0.01 per share)
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Berkshire Realty Company, Inc., a corporation organized and existing under
the laws of Delaware (the "Corporation"), does hereby certify that:
Pursuant to the authority contained in Article IV of the Restated
Certificate of Incorporation of the Corporation, as amended (the "Charter"), and
in accordance with the provisions of Section 151 of the General Corporation Law
of the State of Delaware (the "DGCL"), the Board of Directors of the Corporation
duly adopted the following resolution creating a series of the Preferred Stock,
par value $.01 (the "Preferred Stock"), designated as Series 1997-A Convertible
Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock, par
value $.01, of the Corporation be hereby created, and that the designation and
amount thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof are as follows:
Section 1. Designation, Amount and Price.
Of the 60,000,000 authorized shares of Preferred Stock, 2,737,000 shares
are designated Series 1997-A Convertible Preferred Stock (the "Series 1997-A
Convertible Preferred Stock").
Section 2. Dividends and Distributions.
(a) Holders of shares of Series 1997-A Convertible Preferred Stock will be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the payment of dividends, cumulative quarterly cash
dividends (rounded up to the nearest whole cent) equal to the greater of (i)
2.25% of $25.00 per share (such $25.00, the "Stated Value"), and (ii) the per
share Common Stock Dividend Amount, payable in each case in arrears on February
15, May 15, August 15 and November 15 of each year, commencing on the first such
day after the issuance of a share of Series 1997-A Convertible Preferred Stock
(each a "Dividend Payment Date"). The "Common Stock Dividend Amount" applicable
as of any Dividend Payment Date shall mean the amount which is the product of
(i) the dollar amount of the dividend paid per share of Common Stock on the
dividend payment date with respect to the shares of Common Stock (other than a
distribution payable solely in shares of Common Stock) which occurs on such
Dividend Payment Date or, if no such dividend payment date occurs on such
Dividend Payment Date, the dividend payment date with respect to the shares of
Common Stock next preceding such Dividend Payment Date and (ii) the number of
shares of Common Stock into which each share of Series 1997-A Convertible
Preferred Stock is entitled to be converted, at the Conversion Price then in
effect and otherwise as set forth in this Certificate of Designation, as of the
record date established for such Dividend Payment Date (determined, for purposes
of this computation, to the fourth decimal place). Such dividends will accrue
daily on the basis of a 360-day year of twelve 30-day months, and will, to the
extent not paid in full on a Dividend Payment Date, compound quarterly at a rate
of 2.25% per quarter, whether or not the Corporation has earnings or surplus.
The dividend payable to a holder of a share of Series 1997-A Convertible
Preferred Stock on the first Dividend Payment Date after the share is issued
will be the accrued dividend calculated from September 25, 1997
<PAGE>
to such Dividend Payment Date. If any Dividend Payment Date is not a Business
Day, the dividend due on that Dividend Payment Date will be paid on the Business
Day immediately succeeding that Dividend Payment Date. Each Dividend Payment
Date will be on a date which is the date fixed for payment of dividends with
respect to the shares of Common Stock or is not more than five Business Days
after the date fixed for payment of dividends with respect to the shares of
Common Stock. As used with regard to the Series 1997-A Convertible Preferred
Stock, the term "Business Day" means a day on which both state and federally
chartered banks in New York, New York are required to be open for general
banking business, and all accrued and compounded dividends together with all
accrued but not yet due dividends (whether or not declared or authorized) are
referred to as "Accrued Dividends."
(b) Each dividend will be payable to holders of record of the Series 1997-A
Convertible Preferred Stock on a date (a "Record Date") selected by the Board of
Directors which is not less than 10 nor more than 45 days before the Dividend
Payment Date on which the dividend is to be paid. No Record Date will precede
the close of business on the date the Record Date is fixed.
(c) Unless and until all Accrued Dividends on the Series 1997-A Convertible
Preferred Stock under Section 2(a) through the last preceding Dividend Payment
Date have been paid, the Corporation may not (i) declare or pay any dividend,
make any distribution (other than a distribution payable solely in shares of
Common Stock), or set aside any funds or assets for payment or distribution with
regard to any Junior Shares (as herein defined), (ii) redeem or purchase
(directly or through the Operating Partnership or Subsidiaries), or set aside
any funds or other assets for the redemption or purchase of, any Junior Shares
or (iii) authorize, take or cause or permit to be taken any action of the
general partner of the Operating Partnership, that will result in (A) the
declaration or payment by the Operating Partnership (defined below) of any
distribution to its partners (other than distributions made concurrently with
distributions payable to the Corporation in respect of its partnership interest
that will be used by the Corporation to fund the payment of dividends on the
Series 1997-A Convertible Preferred Stock (such distributions to the Corporation
being referred to as "Authorized LP Distributions")), or set aside any funds or
assets for payment of any distributions to its partners (other than those made
concurrently with Authorized LP Distributions) or (B) the redemption or purchase
(directly or through the Operating Partnership or Subsidiaries), or the setting
aside of any funds or other assets for the redemption or purchase of, any
partnership interests in the Operating Partnership, except for conversions of
partnership interests in the Operating Partnership in the ordinary course into
shares of Common Stock. As used with regard to the Series 1997-A Convertible
Preferred Stock, the term "Junior Shares" means all shares of Common Stock and
all shares of any other class or series of stock of the Corporation to which the
shares of Series 1997-A Convertible Preferred Stock are prior in rank with
regard to payment of dividends or payments upon the liquidation, dissolution or
winding-up of the Corporation; the term "Operating Partnership" means BRI OP
Limited Partnership, a Delaware limited partnership, or any successor thereto;
and the term "Subsidiary" means any Person in which the Company directly or
indirectly owns any equity interest. As used herein, "Person" shall mean an
individual, partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture, nation or
government, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government or other entity of whatever nature.
(d) While any shares of Series 1997-A Convertible Preferred Stock are
outstanding, the Corporation may not pay any dividend, or set aside any funds
for the payment of a dividend, with regard to any shares of any class or series
of stock of the Corporation which ranks on a -parity with Series 1997-A
Convertible Preferred Stock as to payment of dividends unless at least a
proportionate payment is made with regard to all Accrued Dividends on the Series
1997-A Convertible Preferred Stock (except, as to any shares of the Series
1997-A Convertible Preferred Stock as to which a notice of conversion has been
furnished by the holder thereof, at the effective time of conversion). A payment
of dividends with regard to the Series 1997-A Convertible Preferred Stock will
be proportionate to a payment of a dividend with regard to another class or
series of stock if the dividend per share of Series 1997-A Convertible Preferred
Stock is the same percentage of the Accrued Dividends (except as aforesaid) with
regard to a share of Series 1997-A Convertible Preferred Stock that the dividend
paid with regard to a share of stock of the other class or series is of the
Accrued Dividends (except as aforesaid) with regard to a share of stock of that
other class or series.
2
<PAGE>
(e) Any dividend paid with regard to shares of Series 1997-A Convertible
Preferred Stock will be paid equally with regard to each outstanding share of
Series 1997-A Convertible Preferred Stock, except to the extent that shares of
Series 1997-A Convertible Preferred Stock are outstanding for differing amounts
of time during the relevant dividend period.
Section 3. Voting Rights.
The voting rights of the holders of shares of Series 1997-A Convertible
Preferred Stock will be only the following:
(a) The holders of shares of Series 1997-A Convertible Preferred Stock will
have the right to vote on all matters, including without limitation, Transfers,
mergers or consolidations or recapitalizations of the nature described in
Sections 4(a)(i), 4(a)(ii) and 4(a)(iii) of this Certificate of Designation, on
which the holders of Common Stock are entitled to vote on an "as converted"
basis with holders of shares of the Common Stock, as though part of the same
class as holders of Common Stock, with such number of shares of Common Stock
deemed held of record by holders of shares of Series 1997-A Convertible
Preferred Stock on any Record Date as would be the number of shares of Common
Stock into which the shares of Series 1997-A Convertible Preferred Stock held by
such holder would be entitled to be converted on such Record Date. The holders
of shares of Series 1997-A Convertible Preferred Stock shall receive all notices
of meetings of the holders of shares of Common Stock, and all other notices and
correspondence to the holders of shares of Common Stock provided by the
Corporation, and shall be entitled to take such actions, and shall have such
rights, as are set forth in this Certificate of Designation or are otherwise
available to the holders of shares of Common Stock in the Charter and in the
By-laws of the Corporation as are in effect on the date hereof, in each case
with the same effect as would be taken by holders of Series 1997-A Convertible
Preferred Stock if deemed to be holders of such number of shares of Common Stock
as determined as aforesaid.
(b) While any shares of Series 1997-A Convertible Preferred Stock are
outstanding, the Corporation will not, directly or indirectly, including through
a merger or consolidation with any other corporation or otherwise, without
approval of holders of at least a majority of the outstanding shares of Series
1997-A Convertible Preferred Stock, voting separately as a class, (i) issue any
shares of Series 1997-A Convertible Preferred Stock except pursuant to that
certain Stock Purchase Agreement dated as of September 19, 1997, as amended, by
and among the Corporation, Westbrook Berkshire Holdings, L.L.C., and Westbrook
Real Estate Fund II, L.P., or increase the number of authorized shares of Series
1997-A Convertible Preferred Stock; (ii) combine, split or reclassify the
outstanding shares of Series 1997-A Convertible Preferred Stock into a smaller
or larger number of shares; (iii) exchange or convert any shares of Series
1997-A Convertible Preferred Stock for other securities or the right to receive
cash, or propose or require an exchange or conversion other than as provided in
this Certificate of Designation, or reclassify any shares of Series 1997-A
Convertible Preferred Stock, or to authorize, create, classify, reclassify or
issue any class or series of stock ranking prior to or on a parity with the
Series 1997-A Convertible Preferred Stock either as to dividends or upon
liquidation, dissolution or winding-up of the Corporation or as to the rights of
the Series 1997-A Convertible Preferred Stock set forth in this Section 3; (iv)
amend, alter or repeal, or permit to be amended, altered or repealed, the
following provisions of the By-laws of the Corporation: Article I, Section 8,
Article II, Section 2 and Article VI, Section 7 or 9 or (v) amend, alter or
repeal, or permit to be amended, altered or repealed, any of the provisions of
the Charter, this Certificate of Designation, the By-laws of the Corporation,
the agreement of limited partnership of the Operating Partnership, or any
organizational document of any Subsidiary, in such a manner as would affect
adversely the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of (A) the Series 1997-A
Convertible Preferred Stock (including, without limitation, taking any such
action the result of which could be to alter the manner or rate of exchange of
partnership interests in the Operating Partnership for securities of the
Corporation as in effect on the date hereof) or, (B) in the case of a proposed
amendment to the agreement of limited partnership of the Operating Partnership,
or any organizational document of any Subsidiary, in such a manner as would
affect adversely the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions, and
qualifications of the holders of shares of the Series 1997-A Convertible
Preferred Stock or the Common Stock and the shares of Series 1997-A Convertible
Preferred Stock, considered as a whole.
3
<PAGE>
(c) Until March 19, 1999, and for so long thereafter as there shall be
outstanding a number of shares of Series 1997-A Convertible Preferred Stock not
less than 29% of the shares of Series 1997-A Convertible Preferred Stock issued
by the Corporation to Westbrook Berkshire Holdings, L.L.C., the Corporation will
not, directly or indirectly, including through a merger or consolidation with
any other corporation or otherwise, without the approval of the holders of not
less than a majority of the outstanding shares of the Series 1997-A Convertible
Preferred Stock, voting separately as a class, propose, authorize, take, or
cause to be taken or allow to occur any of the following actions: (i) the
Transfer (as defined below) of the record or beneficial ownership of any
interest in Berkshire Apartments, Inc., the Transfer by Berkshire Apartments,
Inc. to a third party of the right to exercise all or a portion of its rights as
the general partner of the Operating Partnership, or the Transfer in a single
transaction or series of transactions of the assets of the Corporation, the
Operating Partnership and the Subsidiaries, considered as a whole, including for
such purpose any Person (except that, with respect to any such Person in which
the Corporation or the Operating Partnership has a direct or indirect minority
interest such that a sale, transfer or assignment is not within the
Corporation's or Operating Partnership's control, and is not otherwise a part of
the transaction or series of transactions otherwise occurring, this provision
shall not apply) owned directly or indirectly by the Corporation to the extent
of the Corporation's attributed interest in such other Person, having a fair
market value (based on the value of the total consideration of each such
transaction, including, without limitation, any debt assumed by any purchaser in
connection therewith) in excess of 10% of the Corporation Market Capitalization
within any 90-day period or 20% of the Corporation Market Capitalization within
any 360-day period, (ii) the Corporation's termination of the election, or the
taking of any action by the Corporation which would cause termination other than
by election, of the Corporation as a real estate investment trust under the
Internal Revenue Code of 1986, as amended, (iii) any alteration in the
Corporation's or the Operating Partnership's business, or the business of the
Corporation, the Operating Partnership and the Subsidiaries, considered as a
whole, such that real estate assets owned directly or indirectly by the
Corporation are, on a square foot basis, less than 90% invested in multifamily
residential properties; or (iv) the Transfer on or before September 19, 1998, of
more than 30% of the Common Stock or units of the Operating Partnership held
directly or indirectly, of record or beneficially, by any of Douglas Krupp or
David Marshall, as of the date hereof, by any of such Persons. There shall be
excluded from the transactions requiring approval of not less than a majority of
the outstanding shares of Series 1997-A Convertible Preferred Stock, as set
forth in clause (i) of this Section 3(c), the (a) public market trading of
shares of Common Stock in unsolicited transactions, (b) sale of Common Stock or
other securities of the Corporation in any underwritten, widely distributed
offering and (c) a transaction which is of the nature described in and subject
to Section 4(a)(i), 4(a)(ii) and 4(a)(iii) of this Certificate of Designation.
There shall be excluded from the transactions requiring approval of not less
than a majority of the outstanding shares of Series 1997-A Convertible Preferred
Stock, as set forth in clause (iv) of this Section 3(c), any Transfer, as to any
said Person, which occurs solely and directly as a result of the death or
proceedings in divorce of such Person. As used herein, "Corporation Market
Capitalization" is the total market capitalization of the Corporation determined
by reference to (determined based upon the Current Market Price, as defined in
Section 5(e)(viii) of this Certificate of Designation) (i) outstanding (assuming
for this purpose the exercise of all then outstanding warrants or other rights
to acquire Common Stock, and the conversion of all other Common Stock
equivalents not otherwise referenced below) shares of Common Stock, (ii)
outstanding shares of Series 1997-A Convertible Preferred Stock (determined as
the quotient of (x) the product of (A) the Current Market Price of a share of
Common Stock and (B) the aggregate Stated Value and Accrued Dividends of all
outstanding shares of Series 1997-A Convertible Preferred Stock, and (y) the
Conversion Price then in effect), and (iii) all partnership and other interests
in the Operating Partnership and the other Subsidiaries held by Persons (other
than the Company and the Subsidiaries) (assuming for this purpose the exchange
or conversion of all such third-Person partnership and other interests in the
Operating Partnership or other Subsidiaries for shares of Common Stock), plus
total consolidated and unconsolidated debt of the Corporation, the Operating
Partnership and the other Subsidiaries, but excluding (i) all nonrecourse
consolidated debt in excess of the Corporation's proportionate share of such
debt and (ii) all nonrecourse unconsolidated debt of partnerships of which the
Corporation is directly or indirectly a limited partner. As used herein,
"Transfer" means any sale, transfer by operation of law or otherwise,
assignment, disposition or arrangement, whether voluntary or involuntary, which
has the effect, directly or indirectly, of altering the holding of or causing or
permitting another Person to succeed to, any voting control or economic
interest, whether beneficial or of record or both, including any arrangement for
collateral purposes only, or which could, with the passage of time or the
occurrence of any event, or both, have such effect.
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<PAGE>
(d) The holders of shares of Series 1997-A Convertible Preferred Stock,
voting as a separate class, shall be entitled at all times and at any time to
elect one director (the "Series 1997-A Preferred Director") to the Board of
Directors of the Corporation (the "Board"); provided, however, that the size of
the Board shall not be increased above nine at any time unless Westbrook Real
Estate Fund II, L.P. shall be entitled to elect or appoint that number of
directors to such expanded Board that will permit ERISA counsel to Westbrook
Real Estate Fund II, L.P. to confirm that Westbrook Berkshire Holdings, L.L.C.'s
investment in the Series 1997-A Convertible Preferred Stock will continue to
qualify as a "venture capital investment" under the plan asset rules and
regulations promulgated under and the provisions of the Employee Retirement
Income Security Act of 1974, as amended, or any successor thereto. The Series
1997-A Preferred Director, who has been elected by the Board and agreed to serve
until his successor is elected and qualified, is Paul D. Kazilionis, who shall
be considered a "third class" director in accordance with Article II, Section
2(b) of the Bylaws of the Corporation (as amended to the date hereof), and who
shall sit as he may request on each committee of the Board (other than the
executive committee of the Board) or on any other group so acting, whether or
not formally constituted as a committee of the Board. In the event that the
Series 1997-A Preferred Director is unable to attend any meeting of the Board
for any reason, then such Series 1997-A Preferred Director may designate, in
writing, one person (the "Observer") who shall have the right to attend, but not
vote at, such meeting. The Observer shall not be deemed to be a member of the
Board of Directors and shall have none of the rights, duties, privileges or
powers of a member of the Board of Directors, including, without limitation, the
right to notice of or to vote at meetings of the Board of Directors, and shall
not be counted as a member of the Board of Directors for the purpose of
determining whether a quorum is present at any meeting of the Board of
Directors. The Series 1997-A Preferred Director from time to time sitting as a
member of the Board may be removed by the holders of record of not less than a
majority of the outstanding shares of Series 1997-A Convertible Preferred Stock
and, if so removed, a successor individual to serve as the Series 1997-A
Preferred Director may be appointed by the holders of record of not less than a
majority of the outstanding shares of Series 1997-A Convertible Preferred Stock.
At any annual meeting of the holders of Common Stock at which third class
directors are to be elected, the incumbent Series 1997-A Preferred Director
shall be nominated and, upon the affirmative vote of not less than a majority of
the holders of shares of Series 1997-A Convertible Preferred Stock, shall be
elected to serve as the Series 1997-A Preferred Director. Upon the occurrence of
a "Preferred Default" (defined below), (i) the number of members of the entire
Board (as if there were no vacancies or unfilled newly-created directorships
thereon) shall be automatically increased such that the holders of the Series
1997-A Convertible Preferred Stock shall be entitled to elect, when considered
with the Series 1997-A Preferred Director, a number of directors of the
Corporation equivalent to the smallest number representing a majority of the
number of members of the entire Board as if there were no vacancies or unfilled
newly created directorships on such Board, and (ii) the holders of shares of
Series 1997-A Convertible Preferred Stock, voting as a separate class, shall be
entitled, at each annual meeting of stockholders of the Corporation and at each
special meeting of stockholders of the Corporation called for the election of
directors by the holders of Series 1997-A Convertible Preferred Stock, to elect
a number of directors of the Corporation equivalent to the smallest number
representing a majority of the number of members of the entire Board as if there
were no vacancies or unfilled newly created directorships on such Board. As used
herein, "Preferred Default" shall mean a failure by the Corporation on any four
consecutive Dividend Payment Dates to pay in full the dividends due and payable
on such dates such that there are Accrued Dividends (whether or not declared)
with respect o such four consecutive Dividend Payment Dates. Whenever the
holders of shares of Series 1997-A Convertible Preferred Stock have the right
under this Section 3(d) to elect a director or directors, but have not done so,
the Secretary of the Corporation will, upon the written request of the holders
of record of at least 25% of the outstanding shares of Series 1997-A Convertible
Preferred Stock, call a special meeting of the holders of Series 1997-A
Convertible Preferred Stock for the purpose of removing and/or electing a
director or directors, as the case may be. The meeting will be held at the
earliest practicable date upon the notice required for annual meetings of the
shareholders of the Corporation (or such shorter notice as is stipulated in the
written requests for such meeting or is otherwise agreed in writing by the
holders of record of the outstanding shares of Series 1997-A Convertible
Preferred Stock before or within 10 days after the meeting) at the place
specified in the request for a meeting, or if there is none, at a place in New
York, New York, designated by the Secretary of the Corporation. If the meeting
has not been called within 2 days after delivery of the written request to the
Secretary of the Corporation, or within 4 days after the request is mailed by
registered mail, addressed to the Secretary of the Corporation at the
Corporation's principal office, the holders of record of at least 25% of the
outstanding shares of Series 1997-A Convertible Preferred Stock may designate in
writing one holder to call and appoint an individual to chair (who need not be
an officer or member of the Board) the meeting at the expense of
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<PAGE>
the Corporation, and the meeting may be called by that person upon the notice
required for annual meetings (or such shorter notice as aforesaid). Any holder
of shares of Series 1997-A Convertible Preferred Stock or its representative
will have access to the stock ledger of the Corporation relating to the Series
1997-A Convertible Preferred Stock for the purpose of causing a meeting of
shareholders to be called in accordance with this Section 3(d). Except as
otherwise provided above in this Section 3(d), a director elected in accordance
with this Section 3(d) will serve until the next annual meeting of the
shareholders of the Corporation and until his or her successor is elected and
qualified by the holders of Series 1997-A Convertible Preferred Stock.
Section 4. Change of Control; Liquidation.
(a) Upon (i) the Transfer in a single transaction, or series of
transactions, of all or substantially all of the assets of the Corporation, the
Operating Partnership and the Subsidiaries, considered as a whole, including for
such purpose the assets of any Subsidiary (except that with respect to any such
Subsidiary in which the Corporation or the Operating Partnership has a direct or
indirect minority interest such that a sale, transfer or assignment is not
within the Corporation's or Operating Partnership's control, and is not a part
of, or occurring in connection with, a transaction or series of transactions
covered hereby, this provision shall not apply), (ii) the merger or
consolidation of the Corporation or the Operating Partnership with any other
Person (other than a merger of the Corporation with or into a wholly-owned
Subsidiary of the Corporation in which the Corporation Market Capitalization is
unchanged), (iii) any recapitalization of the Corporation, the Operating
Partnership and the Subsidiaries, considered as a whole, in a single transaction
or a series of transactions, in an amount or amounts which aggregate 50% or more
of Corporation Market Capitalization or (iv) a Change of Control (as defined
herein), the holders of the Series 1997-A Convertible Preferred Stock, may at
their option receive, and, if so electing by written notice to the Corporation
to such effect, will be entitled to receive, out of the assets of the
Corporation available for distribution to its stockholders, whether from
capital, surplus or earnings, before any distributions made to holders of any
Junior Shares, an amount per share (the "Change of Control Preference") equal to
the product of (A) 115% and (B) the sum of (1) Stated Value plus (2) the per
share amount of Accrued Dividends with regard to the Series 1997-A Convertible
Preferred Stock to the date of final distribution (whether or not declared). For
the purposes of this Section 4(a), Corporation Market Capitalization shall be
calculated on the date of the first of any transactions in a series for purposes
of determining the percentage thereof represented by all transactions in such
series. There shall be excluded from transactions as a result of which the
holders of Series 1997-A Convertible Preferred Stock are entitled to elect and
receive the Change of Control Preference (i) the public market trading of shares
of Common Stock in unsolicited transactions, and (ii) the sale of Common Stock
or other securities of the Corporation in underwritten, widely distributed
offerings. The Corporation shall provide proper notice to each holder of record
of shares of Series 1997-A Convertible Preferred Stock of any event of the
nature set forth in clauses (i) to (iv) of this Section 4(a).
(b) In the event of a voluntary or an involuntary liquidation, dissolution
or winding-up of the Corporation (including, without limitation, the Plan of
Liquidation (as defined in the Certificate of Amendment of the Corporation dated
December 7, 1990, included in the Charter), the holders of the Series 1997-A
Convertible Preferred Stock, may at their option receive, and, if so electing by
written notice to the Corporation to such effect, shall be entitled to receive,
out of the assets of the Corporation available for distribution to its
stockholders, whether from capital, surplus or earnings, before any
distributions made to holders of any Junior Shares, an amount per share as set
forth in this Section 4(b) as a liquidation preference (the "Liquidation
Preference") in the manner and as provided in Section 4(a), except that the
Liquidation Preference shall be at an amount per share equal to the Liquidation
Percentage (as defined and established below) multiplied by the sum of (i)
Stated Value plus (ii) the per share amount of Accrued Dividends with respect to
the Series 1997-A Convertible Preferred Stock to the date of final distribution
(whether or not declared). As used herein, the "Liquidation Percentage" shall
for the periods specified mean the percentage specified as set forth in the
following table:
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<PAGE>
<TABLE>
<CAPTION>
The effective date of the plan of liquidation, dissolution or
winding-up, in terms of the anniversary of the date of the initial Percentage
issuance of shares of Series 1997-A Convertible Preferred Stock Liquidation
--------------------------------------------------------------- -----------
<S> <C>
Before the 5th anniversary 115%
After the 5th but before the 6th anniversary 110%
After the 6th but before the 7th anniversary 105%
After the 7th anniversary 100%
</TABLE>
Notwithstanding the foregoing, upon the liquidation, dissolution or winding-up
of the Corporation solely and directly as a result of the adoption and
implementation of the Plan of Liquidation (as defined in the Certificate of
Amendment of the Corporation dated December 7, 1990, included in the Charter),
holders of shares of Series 1997-A Convertible Preferred Stock which vote in
favor of the adoption of the Plan of Liquidation shall be entitled to receive
the Liquidation Percentage measured as if such Plan of Liquidation was adopted
after the seventh anniversary of the initial issuance of Series 1997-A
Convertible Preferred Stock, regardless of the date on which such Plan of
Liquidation was actually adopted.
(c) Holders of Series 1997-A Convertible Preferred Stock may further elect,
when delivering the written notice to the Corporation with respect to the
election under Section 4(a) or Section 4(b), in lieu of receiving the Change of
Control Preference or the Liquidation Preference, as the case may be, to receive
Common Stock on conversion of Series 1997-A Convertible Preferred Stock, without
regard to the time restriction on conversion established in the first sentence
of Section 5(a) of this Certificate of Designation, in the manner and as
provided in Section 5 of this Certificate of Designation.
(d) If, upon any liquidation, dissolution or winding-up of the Corporation,
the assets of the Corporation, or proceeds of those assets, available for
distribution to the holders of Series 1997-A Convertible Preferred Stock and of
shares of all other classes or series which are on a parity as to distributions
on liquidation with the Series 1997-A Convertible Preferred Stock are not
sufficient to pay in full the Change of Control Preference or the Liquidation
Preference, as the case may be, to the holders of the Series 1997-A Convertible
Preferred Stock who have not elected to convert such stock pursuant to Section
4(c) and any liquidation preference of all other classes or series which are on
a parity as to distributions on liquidation with the Series 1997-A Convertible
Preferred Stock, then the assets, or the proceeds of those assets, which are
available for distribution to such holders of shares of Series 1997-A
Convertible Preferred Stock and of the shares of all other classes or series
which are on a parity as to distributions on liquidation with such Series 1997-A
Convertible Preferred Stock will be distributed to the holders of the Series
1997-A Convertible Preferred Stock and of the shares of all other classes or
series which are on a parity as to distributions on liquidation with the Series
1997-A Convertible Preferred Stock ratably in accordance with the respective
amounts of the liquidation preferences of the shares held by each of them. After
payment of the full amount of the Change of Control Preference or the
Liquidation Preference, as the case may be, such holders of shares of Series
1997-A Convertible Preferred Stock will not be entitled to any further
distribution of assets of the Corporation.
As used herein, a "Change of Control" of the Corporation or the Operating
Partnership shall be deemed to have occurred if any of the following occur (or,
in the case of any proposal, if any of the following could occur as a result
thereof): (i) the Corporation takes or fails to take any action such that it
ceases to be required to file reports under Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Ad"), or any successor to that
Section; (ii) any "person" (as defined in Sections 13(d) and 14(d) of the
Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of either (A) 20% or more of the
outstanding shares of Common Stock, or (B) 20% (by right to vote or grant or
withhold any approval) of the outstanding securities of any other class or
classes which individually or together have the power to elect a majority of the
members of the Board; (iii) the Board determines to recommend, or fails to
determine to recommend, the acceptance of any proposal set forth in a tender
offer statement or proxy statement filed by any
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<PAGE>
person with the Securities and Exchange Commission which indicates the intention
on the part of that person to acquire, or acceptance of which would otherwise
have the effect of that person acquiring, either (A) 20% or more of the
outstanding shares of the Common Stock, or (B) 20% (by right to vote or grant or
withhold any approval) of the outstanding securities of any other class or
classes which individually or together have the power to elect a majority of the
members of the Board; (iv) other than as a result of the death or disability of
one or more of the directors within a three-month period, and other than by
reason of the holders of Series 1997-A Convertible Preferred Stock exercising
voting rights as set forth in Section 3(d) of the Certificate of Designation, a
majority of the members of the Board for any period of three consecutive months
are not persons who (A) had been directors of the Corporation for at least the
preceding 24 consecutive months or (B) when they initially were elected to the
Board, (x) were nominated (if they were elected by the stockholders) or elected
(if they were elected by the directors) with the affirmative concurrence of
66-2/3% of the directors who were Continuing Directors at the time of the
nomination or election by the Board and (y) were not elected as a result of an
actual or threatened solicitation of proxies or consents by a person other than
the Board or an agreement intended to avoid or settle such a proxy solicitation
(the directors described in clauses (A) and (B) of this subsection (iv) being
"Continuing Directors"); (v) the Corporation or a Subsidiary of the Corporation
ceases to be the sole General Partner of the Operating Partnership or grants or
sells to any person, or consents to any amendment to the agreement of limited
partnership of the Operating Partnership, or the organizational documents of the
other Subsidiaries, which has the effect of transferring, the power to control
or direct the actions of the Operating Partnership or such other Subsidiaries as
if such person (A) is a general partner of the Operating Partnership or (B) is a
limited partner of the Operating Partnership with consent or approval rights
greater than the consent or approval rights held by the limited partners of the
Operating Partnership on the date hereof; or (vi) the Operating Partnership is a
party to any entity conversion or any merger or consolidation in which the
Operating Partnership is not surviving entity in such merger or consolidation or
in which the effect is of the nature set forth in the next preceding clause (v).
Section 5. Conversion into Common Stock.
(a) Optional Conversion. (i) On and after September 19, 1998, or earlier
than September 19, 1998 as provided in Section 4(c), each holder of shares of
Series 1997-A Convertible Preferred Stock will have the right, at the holder's
option, exercised by notice to such effect (the "Notice of Election to
Convert"), to convert all or any of the shares of Series 1997-A Convertible
Preferred Stock held of record by the holder into shares of Common Stock, such
that each share of Series 1997-A Convertible Preferred Stock will be entitled to
be converted into (A) a number of fully paid and non-assessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of a share) equal
to Stated Value plus the amount, if any, of the per share amount of Accrued
Dividends as of the effective time of the conversion, divided by the Conversion
Price, as defined below, then in effect, or (B) such other securities or assets
as the holder is entitled to receive in accordance with Section 5(e).
(ii) The holder of each share of Series 1997-A Convertible Preferred Stock
to be converted must surrender the certificate representing that share to the
conversion agent for the Series 1997-A Convertible Preferred Stock appointed by
the Corporation (which may be the Corporation itself), with the Notice of
Election to Convert on the back of that certificate duly completed and signed,
at the principal office of the conversion agent. If the shares issuable on
conversion are to be issued in a name other than the name in which the Series
1997-A Convertible Preferred Stock is registered, each share surrendered for
conversion must be accompanied by an instrument of transfer, in form reasonably
satisfactory to the Corporation, duly executed by the holder or the holder's
duly authorized attorney and by funds in an amount sufficient to pay any
transfer or similar tax which is required to be paid in connection with the
transfer or evidence that such tax has been paid or is not payable.
(b) Mandatory Conversion. Subject to Section 7 of this Certificate of
Designation, if, after the fifth anniversary of the date of the first issuance
of shares of Series 1997-A Convertible Preferred Stock, the closing price of the
Common Stock on each of at least 20 Trading Days (as defined herein) (including
the Trading Day immediately before both the Notice of Mandatory Conversion and
the Mandatory Conversion Date referred to below) of the preceding period of 30
consecutive Trading Days immediately prior to the Notice of Mandatory Conversion
and the Mandatory Conversion Date shall be greater than the Conversion Price in
effect on each of such 20 Trading Days, the Corporation shall have the right,
subject to the rights of the holders under Section 3(d), 4 and
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<PAGE>
7 of this Certificate of Designation, to convert at any time and from time to
time not less than 500,000 of the outstanding shares of Series 1997-A
Convertible Preferred Stock into a number of shares of Common Stock (calculated
as to each conversion to the nearest 1/100th of a share) equal to the product of
(i) the number of shares of Series 1997-A Convertible Preferred Stock to be
converted multiplied by (ii) the Stated Value plus the amount, if any, of the
per share amount of Accrued Dividends, with regard to the Series 1997-A
Convertible Preferred Stock to the date of conversion (whether or not declared),
divided by the Conversion Price then in effect, such that each share of Series
1997-A Convertible Preferred Stock is valued as set forth in clause (ii) in
consideration for Common Stock issued in conversion priced at the Conversion
Price calculated in accordance with Section 5(e) of this Certificate of
Designation. In order to elect to effect the mandatory conversion of Series
1997-A Convertible Preferred Stock, subject to the requirement as to closing
price preceding the Mandatory Conversion Date, set forth above, the Corporation
shall issue a notice as to the date of the intended conversion and number of
shares of Series 1997-A Convertible Preferred Stock which are to be converted
into shares of Common Stock (the "Notice of Mandatory Conversion") to all
holders of outstanding shares of Series 1997-A Convertible Preferred Stock on a
date (the "Mandatory Conversion Notice Date") at least 90 but not more than 120
days prior to the conversion date specified in the Notice of Mandatory
Conversion (the "Mandatory Conversion Date"), which Notice of Mandatory
Conversion specifies a record date (the "Mandatory Conversion Record Date")
selected by the Board of Directors which is not less than 20 more than 45 days
before the Mandatory Conversion Date on which the conversion is to occur. If the
number of shares of Series 1997-A Convertible Preferred Stock to be converted
into shares of Common Stock on a Mandatory Conversion Date is less than all of
the outstanding shares of Series 1997-A Convertible Preferred Stock, then the
number of shares of each holder of Series 1997-A Convertible Preferred Stock, as
held of record by each such holder on the Mandatory Conversion Record Date,
which will be converted into shares of Common Stock will be that number of
shares of Series 1997-A Convertible Preferred Stock rounded to the nearest ten
shares, which is equal to the proportion of all outstanding shares of Series
1997-A Convertible Preferred Stock on such Mandatory Conversion Record Date held
of record by such holder of Series 1997-A Convertible Preferred Stock to the
total number of such shares outstanding. Such number of shares of each holder of
Series 1997-A Convertible Preferred Stock which are to be converted, if less
than all outstanding shares of Series 1997-A Convertible Preferred Stock are
included in the Notice of Mandatory Conversion, will be set forth (with the
computation used in making such determination as to each holder of Series 1997-A
Convertible Preferred Stock) in the Notice of Mandatory Conversion. If the
Corporation gives a Notice of Mandatory Conversion, then, provided that the
computation set forth in the Notice of Mandatory Conversion is not clearly
erroneous, the number of the outstanding shares of Series 1997-A Convertible
Preferred Stock which are the subject of such Notice of Mandatory Conversion
will be automatically converted into shares of Common Stock at the close of
business on the Mandatory Conversion Date regardless of whether the holders of
such shares of Series 1997-A Convertible Preferred Stock actually surrender the
certificates representing their shares of Series 1997-A Convertible Preferred
Stock for conversion. At the close of business on the Mandatory Conversion Date,
(i) the certificates representing the shares of Series 1997-A Convertible
Preferred Stock will cease to represent anything other than the shares of Common
Stock into which the shares of the Series 1997-A Convertible Preferred Stock
were automatically converted and the shares of Series 1997-A Convertible
Preferred Stock which were not automatically converted and (ii) the Corporation
shall, at its option (the exercise of which will be described in the Notice of
Mandatory Conversion), either (A) deliver certificates representing the shares
of Common Stock to which the holders of the Series 1997-A Convertible Preferred
Stock are entitled without requiring the surrender of the certificates which
formerly represented shares of Series 1997-A Convertible Preferred Stock, or (B)
deliver certificates representing (1) the shares of Common Stock to which the
holders of Series 1997-A Convertible Preferred Stock are entitled and (2) the
shares of Series 1997-A Convertible Preferred Stock continued to be held by the
holders of Series 1997-A after giving effect to such conversion, when the holder
surrenders the certificates representing Series 1997-A Convertible Preferred
Stock issued before the Mandatory Conversion Date and complies with the other
requirements of subparagraph 5(a)(ii) (excluding the completion of the Notice of
Election to Convert).
(c) Conversion Procedures. (i) The effective time of the conversion under
Section 5(a) shall be immediately prior to the close of business on the day when
all the conditions in Section 5(a)(ii) have been satisfied. The effective time
of the conversion under Section 5(b) shall, subject to the rights of holders
under Sections 3(d), 4 and 7, be the close of business on the Mandatory
Conversion Date.
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(ii) If shares are surrendered between the close of business on a dividend
payment Record Date and the opening of business on the corresponding Dividend
Payment Date ("Ex Record Date Shares"), the dividend with respect to those
shares will be payable on the Dividend Payment Date to the holder of record of
the Ex Record Date Shares on the dividend payment Record Date notwithstanding
the surrender of the Ex Record Date Shares for conversion after the dividend
payment Record Date and prior to the Dividend Payment Date. The Corporation will
make no payment or adjustment for Accrued Dividends on Ex Record Date Shares,
whether or not in arrears, or for dividends on the shares of Common Stock issued
upon conversion of the Ex Record Date Shares, other than to make payment to the
holder of record thereof on the Record Date. The provisions of this Section
5(c)(ii) shall not limit the obligation of the Corporation to issue shares of
Common Stock in conversion of shares of Series 1997-A Convertible Preferred
Stock, including Ex Record Date Shares, at Stated Value plus Accrued Dividends
(whether or not declared), as elsewhere provided in this Certificate of
Designation.
(iii) Except as otherwise permitted in clause (ii)(B) of the last sentence
of Section 5(b), as promptly as practicable after the effective time for
conversion of shares of Series 1997-A Convertible Preferred Stock, the
Corporation will issue and will deliver to the holder at the office of the
holder set forth in the Notice of Election to Convert, or on the holder's
written order, a certificate or certificates representing the number of full
shares of Common Stock issued upon the conversion of the shares of Series 1997-A
Convertible Preferred Stock. Any fractional interest in respect of a share of
Common Stock arising upon a conversion will be settled as provided in Section
5(d).
(iv) Each conversion will be deemed to have been effected at the effective
time provided in Section 5(c)(i), and the person in whose name a certificate for
shares of Common Stock is (or, in the case of a conversion of less than all
shares of Series 1997-A Convertible Preferred Stock pursuant to Section 5(b), in
whose name certificates for shares of Common Stock and Series 1997-A Convertible
Preferred Stock are) to be issued upon a conversion will be deemed to have
become the holder of record of the shares of Common Stock represented by that
certificate at such effective time. All shares of Common Stock delivered upon
conversion of Series 1997-A Convertible Preferred Stock will upon delivery be
duly and validly issued and fully paid and nonassessable, free of all liens and
charges and not subject to any preemptive rights except such preemptive rights
as may exist pursuant to the Stock Purchase Agreement dated as of September 19,
1997, among the Company and Westbrook Berkshire Holdings, L.L.C., and its
affiliates. The shares of Series 1997-A Convertible Preferred Stock so converted
will no longer be deemed to be outstanding and all rights of the holder with
respect to those shares will immediately terminate, except the right to receive
the shares of Common Stock, the shares of Series 1997-A Convertible Preferred
Stock not converted on a Mandatory Conversion Date, and, if applicable, other
securities, cash or other assets to be issued or distributed as a result of the
conversion.
(d) Fractional Shares. No fractional shares of Common Stock will be issued
upon conversion of shares of Series 1997-A Convertible Preferred Stock. Any
fractional interest in a share of Common Stock resulting from conversion of
shares of Series 1997-A Convertible Preferred Stock will be paid in cash
(computed to the nearest cent) based on the Current Market Price (as herein
defined) of the Common Stock on the Trading Date next preceding the date of
conversion. If more than one share of Series 1997-A Convertible Preferred Stock
is surrendered for conversion at substantially the same time by the same holder,
the number of full shares of Common Stock issuable upon the conversion will be
computed on the basis of all the shares of Series 1997-A Convertible Preferred
Stock surrendered at that time by that holder.
(e) Conversion Price. The "Conversion Price" per share of Series 1997-A
Convertible Preferred Stock will initially be a price (the "Initial Conversion
Price") equal to $12. 125, unless adjusted pursuant to Section 5(e)(xi), and
will be further adjusted as follows from time to time, subject to Section
5(e)(ix), if any of the events described below occurs:
(i) If the Corporation (A) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock or (B) subdivides, splits or
reclassifies its outstanding Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to that event will be reduced so
that the holder of a share of Series 1997-A Convertible Preferred Stock
surrendered for conversion after that event will receive the number of shares of
Common Stock which the holder would have received if the share of Series 1997-A
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Convertible Preferred Stock had been converted immediately before the happening
of the event (or, if there is more than one such event, if the share of Series
1997-A Convertible Preferred Stock had been converted immediately before the
first of those events and the holder had retained all the Common Stock or other
securities or assets received after the conversion). If the Corporation combines
its outstanding Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to that event will be increased so that the
holder of a share of Series 1997-A Convertible Preferred Stock surrendered for
conversion after that event will receive the number of shares of Common Stock
which the holder would have received if the shares of Series 1997-A Convertible
Preferred Stock had been converted immediately before the happening of the event
(or, if there is more than one such event, if the share of Series 1997-A
Convertible Preferred Stock had been converted immediately before the first of
those events and the holder had retained all the Common Stock or other
securities or assets received after the conversion). An adjustment made pursuant
to this Section 5(e)(i) will become effective immediately after the Record Date
in the case of a dividend or distribution, and will become effective immediately
after the effective date in the case of a subdivision, split, reclassification
or combination. If such dividend or distribution is declared but is not paid or
made, the Conversion Price then in effect will be appropriately readjusted.
However, a readjustment of the Conversion Price will not affect any conversion
which takes place before the readjustment.
(ii) If the Corporation issues rights or warrants to the holders of its
Common Stock as a class entitling them to subscribe for or purchase Common Stock
at a price per share less than the Conversion Price then in effect at the Record
Date for the determination of stockholders entitled to receive the rights or
warrants minus $0. 125, the Conversion Price in effect immediately before the
issuance of the rights or warrants will be reduced in accordance with the
equation set forth on Exhibit A hereto, which is hereby incorporated by
reference herein. The adjustment provided for in this Section 5(e)(ii) will be
made successively whenever any rights or warrants are issued, and will become
effective immediately after each Record Date. In determining whether any rights
or warrants entitle the holders of the Common Stock to subscribe for or purchase
shares of Common Stock at less than the Conversion Price then in effect minus
$0. 125 and in determining the aggregate sale price of the shares of Common
Stock issuable on the exercise of rights or warrants and any consideration to be
received by the Corporation for the exercise of such rights or warrants, there
will be taken into account any consideration received by the Corporation for the
rights or warrants, with the value of that consideration, if other than cash, to
be determined by the Board of Directors of the Corporation (whose determination,
if made in good faith, will be conclusive). If any rights or warrants which lead
to an adjustment of the Conversion Price expire or terminate without having been
exercised, the Conversion Price then in effect will be appropriately readjusted.
However, a readjustment of the Conversion Price will not affect any conversion
which takes place before the readjustment.
(iii) If the Corporation distributes to the holders of its Common Stock as
a class any shares of stock of the Corporation (other than Common Stock) or
evidences of indebtedness or assets (other than cash dividends or distributions)
or rights or warrants (other than those referred to in Section 5(e)(ii)) to
subscribe for or purchase any of its securities, then, in each such case, the
Conversion Price will be reduced so that it will equal the price determined by
multiplying the Conversion Price in effect immediately prior to the Record Date
for the distribution by a fraction of which the numerator is the Current Market
Price of the Common Stock on the Record Date for the distribution less the then
fair market value (as determined by the Board of Directors, whose determination,
if made in good faith, will be conclusive) of the stock, evidences of
indebtedness, assets, rights or warrants which are distributed with respect to
one share of Common Stock, and of which the denominator is the Current Market
Price of the Common Stock on that Record Date. Each adjustment will become
effective immediately after the Record Date for the determination of the
stockholders entitled to receive the distribution. If any distribution is
declared but not made, or if any rights or warrants expire or terminate without
having been exercised, effective immediately after the decision is made not to
make the distribution or the rights or warrants expire or terminate, the
Conversion Price then in effect will be appropriately readjusted. However, a
readjustment will not affect any conversion which takes place before the
readjustment.
(iv) If the Corporation issues or sells (or the Operating Partnership
issues or sells) any equity or debt securities which are convertible, directly
or indirectly, into or exchangeable for shares of Common Stock ("Convertible
Securities") or any rights, options (other than the issuance or exercise after
the date hereof of stock options covering no more than 1,100,000 shares of
Common Stock, subject to appropriate
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adjustment to the extent that the Corporation (A) pays a dividend or makes a
distribution on its Common Stock in shares of its Common Stock, (B) subdivides
its outstanding Common Stock into a greater number of shares or (C) combines its
outstanding Common Stock into a smaller number of shares, issued to employees or
directors of the Corporation or its Subsidiaries under the Corporation's
existing employee stock incentive plans) or warrants (except the issuance after
the date hereof of shares of Common Stock pursuant to the warrants to purchase
not more than 2,664,629 shares of Common Stock at a price per share of $11.79
outstanding on the date hereof issued by the Corporation pursuant to that
certain settlement effective September 6, 1994) to purchase Common Stock at
conversion, exchange or exercise price per share which is less than the
Conversion Price then in effect minus $0. 125, unless the provisions of Section
5(e)(ii) or (iii) are applicable, the Corporation will be deemed to have issued
or sold, on the date on which the Convertible Securities, rights, options or
warrants are issued, the maximum number of shares of Common Stock into or for
which the Convertible Securities may then be converted or exchanged or which are
then issuable upon the exercise of the rights, options or warrants immediately
prior to the close of business on the date on which the Convertible Securities,
rights, options or warrants are issued, and the Conversion Price shall be
adjusted downward as if it were an event covered by Section 5(e)(v). However, no
further adjustment of the Conversion Price will be made as a result of the
actual issuance of shares of Common Stock upon conversion, exchange or exercise
of the Convertible Securities, rights, options or warrants. If any Convertible
Securities, rights, options or warrants to which this Section applies are
redeemed, retired or otherwise extinguished or expire without any shares of
Common Stock having been issued upon conversion, exchange or exercise thereof,
effective immediately after the Convertible Securities, rights, options or
warrants expire, the Conversion Price then in effect will be readjusted to what
it would have been if those Convertible Securities, rights, options or warrants
had not been issued. However, a readjustment will not affect any conversion
which takes place before the readjustment. For the purposes of this Section
5(e)(iv), (x) the price of shares of Common Stock issued or sold upon conversion
or exchange of Convertible Securities or upon exercise of rights, options or
warrants will be (A) the consideration paid to the Corporation for the
Convertible Securities, rights, options or warrants, plus (B) the consideration
paid to the Corporation upon conversion, exchange or exercise of the Convertible
Securities, rights, options or warrants, with the value of the consideration, if
other than cash, to be determined by the Board of Directors of the Corporation
(whose determination, if made in good faith, will be conclusive) and (y) any
change in the conversion or exchange price of Convertible Securities or the
exercise price of rights, options or warrants will be treated as an
extinguishment, when the change becomes effective, of the Convertible
Securities, rights, options or warrants which had the old conversion, exchange
or exercise price and an immediate issuance of new Convertible Securities,
rights, options or warrants with the new conversion, exchange or exercise price.
(v) If the Corporation issues or sells any Common Stock (other than (X) on
conversion or exchange of Convertible Securities, (Y) exercise of rights,
options or warrants to which Section 5(e)(ii), (iii) or (iv) applies, or (Z) not
more than $150,000,000 in gross offering proceeds of Common Stock in an
underwritten, widely distributed offering at a price per share to the public of
not less than $11.3125 on or before November 30, 1997) for a consideration per
share less than the Conversion Price then in effect minus $0. 125, (or for a
consideration per share of less than $11.3125 in the case of an issuance
referred to in clause (Z) of the parenthetical in this paragraph (e)(v)) on the
date of the issuance or sale (or on exercise of options or warrants, for less
than the Conversion Price then in effect minus $0. 125 on the date the options
or warrants are issued), upon consummation of the issuance or sale, the
Conversion Price in effect immediately prior to the issuance or sale will be
reduced in accordance with the equation set forth on Exhibit A hereto, which is
hereby incorporated by reference herein.
(vi) If there is a reclassification or change of outstanding shares of
Common Stock (other than a change in par value, or as a result of a subdivision
or combination or as a result of the Corporation's open-market purchases of
Common Stock pursuant to its Dividend Reinvestment Plan), or a merger or
consolidation of the Corporation with any other entity that results in a
reclassification, change, conversion, exchange or cancellation of outstanding
shares of Common Stock, or a sale or transfer of all or substantially all of the
assets of the Corporation, upon any subsequent conversion of Series 1997-A
Convertible Preferred Stock, each holder of the Series 1997-A Convertible
Preferred Stock will be entitled to receive the kind and amount of securities,
cash and other property which the holder would have received if the holder had
converted the shares of Series 1997-A Convertible Preferred Stock into Common
Stock immediately before the first of those events and had retained all the
securities, cash and other assets received as a result of all those events. In
the event that a transaction may be
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viewed as causing this Section 5(e)(vi) to be applicable and 5(e)(iii) is also
applicable, then Section 5(e)(iii) will be applied and this Section 5(e)(vi)
will not be applied.
(vii) From and after a Charter Breach (as defined below), the Conversion
Price from time to time in effect as provided elsewhere in this Section 5(e)
shall at all times be 50% of the amount elsewhere so determined such that
holders of shares of Series 1997-A Convertible Preferred Stock shall receive, on
conversion, two times the number of shares of Common Stock to which they would
be entitled in the absence of the occurrence of a Charter Breach and the
application of this Section 5(e)(vii). A "Charter Breach" shall mean a failure
by the Corporation to observe and comply with Sections 3, 4 and 7 of this
Certificate of Designation or any successor provisions contained in any
amendment to or restatement of the Charter.
(viii) For the purpose of any computation under this Section 5(e), the
"Current Market Price" of the Common Stock on any date will be the average of
the last reported sale prices per share of the Common Stock on each of the
twenty consecutive Trading Days (as defined below) preceding the date of the
computation. The last reported sale price of the Common Stock on each day will
be (A) the last reported sale price of the Common Stock on the principal stock
exchange on which the Common Stock is listed, or (B) if the Common Stock is not
listed on a stock exchange, the last reported sale price of the Common Stock on
the principal automated securities price quotation system on which sale prices
of the Common Stock are reported, or (C) if the Common Stock is not listed on a
stock exchange and sale prices of the Common Stock are not reported on an
automated quotation system, the mean of the high bid and low asked price
quotations for the Common Stock as reported by National Quotation Bureau
Incorporated if at least two securities dealers have inserted both bid and asked
quotations for the Common Stock on at least five of the ten preceding Trading
Days. If the Common Stock is not traded or quoted as described in any of clause
(A), (B) or (C), the Current Market Price of the Common Stock on a day will be
the fair market value of the Common Stock on that day as determined by a member
firm of The New York Stock Exchange, Inc., selected by the Board of Directors.
As used with regard to the Series 1997-A Convertible Preferred Stock, the term
"Trading Day" means (A) if the Common Stock is listed on at least one stock
exchange, a day on which there is trading on the principal stock exchange on
which the Common Stock is listed, (B) if the Common Stock is not listed on a
stock exchange, but sale prices of the Common Stock are reported on an automated
quotation system, a day on which trading is reported on the principal automated
quotation system on which sales of the Common Stock are reported, or (C) if the
Common Stock is not listed on a stock exchange and sale prices of the Common
Stock are not reported on an automated quotation system, a day on which
quotations are reported by National Quotation Bureau Incorporated.
(ix) No adjustment in the Conversion Price will be required unless the
adjustment would require a change of at least 1% in the Conversion Price;
provided, however, that any adjustments which are not made because of this
Section 5(e)(ix) will be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 5 will be made to the
nearest cent or to the nearest one hundredth of a share, as the case may be.
(x) If any one of the events in Sections 5(e)(i) through 5(e)(vii) occurs,
then the Corporation will mail to the holders of record of the Series 1997-A
Convertible Preferred Stock, at least 15 days before the applicable date
specified below, a notice stating the applicable one of (i) the date on which a
record is to be taken for the purpose of the dividend, distribution or grant of
rights or warrants, or, if no record is to be taken, the date as of which the
holders of Common Stock of record who will be entitled to the dividend,
distribution or rights or warrants will be determined, (ii) the date on which it
is expected the Convertible Securities will be issued or the date on which the
change in the conversion, exchange or exercise price of the Convertible
Securities, rights, options or warrants will be effective, (iii) the date on
which the Corporation anticipates selling Common Stock for less than the
Conversion Price on the date of the sale (except that no notice need be given of
the anticipated date of sale of Common Stock upon exercise of options or
warrants which have been described in a notice to the holders of record of
Series 1997-A Convertible Preferred Stock given at least 15 days before the
options or warrants are exercised), or (iv) the date on which the
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective, and the
date as of which it is expected that holders of record of Common Stock will be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon the reclassification, consolidation, merger, share
exchange,
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sale, transfer, dissolution, liquidation or winding-up. Failure to give any such
notice or any defect in the notice will not affect the legality or validity of
the reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding-up. Whenever the Conversion Price is
adjusted, the Corporation will promptly send each holder of record of shares of
Series 1997-A Convertible Preferred Stock a notice of the adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date on
which the adjustment becomes effective and containing a brief description of the
events which caused the adjustment.
(xi) In the event (i) the last reported sale price per share of Common
Stock is less than $11.3125 on any day during the three full Trading Day
period (the "First Measurement Period) after the Corporation is required or
elects to restate, amend or alter or to issue a public announcement restating,
amending or altering any of its financial statements (or parts thereof) and (ii)
during the 30 full Trading Day period (the "Second Measurement Period") after
the end of the First Measurement Period, the last reported sale price per share
of Common Stock is not equal to or greater than $11.3125 for any two full
Trading Days within the Second Measurement Period, then the Initial Conversion
Price per share of Series 1997-A Convertible Preferred Stock will be equal to
the product of (i) the average of the last reported sale price per share of
Common Stock for each of the last 10 full Trading Days of the Second Measurement
Period and (ii) 107%, but in no event shall such Initial Conversion Price exceed
$12.125. If the Initial Conversion Price is to be adjusted as set forth herein
and, during the time from the initial issuance of Series 1997-A Convertible
Preferred Stock to the last day of the Second Measurement Period there shall
have occurred an adjustment to the Conversion Price as otherwise set forth in
this Section 5(e), such other adjustment or adjustments shall be redetermined as
if the Initial Conversion Price determined in accordance with this Section
5(e)(xi) had been in effect on the date of the initial issuance of Series 1997-A
Convertible Preferred Stock.
(f) (i) The Corporation will at all times reserve and keep available, free
from preemptive rights, out of the authorized but unissued shares of Common
Stock, for the purpose of effecting conversion of the Series 1997-A Convertible
Preferred Stock, the maximum number of shares of Common Stock which the
Corporation would be required to deliver upon the conversion of all the
outstanding shares of Series 1997-A Convertible Preferred Stock. For the
purposes of this Section 5(f)(i), the number of shares of Common Stock which the
Corporation would be required to deliver upon the conversion of all the
outstanding shares of Series 1997-A Convertible Preferred Stock will be computed
as if at the time of the computation all the outstanding shares of Series 1997-A
Convertible Preferred Stock were held by a single holder.
(ii) Before taking any action would cause an adjustment reducing the
Conversion Price below the then par value (if any) of the shares of Common Stock
deliverable upon conversion of the Series 1997-A Convertible Preferred Stock,
the Corporation will take all corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and non-assessable shares of Common Stock at the adjusted
Conversion Price.
(iii) The Corporation will seek to list the shares of Common Stock required
to be delivered upon conversion of the Series 1997-A Convertible Preferred
Stock, prior to the delivery, upon each national securities exchange, if any,
upon which the outstanding shares of Common Stock are listed at the time of
delivery.
(g) The Corporation will pay any documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock on conversion of Series 1997-A Convertible Preferred Stock; provided,
however, that the Corporation will not be required to pay any tax which may be
payable in respect of any transfer involved in the issue or delivery of shares
of Common Stock in a name other than that of the holder of record of Series
1997-A Convertible Preferred Stock to be converted and no such issue or delivery
will be made unless and until the person requesting the issue or delivery has
paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that the tax has been paid or is not payable.
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Section 6. Status.
Shares of Series 1997-A Convertible Preferred Stock converted pursuant to
the terms hereof or otherwise acquired by the Corporation shall automatically be
retired upon such conversion or other acquisition, as the case may be, shall not
be reissued as shares of Series 1997-A Convertible Preferred Stock and shall be
restored to the status of authorized but unissued shares of Preferred Stock,
undesignated as to series.
Section 7. Redemption after Notice of Mandatory Conversion.
(a) Notwithstanding anything to the contrary contained in Section 5, each
holder of Series 1997-A Convertible Preferred Stock will have the right,
exercised at any time after the Mandatory Conversion Notice Date but prior to
the Mandatory Conversion Date, to require the Corporation to redeem any or all
of the number of shares of Series 1997-A Convertible Preferred Stock specified
in the Notice of Mandatory Conversion that are owned of record by the holder
(the number of shares as to which each holder elects redemption under this
clause (a) being referred to as the "Identified Redemption Shares"), at a
redemption price per share (the "Redemption Price") equal to 110% multiplied by
the sum of (i) Stated Value plus (ii) the per share amount of the sum of all
Accrued Dividends with regard to the Series 1997-A Convertible Preferred Stock
(whether or not declared) through the Redemption Date, as herein defined.
(b) In order to exercise a right to require the Corporation to redeem a
holder's Series 1997-A Convertible Preferred Stock, the holder must deliver a
request for redemption with respect to the Identified Redemption Shares,
accompanied by the certificates representing the shares to be redeemed, to the
Corporation at any time prior to the Mandatory Conversion Date. If a request for
redemption is given with regard to shares of Series 1997-A Convertible Preferred
Stock, promptly (but in no event more than five Business Days) after the request
for redemption is given to the Corporation, the Corporation will pay the holder
cash equal to the Redemption Price of the shares. The date of such payment is
referred to herein as the "Redemption Date."
(c) (i) If a request for redemption accompanied by the certificates
representing the shares to be redeemed is delivered to the Corporation, on
the Redemption Date dividends will cease to accrue with regard to the
shares of Series 1997-A Convertible Preferred Stock to be redeemed, and at
the close of business on that date the holders of those shares will cease
to be stockholders with respect to those shares, will have no interest in
or claims against the Corporation by virtue of such shares (other than as
described in clause (ii) below) and will have no voting or other rights
with respect to such shares.
(ii) The dividend with respect to a share of Series 1997-A Convertible
Preferred Stock which is the subject of a request for redemption delivered
on a day which falls between the close of business on a dividend payment
Record Date and the opening of business on the corresponding Dividend
Payment Date will be payable on the Dividend Payment Date to the holder of
record of the share of Series 1997-A Convertible Preferred Stock on the
dividend payment Record Date notwithstanding the redemption of the share of
Series 1997-A Convertible Preferred Stock after the dividend payment Record
Date and prior to the Dividend Payment Date.
(d) Notwithstanding the foregoing provisions of this Section 7, the
Corporation may, on notice provided to each holder of Series 1997-A Convertible
Preferred Stock which has delivered to the Corporation a request for redemption,
not more than two Business Days after the delivery to the Corporation of such
request for redemption, elect as to all but not less than all the Identified
Redemption Shares of such holder so noticed for redemption pursuant to this
Section 7, to deliver such number of shares of Common Stock on the Mandatory
Conversion Date as shall equal the quotient of (i) the product of (A) 104%, (B)
the Redemption Price, and (C) the number of the Identified Redemption Shares,
divided by (ii) the Current Market Price computed two Trading Days prior to the
Redemption Date.
Section 8. REIT Declassification.
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(a) In the event that the Corporation should not qualify as a real estate
investment trust within the meaning of Section 856 of the Internal Revenue Code
of 1986, as amended (a "REIT Declassification"), each holder of Series 1997-A
Convertible Preferred Stock shall, subject to the requirements of this Section
8, have the right to require the Corporation to redeem any or all of the shares
of Series 1997-A Convertible Preferred Stock owned of record by such holder, at
a redemption price (the "Declassification Redemption Price") per share equal to
the product of (i) 115% and (ii) the sum of (A) Stated Value plus (B) the per
share amount of Accrued Dividends with regard to the Series 1997-A Convertible
Preferred Stock to the date of final distribution (whether or not distributed).
The Corporation shall immediately notify (the "Declassification Notice") each
holder of Series 1997-A Convertible Preferred Stock in writing of any REIT
Declassification or any proposed REIT Declassification, and each holder of
Series 1997-A Convertible Preferred Stock shall within ninety (90) days after
receipt from the Corporation of the Declassification Notice notify the
Corporation of its election pursuant to this Section 8(a).
(b) Each holder of Series 1997-A Convertible Preferred Stock may exercise
its rights under Section 8(a) hereof by notifying the Corporation in writing of
its election and surrendering the Series 1997-A Convertible Preferred Stock. If
a request for redemption is given with respect to a REIT Declassification,
promptly (but in no event more than five Business Days) after the request for
redemption is given to the Corporation, the Corporation will pay the holder cash
equal to the Declassification Redemption Price of the shares. The date of such
payment is referred to herein as the "Declassification Redemption Date."
(c) (i) If a request for redemption accompanied by the certificates
representing the shares to be redeemed under this Section 8 is delivered to the
Corporation, on the Declassification Redemption Date dividends will cease to
accrue with regard to the shares of Series 1997-A Convertible Preferred Stock to
be redeemed, and at the close of business on that date the holders of those
shares will cease to be stockholders with respect to those shares, will have no
interest in or claims against the Corporation by virtue of such shares (other
than as described in clause (ii) below) and will have no voting or other rights
with respect to such shares.
(ii) The dividend with respect to a share of Series 1997-A Convertible
Preferred Stock which is the subject of a request for redemption under this
Section 8 delivered on a day which falls between the close of business on a
dividend payment Record Date and the opening of business on the corresponding
Dividend Payment Date will be payable on the Dividend Payment Date to the holder
of record of the share of Series 1997-A Convertible Preferred Stock on the
dividend payment Record Date notwithstanding the redemption of the share of
Series 1997-A Convertible Preferred Stock under this Section 8 after the
dividend payment Record Date and prior to the Dividend Payment Date.
Section 9. Ranking. The shares of Series 1997-A Convertible Preferred Stock
will, with respect to the payment of dividends, the right to redemption in
accordance with Section 7, the right to receive the Change of Control
Preference, the right to receive the Liquidation Preference, and any other
distribution of assets on liquidation, dissolution or winding-up of the
Corporation, rank prior to any other series of Preferred Stock, prior to Common
Stock and prior to any other class or series of capital stock of the
Corporation.
Section 10. Miscellaneous.
(a) Except as otherwise expressly provided to this Certificate of
Designation, whenever a notice or other communication is required or permitted
to be given to holders of shares of Series 1997-A Convertible Preferred Stock,
the notice or other communication will be deemed properly given if deposited in
the United States mail, postage prepaid, addressed to the persons shown on the
books of the Corporation as the holders of the shares of Series 1997-A
Convertible Preferred Stock at the addresses as they appear on the books of the
Corporation, as of the Record Date or dates determined in accordance with
applicable law and with the Charter and Bylaws, as in effect from time to time,
with a copy sent to Westbrook Berkshire Holdings, L.L.C., c/o Westbrook
Partners, L.L.C., at 599 Lexington Avenue, Suite 3800, New York, New York 10022
and at 13155 Noel Road, LB 54, Suite 2300, Dallas, Texas 75240, in each case by
documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service.
16
<PAGE>
(b) Shares of Series 1997-A Convertible Preferred Stock will not have any
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications or terms and conditions of redemption, other than those
specifically set forth herein, in the Charter, and as may be provided under
applicable law insofar as any such provision does not conflict with the terms
hereof
(c) The headings of the various subdivisions herein are for convenience
only and will not affect the meaning or interpretation of any of the provisions
herein.
(d) Notwithstanding Section 3 hereof, the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of the
Series 1997-A Convertible Preferred Stock may be waived, and any of such
provisions of the Series 1997-A Convertible Preferred Stock may be amended, only
with the approval of holders of at least a majority of the outstanding shares of
Series 1997-A Convertible Preferred Stock, voting separately as a class.
(e) Notwithstanding anything to the contrary contained in Section 2, 3, 4,
5 7, 8 or 10(d) hereof, each holder of record of Series 1997-A Convertible
Preferred Stock hereby agrees (subject to relinquishment by Westbrook Real
Estate Fund II, L.P. as permitted below) that, in determining whether any holder
of Series 1997-A Convertible Preferred Stock has (i) voted to remove or elect
any director of the Corporation under Section 3, (ii) approved any action by the
Corporation under Section 3, (iii) elected the Change of Control Preference, or
the Liquidation Preference, as the case may be, or shares of Common Stock in
lieu of either thereof under Section 4, (iv) elected to cause the conversion of
such holder's Series 1997-A Convertible Preferred Stock into Common Stock or
other assets under Section 5, (v) elected to receive the Redemption Price under
Section 7 after receiving a Notice of Mandatory Conversion, (vi) elected to
receive the Declassification Redemption Price under Section 8 or (vi) received
any notice of the Corporation required or permitted by this Certificate of
Designation, Westbrook Real Estate Fund II, L.P. shall have the right to grant
or deny such approvals, make or decline any such elections or receive any such
notices with regard to all shares of the Series 1997-A Convertible Preferred
Stock held of record by such holder, and a notice received by Westbrook Real
Estate Fund II, L.P. and a document executed by Westbrook Real Estate Fund II,
L.P. calling a meeting of shareholders, exercising the right to take action by
written consent without a meeting, exercising voting rights either together with
holders of shares of Common Stock or separately as a class, including without
limitation the granting or denying of approval to any action by the Corporation,
or electing or removing any director, or electing or declining to the
Corporation to effect the conversion as to any shares of Series 1997-A
Convertible Preferred Stock, or electing or declining to the Corporation to
effect the redemption as to any shares of Series 1997-A Convertible Preferred
Stock, shall determine the matter for such holders as Westbrook Real Estate Fund
II, L.P. may indicate. Upon written notice by Westbrook Real Estate Fund II,
L.P. to the Corporation, Westbrook Real Estate Fund II, L.P. may relinquish such
rights and powers over any or all shares of Series 1997-A Convertible Preferred
Stock. The foregoing may, but need not, be evidenced by execution by each holder
of Series 1997-A Convertible Preferred Stock, other than Westbrook Real Estate
Fund II, L.P., of a proxy in favor of Westbrook Real Estate Fund II, L.P.
Section 11. Severability of Provisions.
Whenever possible, each provision hereof shall be interpreted in a manner
as to be effective and valid under applicable law, but if any provision hereof
is held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating or otherwise adversely affecting the remaining provisions
hereof If a court of competent jurisdiction should determine that a provision
hereof would be valid or enforceable if a period of time were extended or
shortened or a particular percentage were increased or decreased, then such
court may make such change as shall be necessary to render the provision in
question effective and valid under applicable law.
17
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation by its President and attested by its Secretary as of the __th
day of ____________, 1997.
BERKSHIRE REALTY COMPANY, INC.
By: /s/ David F. Marshall
-------------------------------
David F. Marshall
President
[SEAL]
Attest:
/s/ [ILLEGILBLE]
- -----------------------------
Name: [ILLEGIBLE]
- -----------------------------
Title: Secretary
18
<PAGE>
Exhibit A
OBJECTIVE: To keep the Preferred Stock holders' relative ownership of shares
constant (as compared to transaction consummated at the Effective
Conversion Price), upon issuance of a "New Dilutive Security" (see
definition below), the then-applicable Conversion Price of the
Preferred Stock will be adjusted as follows:
PRIOR ANTI-DILUTION ADJUSTED
CONVERSION PRICE ADJUSTMENT FORMULA CONVERSION PRICE
---------------- ------------------ ----------------
X x (A+B+C)+EX = X^
------------------
(A+B+C^)+EX^
t...must be solved for per calculation included in
example below.
DEFINITIONS:
"New Dilutive Security" - A Common stock or common stock equivalent issuance at
a price below FX
X - Conversion Price of Preferred Stock prior to issuance of "New Dilutive
Security".
X^ - Conversion Price of Preferred Stock adjusted for issuance of "New
Dilutive Security".
FX - Effective Conversion Price of Preferred Stock prior to issuance of
"New Dilutive Security."
FX^ - Effective Conversion Price of Preferred Stock adjusted for issuance
of "New Dilutive Security"
A - The number of fully diluted common shares outstanding
B - Shares of Common Stock issuable upon conversion of all convertible
Operating Partnership Units outstanding prior to issuance of New Dilutive
Security.
C - Shares of Common Stock issuable upon conversion of all Preferred Stock,
assuming the prior Conversion Price, (or X).
C^ - Shares of Common Stock issuable upon conversion of all outstanding
Preferred Stock, assuming the adjusted Conversion Price for the New
Dilutive Security issuance (or X^).
EX - "New Dilutive Security" equivalent common shares, assuming prior
Effective Conversion price, (FX)
EX^ - "New Dilutive Security" equivalent common shares, based on actual
conversion of security.
<PAGE>
Exhibit A (continued)
Example
Assume a 10,000,000 share common stock issuance at $10/share (the "New
Dilutive Security") following an investment of 10,000,0OO of Preferred Stock
at a $12.125 Conversion Price ($11.995 Effective Conversion Price):
<TABLE>
<CAPTION>
Assumptions
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding Common Stock 25,480,851 Gross Proceeds - New issue 100,000,000
OP Units Outstanding 6,527,022 New Shares Issued 10,000,000
Pref. Stock Equivalent Common Stock 5,773,196 New Share Issue Price $ 10.00
Preferred Conversion Price $12.125 Effective Pref. Conversion Price $11.995
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Prior to solving for C^, the following table must be created:
<TABLE>
<CAPTION>
Post-New Dilutive Post-New Dilutive
Security Issuance Security Issuance
Pre-New Dilutive Issued at $10 per Issued at Effective
Security Issuance Share and Unadjusted Conversion Price
---------------------- ---------------------- ----------------------
Share Capitalization of Corporation # of Shares % # of Shares % # of Shares %
- ----------------------------------- ----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Common Stock Equivalent Shares (A) 25,480,851 67.44% 25,480,851 53.33% 25,480,851 55.25%
Convertible OP Units Outstanding (B) 6,527,022 17.28% 6,527,022 13.66% 6,527,022 14.15%
Pref. Stock Equivalent Common Stock (C) 5,773,196 15.28% 5,773,196 12.08% 5,773,196 12.52%
v Dilutive Security Shares (EX^/EX) -- 0.00% 10,000,000 20.93% 8,336,745 18.08%
---------- ------ ---------- ------ ---------- ------
Total 37,781,069 100.00% 47,781,069 100.00% 46,117,814 100.00%
</TABLE>
C^ is the number of shares of Common stock into which the shares of Preferred
stock must convert in order to maintain the Preferred Stock holders' ownership
percentage at 12.5% (i.e. as if the issuance were done at the effective
conversion price prior to the issuances)
<TABLE>
<S> <C>
Share Capitalization, post New Dilutive Security Issuance as issued
at $10 per share and unadjusted 47,781,069
Less Preferred Stock Equivalent Common Stock (5,773,196)
-----------
Non-Preferred Share Capitalization 42,007,873
Ownership of Preferred Shareholders if New Security Issued at Effective Conversion Price 12.52%
Remaining Shareholders Ownership Interest 87.48%
Total Shares Grossed up to Maintain Preferred Ownership Percentage at 12.52% 48,019,076
Preferred Stock Ownership Percentage 12.52%
-----------
Number of Shares Preferred must convert into in order to keep Ownership Percentage at 12.52% 6,011,203
===========
</TABLE>
<PAGE>
Exhibit A (continued)
<TABLE>
<CAPTION>
Prior Conversion Adjusted Conversion
Price Price
------- -----
<S> <C> <C>
$12.125 x ((A+B+C) + (dilutive issue proceeds / $12.125)) =
-----------------------------------------------
((A+B+C^) + (dilutive issue proceeds /$10.00))
$12.125 x (37,781,069 + 8,336,745) =
--------------------------
(38,019,076 + 10,000,000)
$12.125 x 46,117,814 = 96.04% = $11.6449
----------
48,019,076
Preferred Equivalent Common Stock at New Conversion Price = 70,000,000 = 6,011,203
---------------
11.645
</TABLE>
Checking the Calculation
<TABLE>
<CAPTION>
Share Capitalization of Corporation Shares %
- ---------------------------------------------- ---------- ------
<S> <C> <C>
Common Stock Equivalent Shares (A) 25,480,851 53.06%
Convertible OP Units Outstanding (B) 6,527,022 13.59%
Preferred Stock Equivalent Common Stock (C^/C) 6,011,203 12.52%
New Dilutive Security Shares (EX^/EX) 10,000,000 20.83%
---------- ------
TOTAL 48,019,076 100.00%
</TABLE>
Conformed Execution Copy
================================================================================
REVOLVING CREDIT AGREEMENT
among
BERKSHIRE REALTY COMPANY, INC.,
BRI OP LIMITED PARTNERSHIP,
CERTAIN GUARANTORS
and
BANKBOSTON, N.A.
and
OTHER BANKS WHICH MAY BECOME
PARTIES TO THIS AGREEMENT
and
BANKBOSTON, N.A.,
AS AGENT
DATED AS OF JANUARY 30, 1998
================================================================================
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ss.1. DEFINITIONS AND RULES OF INTERPRETATION ...................................... 1
ss.1.1. Definitions ........................................................ 1
ss.1.2. Rules of Interpretation ............................................ 22
ss.2. THE REVOLVING CREDIT FACILITY AND LETTER OF CREDIT
FACILITY ..................................................................... 22
ss.2.1. Commitment to Lend ................................................. 22
ss.2.2. Unused Commitment Fee .............................................. 23
ss.2.3. Reduction of Commitment ............................................ 23
ss.2.4. Revolving Credit Notes ............................................. 24
ss.2.5. Interest on Revolving Loans ........................................ 24
ss.2.6. Requests for Revolving Loans ....................................... 24
ss.2.7. Funds for Revolving Loans .......................................... 25
ss.2.8. Issuance of Letters of Credit ...................................... 25
ss.2.9. Requests for Letters of Credit ..................................... 26
ss.2.10. Form and Expiration of Letters of Credit .......................... 26
ss.2.11. Banks' Participation in Letters of Credit ......................... 26
ss.2.12. Presentation ...................................................... 26
ss.2.13. Payment of Drafts ................................................. 27
ss.2.14. Uniform Customs and Practice ...................................... 27
ss.2.15. Subrogation ....................................................... 28
ss.2.16. Modification, Consent, etc......................................... 28
ss.2.17. Letter of Credit Fees ............................................. 29
ss.2.18. Extension of Maturity Date ........................................ 29
ss.3. REPAYMENT OF THE LOANS ....................................................... 29
ss.3.1. Stated Maturity .................................................... 29
ss.3.2. Mandatory Prepayments .............................................. 29
ss.3.3. Optional Prepayments ............................................... 30
ss.3.4. Partial Prepayments ................................................ 30
ss.3.5. Effect of Prepayments .............................................. 30
ss.4. CERTAIN GENERAL PROVISIONS ................................................... 30
ss.4.1. Conversion Options ................................................. 30
ss.4.3. [Intentionally omitted.] ........................................... 31
ss.4.4. [Intentionally omitted.] ........................................... 31
ss.4.5. Funds for Payments ................................................. 31
ss.4.6. Computations ....................................................... 32
ss.4.7. Inability to Determine Eurodollar Rate ............................. 32
ss.4.8. Illegality.......................................................... 32
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ss.4.9. Additional Interest ................................................ 33
ss.4.10. Additional Costs, Etc. ............................................ 33
ss.4.11. Capital Adequacy .................................................. 34
ss.4.12. Indemnity of Obligors ............................................. 35
ss.4.13. Interest on Overdue Amounts; Late Charge .......................... 35
ss.4.14. Certificate ....................................................... 35
ss.5. APPRAISALS ................................................................... 35
ss.5A. GUARANTEES ................................................................... 36
ss.5A.1. Guarantees of Obligations ......................................... 36
ss.5A.2. Continuing Obligation ............................................. 36
ss.5A.3. Waivers with Respect to Obligations ............................... 37
ss.5A.4. Banks' Power to Waive, etc. ....................................... 38
ss.5A.5. Information Regarding the Borrower, etc. .......................... 39
ss.5A.6. Certain Guarantor Representations ................................. 40
ss.5A.7. Subrogation ....................................................... 40
ss.5A.8. General Subordination ............................................. 40
ss.5A.9. Future Subsidiaries; Further Assurances ........................... 40
ss.6. REPRESENTATIONS AND WARRANTIES ............................................... 41
ss.6.1. Authority, Etc. .................................................... 41
ss.6.2. Governmental Approvals ............................................. 42
ss.6.3. Title to Properties; Leases ........................................ 43
ss.6.4. Financial Statements ............................................... 43
ss.6.5. No Material Changes, Etc. .......................................... 44
ss.6.6. Franchises, Patents, Copyrights, Etc. .............................. 44
ss.6.7. Litigation ......................................................... 44
ss.6.8. No Materially Adverse Contracts, Etc. .............................. 44
ss.6.9. Compliance With Other Instruments, Laws, Etc. ...................... 44
ss.6.10. Tax Status ........................................................ 45
ss.6.11. No Event of Default ............................................... 45
ss.6.12. Holding Company and Investment Company Acts ....................... 45
ss.6.13. Absence of UCC Financing Statements, Etc. ......................... 45
ss.6.14. Setoff, Etc. ...................................................... 45
ss.6.15. [Intentionally Omitted] ........................................... 45
ss.6.16. Pension Plans ..................................................... 45
ss.6.17. Regulations U and X ............................................... 46
ss.6.18. Environmental Compliance .......................................... 46
ss.6.19. Subsidiaries and Nominees ......................................... 48
ss.6.20. [Intentionally omitted] ........................................... 48
ss.6.21. Loan Documents .................................................... 48
ss.6.22. Borrowing Base Property ........................................... 48
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ss.7. AFFIRMATIVE COVENANTS ........................................................ 51
ss.7.1. Punctual Payment ................................................... 51
ss.7.2. Maintenance of Office .............................................. 51
ss.7.3. Records and Accounts ............................................... 51
ss.7.4. Financial Statements, Certificates and Information ................. 52
ss.7.5. Notices ............................................................ 55
ss.7.6. Existence: Maintenance of Properties ............................... 57
ss.7.7. Insurance .......................................................... 57
ss.7.8. Taxes .............................................................. 60
ss.7.9. Inspection of Properties and Books ................................. 61
ss.7.10. Compliance with Laws, Contracts, Licenses, and Permits ............ 61
ss.7.11. Use of Proceeds ................................................... 62
ss.7.12. Further Assurances ................................................ 62
ss.7.13. REIT Status: Operation of Business ................................ 62
ss.7.14. [Intentionally omitted.] .......................................... 62
ss.7.15. Partnership Status ................................................ 62
ss.7.16. Public Company Status ............................................. 62
ss.7.17. Operation and Control ............................................. 63
ss.8. CERTAIN NEGATIVE COVENANTS ................................................... 63
ss.8.1. Restrictions on Indebtedness ....................................... 63
ss.8.2. Restrictions on Liens. Etc.......................................... 64
ss.8.3. Restrictions on Investments ........................................ 66
ss.8.4. Merger, Consolidation .............................................. 68
ss.8.5. Sale and Leaseback ................................................. 68
ss.8.6. Compliance with Environmental Laws ................................. 68
ss.8.7. REIT Distributions ................................................. 70
ss.8:8. Borrower Distributions ............................................. 70
ss.8.9. Asset Sales ........................................................ 70
ss.8.10. Interest Rate Protection .......................................... 71
ss.8.11. Certain Guarantees ................................................ 71
ss.8.12. ERISA, etc. ....................................................... 71
ss.8.13. Structural Change ................................................. 71
ss.9. FINANCIAL COVENANTS .......................................................... 72
ss.9.1. Leverage Ratio ..................................................... 72
ss.9.2. Interest Coverage .................................................. 72
ss.9.3. Debt Service Coverage .............................................. 72
ss.9.4. Minimum Consolidated Tangible Net Worth ............................ 72
ss.9.5. Secured Debt ....................................................... 72
ss.9.6. Recourse Debt ...................................................... 72
ss.10. CLOSING CONDITIONS ........................................................... 73
ss.10.1. Loan Documents .................................................... 73
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
ss.10.2. Certified Copies of Organizational Documents ..................... 73
ss.10.3. By-Laws; Resolutions ............................................. 73
ss.10.4. Incumbency Certificate: Authorized Signers ....................... 73
ss.10.5. Opinions of Counsel Concerning Loan Documents .................... 74
ss.10.6. Swap Assignment .................................................. 74
ss.10.7. Performance: No Default .......................................... 74
ss.10.8. Representations and Warranties ................................... 74
ss.10.9. Proceedings and Documents ........................................ 74
ss.10.10. Compliance Certificate ........................................... 74
ss.10.11. Other ............................................................ 74
ss.11. CONDITIONS TO ALL BORROWINGS ................................................. 75
ss.11.1. Representations True: No Default .................................. 75
ss.11.2. No Legal Impediment ............................................... 75
ss.11.3. Governmental Regulation ........................................... 75
ss.11.4. Proceedings and Documents ......................................... 75
ss.11.5 Borrowing Documents ............................................... 75
75
ss.12. EVENTS OF DEFAULT; ACCELERATION; ETC ......................................... 76
ss.12.1. Events of Default and Acceleration ............................... 76
ss.12.2. Termination of Commitments ....................................... 79
ss.12.3. Remedies ......................................................... 79
ss.12.4. Distribution of Proceeds ......................................... 80
ss.13. SETOFF ....................................................................... 81
ss.14.THE AGENT ..................................................................... 81
ss.14.1. Authorization ..................................................... 81
ss.14.2. Employees and Agents .............................................. 81
ss.14.3. No Liability ...................................................... 82
ss.14.4. No Representations ................................................ 82
ss.14.5. Payments .......................................................... 82
ss.14.6. Holders of Notes .................................................. 83
ss.14.7. Indemnity ......................................................... 83
ss.14.8. Agent as Bank ..................................................... 84
ss.14.9. Resignation ....................................................... 84
ss.14.10. Notification of Defaults and Events of Default ................... 84
ss.14.11. Duties in the Case of Enforcement ................................ 84
ss.15. EXPENSES ..................................................................... 85
ss.16. INDEMNIFICATION .............................................................. 85
ss.17. SURVIVAL OF COVENANTS ETC. ................................................... 86
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
ss.18. ASSIGNMENT AND PARTICIPATION ................................................. 87
ss.18.1. Conditions to Assignment by Banks ................................. 87
ss.18.IA. Assignment Among Banks ........................................... 87
ss.18.2. Certain Representations and Warranties: Limitations; Covenants .... 87
ss.18.3. Register .......................................................... 88
ss.18.4. New Notes ......................................................... 88
ss.18.5. Participation ..................................................... 89
ss.18.6. Pledge by Bank .................................................... 89
ss.18.7. No Assignment by REIT or Borrower ................................. 89
ss.18.8. Disclosure ........................................................ 89
ss.19. NOTICES, ETC. ................................................................ 90
ss.20. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE ........................... 90
ss.21. HEADINGS ..................................................................... 91
ss.22. COUNTERPARTS ................................................................. 91
ss.23. ENTIRE AGREEMENT, ETC. ....................................................... 91
ss.24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS ............................... 91
ss.25. CONSENTS, AMENDMENTS, WAIVERS, ETC. .......................................... 92
ss.26. SEVERABILIIY ................................................................. 92
ss.27. CONFIDENTIALITY .............................................................. 93
ss.28. NO UNWRITTEN AGREEMENTS ...................................................... 93
ss.29. OBLIGATIONS JOINT AND SEVERAL ................................................ 93
</TABLE>
-V-
<PAGE>
EXHIBITS
A Form of Revolving Credit Note
B Form of Loan Request
C Form of Compliance Certificate
D Form of Borrowing Base Certificate
E Form of Assignment and Acceptance
SCHEDULES
1 Banks and Commitments
2 Borrowing Base Properties
6.3 Balance Sheet Exceptions
6.7 Litigation
6.16 Benefit Plans
6.19 Subsidiaries and Nominees
8.1 Outstanding Indebtedness
8.2 Outstanding Liens
-vi-
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of the 30th day of January,
1998, by and among BERKSHIRE REALTY COMPANY, INC. (the "REIT"), a Delaware
corporation having its principal place of business at 470 Atlantic Avenue,
Boston, Massachusetts 02210, BRI OP LIMITED PARTNERSHIP (the "OP"), a Delaware
limited partnership having its principal place of business at 470 Atlantic
Avenue, Boston, Massachusetts 02210, the Guarantors named herein and BANKBOSTON,
N.A. and the other lending institutions which may become parties hereto pursuant
to ss.18 (the "Banks"), and BankBoston, N.A., as Agent.
ss.1. DEFINITIONS AND RULES OF INTERPRETATION
ss.1.1. Definitions. The following terms shall have the meanings set forth
in this ss.1 or elsewhere in the provisions of this Agreement referred to below:
Accumulated Benefit Obligations. The actuarial present value of the
accumulated benefit obligations under any Plan, calculated in accordance with
Statement No. 87 of the Financial Accounting Standards Board.
Adjusted Net Operating Income. With respect to any Eligible Real Estate
for any fiscal period, an amount equal to the Net Operating Income attributable
to such asset for such fiscal period adjusted to add back the general and
administrative expenses of the Borrower allocated to such asset on the books and
records of the Borrower and its Consolidated Subsidiaries, to deduct an assumed
management fee allocated to such asset to a rate of four percent (4%) of the
gross revenues attributable to such asset for such fiscal period and to deduct
an adjustment for capital expenditure requirements at the annual rate of $200
per rental unit.
Advance Value. With respect to each Borrowing Base Property owned in fee by
the Borrower or by a Nominee acting on behalf of the Borrower (and excluding all
Joint Venture Assets included in the Borrowing Base Property), at the relevant
time of reference thereto, (a) for each Borrowing Base Property owned in fee by
the Borrower or such a Nominee for more than four consecutive fiscal quarters
for which financial reports shall have been provided to the Banks pursuant to
ss.6.4 and/or ss.7.4, the lesser of (i) 60% of its Borrowing Base Value or (ii)
its value as determined by dividing its Adjusted Net Operating Income for the
period of four consecutive fiscal quarters most recently ended for which
financial information is required to have been reported under ss.7.4 by 1.5 and
then dividing the result by the mortgage constant, which is derived by assuming
an interest rate equal to the sum of the yield on United States Treasury
obligations maturing ten years from the date of determination plus two percent
(2%) per annum and assuming a 25-year amortization schedule; and (b) for
Borrowing Base Property owned in fee by the Borrower or such a
<PAGE>
Nominee for less than such period, 60% of its Borrowing Base Value; provided,
however, that to the extent that any Borrowing Base Property is encumbered by
any lien or encumbrance permitted under ss.8.2(ii)(B) that has not been bonded
as provided in ss.7.8, the amount of the Indebtedness secured by such lien or
encumbrance shall be deducted from the value described for such property in
clause (a) or (b) above.
Agent. BankBoston, N.A. acting as agent for the Banks.
Agent's Head Office. The Agent's head office located at 100 Federal Street,
Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time by notice to the REIT, the Borrower and the Banks.
Agents Special Counsel. Ropes & Gray or such other counsel as may be
approved by the Agent.
Agreement. This Revolving Credit Agreement, including the Schedules and
Exhibits hereto.
Applicable Margin.
(a) if and so long as the Borrower shall maintain credit ratings on
its long-term senior unsecured debt from at least two nationally recognized
credit ratings services, at least one of which shall be Moody's or S&P:
(i) on any date on which the lowest of such ratings shall be Baa1
or BBB+ or their equivalent (or better), nine-tenths of one percent
(.90%);
(ii) on any date on which the lowest of such ratings shall be
Baa2 or BBB or their equivalent, one percent (1 %);
(iii) on any date on which the lowest of such ratings shall be
Baa3 or BBB- or their equivalent, one and one-tenth percent (1.10%);
and
(iv) on any date on which the lowest of such ratings shall be
lower than Baa3 or BBB- or their equivalent, one and seven-twentieths
percent (1.35%);
provided that adjustments to the Applicable Margin set forth in this clause
(a) shall take effect as of the date that a credit rating agency announces
the issuance of a new or adjusted rating of the long-term senior unsecured
debt of the Borrower; and
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(b) if and so long as the Borrower shall not maintain credit ratings
on its long-term senior unsecured debt from at least two nationally
recognized credit ratings services, at least one of which shall be Moody's
or S&P:
(i) on any date on which the Leverage Ratio is equal to or less
than 35%, one and one-tenth percent (1.10%);
(ii) on any date on which the Leverage Ratio is equal to or less
than 45% but greater than35 %, one and one-fifth percent (1.20%); and
(iii) on any date on which the Leverage Ratio is greater than
45%, one and three-tenths percent (1.30%);
provided that for purposes of calculating the Applicable Margin set forth
in this clause (b), (i) the Leverage Ratio shall be determined as of the
end of the most recent March, June, September or December for which
financial statements have been furnished (or are required to have been
furnished) by the Borrower to the Banks pursuant to ss.6.4 and ss.7.4 and
(ii) any adjustment in such Applicable Margin shall be prospective and
shall take effect on the fifth Business Day following the date upon which
such financial statements referred to in the foregoing clause (i) are
furnished (or are required to be furnished) by the Borrower to the Banks
pursuant to ss.7.4.
Appraisal. An MAI appraisal of the value of a parcel of Real Estate,
determined on an orderly liquidation basis, performed by an independent
appraiser selected by the Agent who is not employed by the REIT, the Borrower,
the Agent or a Bank, the form and substance of such appraisal and the identity
of the appraiser to be in accordance with regulatory laws and policies
applicable to the Banks and the form and substance of such appraisal to be
acceptable to the Agent.
Appraised Value. The fair market value of a parcel of Borrowing Base
Property (including without limitation any Joint Venture Asset) determined by
the most recent Appraisal of such parcel obtained pursuant to ss.5, subject,
however, in the case of each Appraisal to such changes or adjustments to the
value determined thereby as may be required by the appraisal department of the
Agent.
Balance Sheet Date. December 31, 1996.
Banks. BKB and the other lending institutions listed on Schedule 1 hereto
and any other Person who becomes an assignee of any rights of a Bank pursuant to
ss.18.
Base Rate: The higher of (a) the annual rate of interest announced from
time to time by BKB at its head office in Boston, Massachusetts as its "base
rate" and (b) one half of one
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percent (1/2%) above the overnight federal funds effective rate as published by
the Board of Governors of the Federal Reserve System, as in effect from time to
time.
Base Rate Revolving Loans. Those Revolving Loans bearing interest
calculated by reference to the Base Rate.
BKB. BankBoston, N.A.
Borrower. The OP.
Borrowing Base Availability. The sum of the Advance Values and the J.V.
Advance Values for all the Borrowing Base Property, minus the outstanding
principal amount of all Unsecured Senior Public Debt; provided, that these shall
be deducted from the Borrowing Base Availability, each of the following:
(a) except as otherwise agreed in writing by the Majority Banks, the
amount, if any, by which the Advance Value or J.V. Advance Value, as the
case may be, of any individual Borrowing Base Property shall exceed 15% of
the Borrowing Base Availability;
(b) the amount, if any, by which the aggregate Advance Values and/or
J.V. Advance Values of properties which are not multifamily housing
facilities shall exceed 10% of the Borrowing Base Availability; and
(c) the amount, if any, by which the aggregate J.V. Advance Values of
Borrowing Base Properties which are Joint Venture Assets shall exceed 10%
of the Borrowing Base Availability.
Borrowing Base Certificate. See ss.7.4(m).
Borrowing Base Property. At the relevant time of reference, the Eligible
Real Estate, plus any other Real Estate approved by the Majority Banks in their
sole good faith judgment. The Borrowing Base Properties as of the date hereof
are listed in Schedule 2 hereto.
Borrowing Base Value.
a) with respect to Eligible Real Estate, the value, calculated quarterly
as of the end of each fiscal quarter of the Borrower, of such property
which shall be determined by capitalizing the Adjusted Net Operating
Income of such parcel for the period of four consecutive fiscal
quarters then ended at a capitalization rate of 9.0%;
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b) with respect to Borrowing Base Property that is not Eligible Real
Estate (including without limitation any Joint Venture Asset), the
Appraised Value of the parcel; and
c) notwithstanding (a) above, with respect to Eligible Real Estate which
has been owned by the Borrower or by a Nominee acting on behalf of the
Borrower for less than four consecutive fiscal quarters for which
financial reports shall have provided to the Banks pursuant to ss.6.4
and/or ss.7.4, the purchase price of such parcel plus the amount of
any capitalized improvements completed or installed on such property
since its acquisition by the Borrower or such Nominee.
Building. With respect to each parcel of Borrowing Base Property, all of
the buildings, structures and improvements now or hereafter located thereon.
Building Service Equipment. All apparatus, fixtures and articles of
personal property owned by the Borrower now or hereafter attached to or used or
procured for use in connection with the operation or maintenance of any
building, structure or other improvement located on or included in the Borrowing
Base Property, including, but without limiting the generality of the foregoing,
all engines, furnaces, boilers, stokers, pumps, heaters, tank, dynamos, motors,
generators, switchboards, electrical equipment, heating, plumbing, lifting and
ventilating apparatus, air-cooling and air-conditioning apparatus, gas and
electric fixtures, elevators, escalators, fittings, and machinery and all other
equipment of every kind and description, used or procured for use in the
operation of a Building (except apparatus, fixtures or articles of personal
property belonging to lessees or other occupants of such building or to persons
other than the Borrower unless the same be abandoned by any such lessee or other
occupant or person), together with any and all replacements thereof and
additions thereto.
Business Day. Any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, which also is a Eurodollar Business Day.
Capitalized Leases. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See ss.6.18.
CODE. The Internal Revenue Code of 1986, as amended.
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Commitment. With respect to each Bank, the amount set forth on Schedule 1
hereto as the amount of such Bank's Commitment to make or maintain Loans to, and
to participate in Letters of Credit for the account of, the Borrower, as the
same may be reduced from time to time.
Commitment Percentage. With respect to each Bank, the percentage set forth
on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of
all of the Banks.
Compliance Certificate. See ss.7.4(g).
Consolidated or combined. With reference to any term defined herein, that
term as applied to the accounts of the Borrower and its Subsidiaries,
consolidated or combined in accordance with generally accepted accounting
principles.
Consolidated Fixed Charges. For any fiscal period, an amount equal to the
sum of the consolidated Interest Expense of the Borrower and its Subsidiaries
for such fiscal period plus the aggregate amount of scheduled principal
amortization and preferred dividends on Indebtedness for borrowed money for such
fiscal period and preferred dividends and other preferred Distributions for such
fiscal period of the Borrower and its Subsidiaries determined on a consolidated
basis.
Consolidated Subsidiary. Any Subsidiary of the Borrower or other entity
whose assets and liabilities are included in the consolidated balance sheet of
the Borrower in accordance with generally accepted accounting principles.
Consolidated Tangible Net Worth. At any date, the total of:
(a) partners' equity of the Borrower and its Subsidiaries determined
in accordance with generally accepted accounting principles on a
Consolidated basis, excluding the effect of any foreign currency
translation adjustments; minus
(b) the amount by which such partners' equity has been increased after
the Balance Sheet Date by any of (i) the income of any Person accrued prior
to the date such Person becomes a Subsidiary or is merged into or
consolidated with the Borrower or any of its Subsidiaries, (ii) the income
of any Person which is not the Borrower or a Subsidiary except to the
extent actually distributed in cash to the Borrower or a Subsidiary, (iii)
the write-up of any asset or the retirement of any Indebtedness or equity
at less than face value, (iv) extraordinary and nonrecurring gains or (v)
any after-tax gains attributable to returned surplus assets of any plan;
minus
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(c) to the extent not already deducted from the amount in clause (a)
above, (i) treasury stock, (ii) receivables due from an employee stock
ownership plan and (iii) guarantees of indebtedness incurred by an employee
stock ownership plan; minus
(d) the amount of intangible assets carried on the balance sheet of
the Borrower and its Subsidiaries determined in accordance with generally
accepted accounting principles on a Consolidated basis, including goodwill,
patents, patent applications, copyrights, trademarks, tradenames, research
and development expense, organizational expense, unamortized debt discount
and expense, deferred financing charges and debt acquisition costs.
Consolidated Total Assets. The sum of the following:
(a) the value of each parcel of Real Estate owned in fee by the
Borrower or a Nominee acting on behalf of the Borrower or a Consolidated
Subsidiary for a period of not less than four consecutive fiscal quarters
for which financial reports shall have been delivered pursuant to ss.6.4
and/or ss.7.4, which shall be determined by capitalizing the Adjusted Net
Operating Income of such parcel for the period of four consecutive fiscal
quarters then ended at a capitalization rate of 9.0%;
(b) the value of each parcel of Real Estate owned in fee by the
Borrower or such Nominee or a Consolidated Subsidiary for less than the
period specified in clause (a) above, which shall be deemed to be its
acquisition cost (or value at which such property is carried on the balance
sheet of the Borrower or a Subsidiary in accordance with generally accepted
accounting principles, minus any reserves relating thereto) plus the cost
of any capitalized improvements made to the property following such
acquisition;
(c) the value of each parcel of Real Estate owned indirectly by the
Borrower or a Consolidated Subsidiary through a joint venture, Subsidiary
or other entity that is not a Consolidated Subsidiary, which shall be
determined by (A) capitalizing the Adjusted Net Operating Income of such
parcel for the period of four consecutive fiscal quarters then ended at a
capitalization rate of 11 % (provided, however, that in the case of parcels
used principally for multifamily housing facilities that are owned in fee
simple by such joint venture, Subsidiary or other entity and have achieved
90% occupancy for at least three (3) consecutive months, such
capitalization rate shall be reduced to 9%); (B) deducting from such value
the principal amount of any debt of such joint venture, Subsidiary or other
entity secured by such parcel; (C) multiplying the amount calculated in (B)
by the percentage of the Borrower's ownership interest in the joint
venture, Subsidiary or other entity; and (D) if, and only if, the Agent
shall reasonably determine that the Borrower does not
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have direct or indirect operating control of the property, discounting the
amount calculated in (C) by 10%;
(d) the value of each mortgage loan owned by the Borrower or a
Consolidated Subsidiary (excluding loans on properties owned in fee by the
Borrower or a Consolidated Subsidiary), which shall be determined as equal
to the value at which such mortgage loan is carried on the consolidated
balance sheet of the Borrower and its Subsidiaries in accordance with
generally accepted accounting principles minus (without double counting)
any reserves relating thereto;
(e) the value of any raw land and any Development Assets (unless
included above), which shall be determined to be equal to the value at
which such asset is carried on the consolidated balance sheet of the
Borrower and its Subsidiaries in accordance with generally accepted
accounting principles; plus
(f) other tangible or financial assets, including cash, securities,
accounts receivable and escrows at the value thereof shown on the
consolidated balance sheet of the Borrower and its Subsidiaries in
accordance with generally accepted accounting principles minus (without
double counting) related reserves.
Notwithstanding any provision of the foregoing to the contrary, there shall
not be included in Consolidated Total Assets (i) intangible assets, including
without limitation any goodwill or deferred debt costs, (ii) mortgage-backed
securities securing Indebtedness omitted from Consolidated Total Indebtedness as
provided in clause (ii) of the definition of "Consolidated Total Indebtedness"
and (iii) any other asset not identified in paragraphs (a) through (f) above.
Consolidated Total Indebtedness. All liabilities of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles, excluding (i) minority interests recorded as
liabilities on the balance sheet of any Subsidiary and (ii) Indebtedness that is
secured solely by mortgage-backed securities without recourse to other assets or
revenues of the REIT, the Borrower or any Subsidiary, but specifically including
(A) in accordance with generally accepted accounting principles, any contingent
obligation that is probable and measurable and (B) any guarantee of any
Indebtedness of an unconsolidated Subsidiary or joint venture in which the
Borrower is a direct or indirect investor. For the purpose of clause (B) of the
preceding sentence, the amount of any such guarantee shall be the full principal
amount thereof (including any amount for which the guarantor may be liable on a
joint and several basis), except that if the debt guaranteed is also guaranteed
on a joint and several basis by a third party and the value (determined as
provided in paragraph (a) of the definition of "Consolidated Total Assets", but
modified to use a 12% capitalization rate) of the Real Estate of such
unconsolidated Subsidiary or joint venture which is security for the
Indebtedness supported by such guarantee exceeds the full principal amount of
the loan subject to such guarantee,
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then only the portion of such full principal amount equal to the percentage
ownership of the unconsolidated Subsidiary or joint venture held by the Borrower
or a Consolidated Subsidiary shall be counted for the purposes of calculating
Consolidated Total Indebtedness.
Conversion Request. A notice given by the Borrower to the Agent of its
election to convert or continue a Loan in accordance with ss.4.1.
Debt Service Coverage Ratio. On any date, an amount, expressed as a
percentage, equal to the consolidated Operating Cash Flow of the Borrower and
its Subsidiaries for the period of four consecutive fiscal quarters of the
Borrower (treated as a single accounting period) most recently ended for which
the Borrower has delivered financial statements to the Banks under ss.6.4 or is
required under ss.7.4 to have delivered financial statements to the Banks,
divided by the Consolidated Fixed Charges of the Borrower and its Subsidiaries
for such period.
Default. See ss.12.1.
Development Assets. An amount equal to the sum of (a) the aggregate amount
of assets of the Borrower and its Subsidiaries which constitute multifamily
housing facilities "Under Development", determined on a consolidated basis in
accordance with generally accepting accounting principles, plus (b) the
aggregate amount committed and/or budgeted by the Borrower and its Subsidiaries
for costs of developing, designing, constructing and equipping multifamily
housing facilities "Under Development". For the purposes hereof, a facility is
deemed "Under Development" if it is in the process of development, design or
construction or, if constructed, has not achieved a minimum occupancy of tenants
paying rent under leases approved in accordance with the terms of this Agreement
for ninety percent (90%) of all units for a minimum consecutive period of three
(3) months at rental rates at or above the market rental rate for similar
properties in the same geographical area. For the purpose hereof, the facilities
to be developed on raw land adjacent to the sites of existing fully constructed
facilities of the Borrower or a Subsidiary shall include only the facilities to
be developed and not the existing constructed facilities and the amounts
described in clauses (a) and (b) of the first sentence of this definition shall
include all costs of raw land.
Distribution. The declaration or payment of any dividend on or in respect
of any shares of any class of capital stock of the REIT, other than dividends
payable solely in equity securities of the REIT; the purchase, redemption,
exchange or other retirement of any shares of any class of capital stock of the
REIT, directly or indirectly through a Subsidiary of the REIT or otherwise,
other than purchases, redemptions, exchanges or other retirements paid solely in
equity securities of the REIT; the return of capital by the REIT to its
shareholders as such; the declaration or payment of any distribution on or in
respect of any general or limited partnership interests in the Borrower, other
than distributions payable solely in units of partnership interests of the
Borrower; the purchase, redemption, exchange
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or other retirement of any units of general or limited partnership interests of
the Borrower, directly or indirectly through the REIT or any Subsidiary of the
Borrower or otherwise, other than purchases, redemptions, exchanges or other
retirements paid solely in partnership interests of the Borrower; the return of
capital by the Borrower to its general or limited partners as such; the payment
by the Borrower of any principal of or interest on the Indebtedness permitted by
ss.8.1(n); or any other distribution on or in respect of any shares of any class
of capital stock of the REIT or in respect of any partnership interest of the
Borrower.
Dollars or $. Dollars in lawful currency of the United States of America.
Domestic Lending Office. Initially, the office of each Bank designated as
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
located within the United States that will be making or maintaining Base Rate
Revolving Loans.
Drawdown Date. The date on which any Revolving Loan is made or is to be
made, the date on which any Letter of Credit is to be issued and the date on
which any Revolving Loan is converted or combined in accordance with ss.4.1.
Durham Construction Loan Agreement. The Amended and Restated Construction
Loan Agreement dated as of January 30, 1998, as from time to time in effect,
among the REIT, the Borrower, the Guarantors, BKB, for itself and as Agent,
Mellon Bank, N.A. and such other lenders as shall from time to time become party
thereto.
EBITDA. With respect to any Person for any fiscal period, an amount equal
to the sum of (a) the Net Income of such Person for such fiscal period plus (b)
depreciation, amortization, Interest Expense and taxes deducted in calculating
such Net Income, plus (c) any extraordinary or nonrecurring losses deducted in
calculating such Net Income, minus (d) any extraordinary or nonrecurring gains
included in calculating such Net Income, all as determined in accordance with
generally accepted accounting principles.
Effective Date. January 30, 1998.
Eligible Assign. Any of (a) a commercial bank organized under the laws of
the United States, or any State thereof or the District of Columbia; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia; (c) a
commercial bank organized under the laws of any other country which is a member
of the Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, provided that such bank is acting
through a branch or agency located in the country in which it is organized or
another country which is also a member of the OECD; and (d) the central bank of
any country which is a member of the OECD; provided, however, that no
institution described in clause (a), (b) or (c) above shall be an Eligible
Assignee unless it has total assets
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in excess of $10 billion and unless debt obligations issued by such financial
institutions (or by a parent entity owning beneficially all of the capital stock
of such financial institution) are rated "Ba2" or higher by Moody's or "BB" or
higher by S&P.
Eligible Real Estate. Real Estate:
(a) which is utilized principally for a multifamily housing facility;
(b) which is owned in fee by the Borrower or any Subsidiary which is a
Guarantor or title to which is held for the benefit of the Borrower or any
Subsidiary which is a Guarantor in the name of its Nominee;
(c) which is subject to no mortgage liens, springing liens or negative
pledges and is subject to no other liens or encumbrances other than
Permitted Liens;
(d) with respect to which there shall have been furnished to the Agent
an owner's or mortgagee's title insurance policy or a title opinion of
qualified legal counsel obtained in connection with the original
acquisition of such Eligible Real Estate or as updated pursuant to
ss.7.4(s) and reasonably acceptable to the Agent in form and in substance
insuring or opining that such Real Estate is free of all defects in title
and other encumbrances except those which in the judgment of the Agent have
no more than an immaterial effect on the value or marketability of such
Real Estate;
(e) which has no material structural defects and no material deferred
maintenance, as evidenced by a written report satisfactory in form and
substance to the Agent;
(f) which is free from environmental hazards as verified by a written
report of an Environmental Engineer satisfactory in form and substance to
the Agent;
(g) which has an occupancy level of 85% or greater; and
(h) which has adequate insurance, as described in ss.7.7.
The Eligible Real Estate as of the date hereof is listed Schedule 2 hereto.
Employee Benefit Plan. Any employee benefit plan within the meaning of
ss.3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Engineer. A firm of independent professional engineers or
other scientists generally recognized as expert in the detection, analysis and
remediation of Hazardous Substances and related environmental matters and
reasonably acceptable to the Agent.
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Environmental Laws. See ss.6.18(a).
ERISA. The Employee Retirement Income Security Act of 1974, as amended and
in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with the
REIT or the Borrower under ss.414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of ss.4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent and the Banks
in their sole discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank designated as
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate
Loan, the sum of (a) the arithmetic average of the rates per annum for each
Reference Bank equal to the rate at which such Reference Bank's Eurodollar
Lending Office is offered Dollar deposits two Eurodollar Business Days prior to
the beginning of such Interest Period in an interbank eurodollar market where
the eurodollar and foreign currency and exchange operations of such Eurodollar
Lending Office are customarily conducted, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Rate Loan to which such Interest
Period applies.
Eurodollar Rate Loans. The Revolving Loans bearing interest calculated by
reference to a Eurodollar Rate.
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Event of Default. See ss.12.l.
Fee Letter. The letter agreement dated January 26, 1998 among the REIT, the
Borrower, BKB and BancBoston Securities Inc.
FNMA. The Federal National Mortgage Association.
FNMA Loan Agreement. The Master Credit Facility Agreement dated as of
November 17, 1995 by and among the Borrower, the REIT, BRI River Oaks Limited
Partnership and Washington Mortgage Financial Group, Ltd., as from time to time
in effect.
Foreign Trade Regulations. Collectively and as from time to time in effect
(including any successor statutes or regulations), (a) any act that prohibits or
restricts, or empowers the President or executive agencies of the United States
of America to prohibit or restrict, exports to or financial transactions with
any foreign country or foreign national, (b) the regulations with respect to
certain prohibited foreign trade transactions set forth at 15 C.F.R. Parts 730
et seq., 22 C.F.R. Parts 120-130 and 31 C.F.R. Parts 500 et seq. and (c) any
order, regulation, ruling, interpretation, direction, instruction or notice
relating to any of the foregoing.
Funds From Operations. With respect to any Person for any fiscal period,
net income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring and sales of
property and nonrecurring income and expense items, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect funds from operations on the same basis.
Generally accepted accounting principals. (a) When used in ss.8.3(j) and
ss.9, whether directly or indirectly through reference to a capitalized term
used therein, (i) principles that are consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its predecessors in
effect for the fiscal year ended on the Balance Sheet Date and (ii) to the
extent consistent with such principles, the accounting practices of the REIT
reflected in its financial statements for the year ended on the Balance Sheet
Date and (b) when used in general, other than as provided above, principles that
are (i) consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time
and (ii) consistently applied with past financial statements of the Borrower
adopting the same principles; provided that in each case referred to in this
definition of "generally accepted accounting principles" a certified public
accountant would, insofar as the use of such accounting principles is pertinent,
be in a position to deliver an unqualified opinion (other than a qualification
regarding changes in generally accepted accounting principles) as to financial
statements in which such principles have been properly applied.
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Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of ss.3(2) of ERISA maintained or contributed to by the REIT, the
Borrower or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA, other
than a Multiemployer Plan.
Guarantor. Each of the REIT, BRI Texas Apartments Limited Partnership, BRI
Benchmark Limited Partnership, BRI Commons Limited Partnership, BRI Hunters Glen
Limited Partnership, BRI Diamond Ridge Associates Limited Partnership, BRI
Foxglove Associates L.L.C., BRI Ridgeview Chase Associates Limited Partnership,
BRI Texas Apartments-II, Inc., Berkshire Apartments, Inc., BRI Hunters Glen-II,
Inc., BRI Baltimore - 31, L.L.C., BRI Emerald, Inc. and each other Person which
shall become a Subsidiary (other than a Special Purpose Subsidiary) of the REIT.
Hazardous Substances. See ss.6.18(b).
Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, including in any event and
whether or not so classified: (a) all debt and similar monetary obligations,
whether direct or indirect; (b) all liabilities secured by any mortgage, pledge,
security interest, lien, charge or other encumbrance existing on property owned
or acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest directly
or indirectly in a Person, to purchase indebtedness, or to assure the owner of
indebtedness against loss through an agreement to purchase goods, supplies or
services for the purpose of enabling the debtor to make payment of the
indebtedness held by such owner or otherwise, the obligation to reimburse the
issuer in respect of any letter of credit and contingent obligations in respect
of interest rate protection agreements; provided, that with respect to the REIT
there shall not be included in Indebtedness any partnership interests of the
Borrower which are required under generally accepted accounting principles to be
carried as liabilities in the balance sheet of the REIT solely by virtue of
their status as minority interests as a result of their being partners in the
Borrower.
Initial Limited Banner Contribution Agreement. The Initial Limited Partner
Contribution Agreement dated as of April 5, 1995, as from time to time in
effect, between the Borrower and GN Limited Partnership, a Massachusetts limited
partnership.
Interest Expense. With respect to any Person for any fiscal period, the
interest expense of such Person for such fiscal period determined in accordance
with generally accepted accounting principles.
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Interest Payment Date. (a) As to each Loan, the first day of each calendar
month, and (b) also as to each Eurodollar Rate Loan, the last day of the
Interest Period relating thereto.
Interest Period. With respect to each Loan (a) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrower in a Loan Request
(i) for any Base Rate Revolving Loan, the calendar month which includes the day
immediately following the commencement date and (ii) for any Eurodollar Rate
Loan, one, two, three or six months, and (b) thereafter, each period commencing
on the day following the last day of the next preceding Interest Period
applicable to such Loan and ending on the last day of one of the periods set
forth above, as selected by the Borrower in a Conversion Request; provided that
all of the foregoing provisions relating to Interest Periods are subject to the
following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Revolving Loan
would end on a day that is not a Business Day, that Interest Period shall
end on the next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in ss.4.1,
the Borrower shall be deemed to have requested a conversion of the affected
Eurodollar Rate Loan to a Base Rate Revolving Loan on the last day of the
then current Interest Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Eurodollar
Business Day of a calendar month; and
(e) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond the Maturity Date shall end on the Maturity
Date.
Investments. With respect to any Person, all shares of capital stock,
evidences of Indebtedness and other securities issued by any other Person, all
loans, advances, or extensions of credit to, or contributions to the capital of,
any other Person, all purchases of the securities or business or integral part
of the business of any other Person and commitments and options to make such
purchases, all interests in real property, and all other investments; provided,
however, that the term "Investment" shall not include (i) equipment,
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inventory and other tangible personal property acquired in the ordinary course
of business, (ii) current trade and customer accounts receivable for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms, (iii) advances to employees for travel expenses, drawing
accounts and similar expenditures, (iv) prepaid expenses made in the ordinary
course of business or (v) stock or other securities acquired in connection with
the satisfaction or enforcement of Indebtedness or claims due or owing to the
Borrower or any Subsidiary or Nominee or as security for any such Indebtedness
or claim. In determining the aggregate amount of Investments outstanding at any
particular time: (a) there shall be included as an Investment all interest
accrued with respect to Indebtedness constituting an Investment unless and until
such interest is paid; provided, however, that accrued interest on mortgage
loans shall not be included in the book value thereof for the purpose of
ss.8.3(j); (b) there shall be deducted in respect of each such Investment any
amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (c)
there shall not be deducted in respect of any Investment any amounts received as
earnings on such Investment, whether as dividends, interest or otherwise, except
that accrued interest included as provided in the foregoing clause (a) may be
deducted when paid; and (d) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Joint Venture Asset. A Borrowing Base Property that is not owned 100% in
fee by the Borrower or a Subsidiary or a Nominee acting on behalf of the
Borrower or a Subsidiary.
J.V. Advance Value. With respect to each Joint Venture Asset, (a) if the
Borrower has effective operating control of the Joint Venture Asset, an amount
equal to 50% of the Appraised Value of the Joint Venture Asset multiplied by the
Borrower's percentage ownership interest in the Joint Venture Asset or (b) if
the Borrower does not have effective operating control of the Joint Venture
Asset, an amount equal to 40% of the Appraised Value of the Joint Venture Asset
multiplied by the Borrower's percentage ownership interest in the Joint Venture
Asset; provided, however, that to the extent that any Joint Venture Asset is
encumbered by a lien or encumbrance described in ss.8.2(ii)(B) that has not been
bonded as provided in ss.7.8, the amount of the Indebtedness secured by such
lien or encumbrance shall be deducted from the value described for such property
in clause (a) or (b) above.
Leases. Leases, licenses and agreements whether written or oral, relating
to the use or occupation of space in or on the Building or on the Real Estate by
persons other than the Borrower.
Letter of Credit Exposure. On any date, the sum of (a) the aggregate face
amount of all drafts that may then or thereafter be presented by beneficiaries
under all Letters of Credit then outstanding, plus (b) the aggregate face amount
of all drafts that the Agent has
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previously accepted under Letters of Credit but has not paid. Letter of Credit
Exposure shall be allocated to each Bank in accordance with its Commitment
Percentage.
Leverage Ratio. On any date the quotient, expressed as a percentage, equal
to the Consolidated Total Indebtedness of the Borrower and its Subsidiaries
divided by the Consolidated Total Assets of the Borrower and its Subsidiaries.
Loan Documents. This Agreement, the Notes, the Letters of Credit, each
Qualified Hedge Agreement, the Fee Letter, the Swap Assignment and all
amendments to the foregoing and other documents, instruments or agreements
executed or delivered by or on behalf of the Borrower or any Nominee in
connection with the Loans.
Loan Request. See ss.2.6.
Loans. The Revolving Loans to be made by the Banks hereunder.
Majority Banks. Banks holding 66 2/3% of the Commitments.
Margin Stock. "Margin stock" within the meaning of Regulation G, T, U or X
(or any successor provisions) of the Board of Governors of the Federal Reserve
System, or any regulations, interpretations or rulings thereunder, all as from
time to time in effect.
Maturity Date. January 31, 2000, or such earlier date on which the
Revolving Loans shall become due and payable pursuant to the terms hereof,
subject to extension to January 31, 2001 on the terms set forth in ss.2.18.
Moody's. Moody's Investors Service, Inc. and its successors and assigns.
Multiemployer Plan. Any multiemployer plan within the meaning of ss.3(37)
of ERISA maintained or contributed to by the REIT, the Borrower or any ERISA
Affiliate.
Net Income (or Deficit). With respect to any Person (or any asset of any
Person) for any fiscal period, the net income (or deficit) of such Person (or
attributable to such asset), after deduction of all expenses, taxes and other
proper charges, determined in accordance with generally accepted accounting
principles.
Net Operating Income. With respect to any Person (or any asset of any
Person) for any fiscal period, an amount equal to the sum of (a) the Net Income
of such Person (or attributable to such asset) for such fiscal period plus (b)
depreciation and amortization, Interest Expense, corporate general and
administrative expenses allocated to such Person (or asset) and any
extraordinary or nonrecurring losses deducted in calculating such Net Income
minus (c) any extraordinary or nonrecurring gains included in calculating such
Net Income, all as determined in accordance with generally accepted accounting
principles.
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Nominee. Each Subsidiary of the Borrower which holds fee title to a parcel
of real estate on behalf of the Borrower pursuant to an agency or other written
contractual arrangement approved by the Majority Banks.
Non-recourse Indebtedness. Indebtedness of the Borrower or a Subsidiary
which is secured by one or more parcels of Real Estate (other than Borrowing
Base Property) or interests therein and Short-term Investments and is not a
general obligation of the REIT, the Borrower, any Subsidiary or any Nominee, the
holder of such Indebtedness having recourse solely to the parcels of Real Estate
securing such Indebtedness, the Building and Leases thereon and the rents and
profits thereof and the Short-term Investments securing such Indebtedness;
provided, however, that the holder of such Indebtedness may have recourse
against the general credit of the REIT, the Borrower or such Subsidiary (i) with
respect to claims based on fraud, intentional misrepresentation, misapplication
of funds, intentional mismanagement or waste, failure to comply with legal
requirements necessary to maintain the tax-exemption on the interest on such
Indebtedness (if applicable) or failure to pay transfer fees and charges due to
the lender in connection with any sale or other transfer of the Real Estate
subject to such Indebtedness, (ii) with respect to claims arising from the
presence of Hazardous Substances on the parcels of Real Estate securing such
Indebtedness, (iii) with respect to reimbursement for payments of real estate
taxes, assessments and premiums for insurance on the Real Estate subject to such
Indebtedness, (iv) with respect to any loss by fire or casualty to the extent
not compensated by insurance proceeds, (v) with respect to any premium required
to be paid on tax-exempt Non-recourse Indebtedness in the event that it shall
become subject to taxation and (vi) with respect to additional expenses and
liabilities related to the Real Estate securing such Indebtedness in an
aggregate amount that shall not exceed in the case of any single issue of such
Indebtedness the sum of $200,000; and provided, further, that such Indebtedness
may be secured or supported by (a) a replacement reserve fund in an amount not
to exceed the product of $300 times the number of units of housing in the
projects financed by such Indebtedness or (b) if such Indebtedness is
tax-exempt, a debt service reserve fund in an amount not exceeding federal tax
guidelines; and provided, further, that Indebtedness of any Special Purpose
Subsidiary shall be considered Non-recourse Indebtedness hereunder even if such
Indebtedness shall constitute a general obligation of such Special Purpose
Subsidiary so long as the only asset of such Special Purpose Subsidiary is the
Real Estate financed by such Indebtedness and there is no recourse for such
Indebtedness to the REIT or the Borrower.
Notes. The Revolving Credit Notes.
Obligations. All indebtedness, obligations and liabilities of the Borrower
and its Subsidiaries to any of the Banks and the Agent, individually or
collectively, under this Agreement or any of the other Loan Documents or in
respect of any of the Loans or the Notes or the Letters of Credit, or other
instruments at any time evidencing any of the foregoing, whether existing on the
date of this Agreement or arising or incurred hereafter,
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direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise.
Obligor. Each of the Borrower, the REIT and each Subsidiary of the Borrower
or the REIT which shall become a guarantor hereunder.
OP Partnership Agreement. The Amended and Restated Agreement of Limited
Partnership of BRI OP Limited Partnership dated as of May 1,1995 among the REIT,
as general partner, and GN Limited Partnership, a Massachusetts limited
partnership, as initial limited partner, as from time to time in effect.
Operating Cash Flow. With respect to any Person for any fiscal period, an
amount equal to EBITDA for such fiscal period minus an allowance for capital
expenditure requirements computed at the annual rate of $200 per unit for
multifamily housing projects.
Outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
Partnership Status. With respect to the Borrower, its status as a limited
partnership exempt from federal income taxation under the Code.
PBGC. The Pension Benefit Guaranty Corporation created by ss.4002 of ERISA
and any successor entity or entities having similar responsibilities.
Permitted Liens. Liens, security interests and other encumbrances permitted
by ss.8.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Plan. At any time, any pension benefit plan subject to Title IV of ERISA
maintained, or to which contributions have been made or are required to be made,
by the REIT, the Borrower or any ERISA Affiliate within six years prior to such
time.
Prior Credit Agreement. The 1992 Credit Agreement dated as of December 30,
1992, as amended and restated through the Amended and Restated 1992 Credit
Agreement dated as of November 21, 1995 among the REIT, the OP, the Guarantors
named herein, BankBoston, N.A., Mellon Bank, N.A. and BankBoston, N.A., as
Agent, and as further amended to the date hereof.
Prospectus. The Prospectus/Proxy Statement of the REIT dated November 8,
1990 as amended by Supplement No. 1 thereto dated November 29, 1990, Supplement
No. 2
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thereto dated December 14, 1990, Supplement No. 3 thereto dated January 31,
1991 and Supplement No. 4 thereto dated May 22, 1991.
Qualified Hedge Agreement. Each of the Master Agreement dated as of October
31, 1995 between BKB and the Borrower and any other interest rate protection
agreement which is entered into between the Borrower and any Bank.
Real Estate. All real property at any time owned or leased (as lessee or
sublessee) by the Borrower or any of its Subsidiaries or Nominees.
Record. The grid attached to any Note, or the continuation of such grid, or
any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
Reference Bank. BKB.
Register See ss.183
REIT Status. With respect to the REIT, its status as a real estate
investment trust as defined in ss.856(a) of the Code.
Release. See ss.6.18(c)(iii).
Rent Roll. A report prepared by the Borrower showing with respect to Real
Estate utilized principally for multifamily housing, for each unit its type,
occupancy status, lease expiration date, market rent, lease rent and other
information, substantially in the form presented to the Agent prior to the date
hereof or in such other form as may have been approved by the Agent, such
approval not to be unreasonably withheld.
Revolving Credit Note Record. A Record with respect to any Revolving Credit
Note.
Revolving Credit Notes. See ss.2.4.
Revolving Loans. Revolving loans made or to be made by any of the Banks to
the Borrower pursuant to ss.2.
S&P. Standard & Poor's, a Division of The McGraw-Hill Companies, Inc., and
its successors and assigns.
SEC. The federal Securities and Exchange Commission.
Short-term Investments. Investments described in subsections (a) through
(g), inclusive, of ss.8.3.
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Special Purpose Subsidiary. Any Subsidiary of the REST and/or the Borrower
which was formed (a) solely for the purpose of incurring Non-recourse
Indebtedness and owning properties financed thereby or (b) solely for the
purpose of acting as general partner of an entity described in clause (a).
State. A state of the United States of America.
Structural Change. Each entry by the Borrower or any Subsidiary in any
line of business (including without limitation the acquisition of Real Estate
other than for current or eventual use principally as a multifamily housing
facility) other than a line of business in which it is engaged as a continuing
matter on the Effective Date, each spinoff or divestiture affecting the Borrower
or any Subsidiary (excluding such transactions to which only the Borrower and/or
its Subsidiaries are parties) and each Investment permitted by ss.8.3(j), in
each case whether or not permitted by the terms hereof other than ss.8.13.
Subsidiary. Any corporation, association, partnership, trust, or other
business entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes or controlling interests) of the outstanding Voting Interests or, in
the case of a partnership, of which the designated parent or a Subsidiary owns a
majority (by percentage of ownership) of the limited partnership interests or is
a general partner.
Swap Assignment. See ss. 10.6.
Test Period. See ss.9.2.
Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time.
Type. As to any Loan, its nature as a Base Rate Revolving Loan or a
Eurodollar Rate Loan.
Unsecured Senior Public Debt. Unsecured Indebtedness of the REIT or the
Borrower which is issued pursuant to a registration statement filed with the SEC
or an exemption from registration under Rule 144A promulgated under the
Securities Exchange Act of 1934, as amended.
Voting Interests. Stock or similar ownership interests, of any class or
classes (however designated), the holders of which are at the time entitled, as
such holders, (a) to vote for the election of a majority of the directors (or
persons performing similar functions) of the corporation, association,
partnership, trust or other business entity involved, or (b) to control, manage,
or conduct the business of the corporation, partnership, association, trust or
other business entity involved.
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Wholly Owned Subsidiary: Any Subsidiary of which all of the outstanding
capital stock (or other shares of beneficial interest) entitled to vote
generally (other than directors' qualifying shares) is owned by the REIT (or
other specified Person) directly, or indirectly through one or more Wholly Owned
Subsidiaries.
ss.1.2. Rules of Interpretation.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial
Code as in effect in Massachusetts, have the meanings assigned to them
therein.
(h) Reference to a particular "ss." refers to that section of this
Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Agreement as a whole and not to any particular section
or subdivision of this Agreement.
ss.2. THE REVOLVING CREDIT FACILITY AND LETTER OF CREDIT FACILITY.
ss.2.1. Commitment to Lend. Subject to the terms and conditions set forth
in this Agreement, each of the Banks severally agrees to lend to the Borrower,
and the Borrower may borrow (and repay and reborrow) from time to time between
the Effective Date and the Maturity Date upon notice by the Borrower to the
Agent given in accordance with ss.2.6,
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such sums as are requested by the Borrower for the purposes set forth in ss.7.11
up to a maximum aggregate principal amount outstanding (after giving effect to
all amounts requested) at any one time equal to such Bank's Commitment minus the
portion of such Bank's Commitment allocated to Letter of Credit Exposure;
provided, that, in all events no Default or Event of Default shall have occurred
and be continuing and the Borrower's pro forma financial statements as required
pursuant to ss.2.6(iii) shall demonstrate compliance with all covenants set
forth therein; and provided, further, that the sum of outstanding principal
amount of the Revolving Loans (after giving effect to all amounts requested)
plus Letter of Credit Exposure shall not at any time exceed either (i) the Total
Commitment or (ii) the Borrowing Base Availability. The Revolving Loans shall be
made pro rata in accordance with each Bank's Commitment Percentage. Each request
for a Revolving Loan hereunder shall constitute a representation and warranty by
the Borrower that all of the conditions set forth in ss.10 have been satisfied
as of the Effective Date and that all of the conditions set forth in ss.11 have
been satisfied on the date of such request.
ss.2.2. Unused Commitment Fee. The Borrower agrees to pay to the Agent for
the accounts of the Banks in accordance with their respective Commitment
Percentages an unused commitment fee calculated at the rate per annum of
two-tenths of one percent (.20%) on the average daily amount by which the Total
Commitment exceeds the sum of the outstanding principal amount of Revolving
Loans plus the Letter of Credit Exposure during each calendar quarter or portion
thereof commencing on the Effective Date and ending on the Maturity Date. The
unused commitment fee shall be payable quarterly in arrears on the first day of
each calendar quarter for the immediately preceding calendar quarter or portion
thereof, with a final payment on the Maturity Date or, as provided in ss.2.3,
any earlier date on which the Commitments shall be reduced or shall terminate.
ss.2.3. Reduction of Commitment. The Borrower shall have the right at any
time and from time to time upon five Business Days' prior written notice to the
Agent to reduce by $1,000,000 or an integral multiple of $100,000 in excess
thereof or to terminate entirely the unborrowed portion of the Commitments,
whereupon the Commitments of the Banks shall be reduced pro rata in accordance
with their respective Commitment Percentages of the amount specified in such
notice or, as the case may be, terminated, any such reduction to be without
penalty (unless such reduction requires repayment of a Eurodollar Rate Loan)
provided, that no such reduction may reduce the Total Commitment to an amount
that is less than the sum of the principal amount of Revolving Loans outstanding
plus the Letter of Credit Exposure in effect immediately after giving effect to
such reduction. Promptly after receiving any notice of the Borrower delivered
pursuant to this ss.2.3, the Agent will notify the Banks of the substance
thereof. Upon the effective date of any such reduction or termination, the
Borrower shall pay to the Agent for the respective accounts of the Banks the
full amount of any facility fee under ss.2.2 then accrued on the amount of the
reduction. No reduction or termination of the Commitment may be reinstated.
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ss.2.4. Revolving Credit Notes. The Revolving Loans shall be evidenced by
separate promissory notes of the Borrower in substantially the form of Exhibit A
hereto (collectively, the "Revolving Credit Notes"), dated as of the Effective
Date (or such later date to which interest on the Revolving Loans has been paid
in full) and completed with appropriate insertions. One Revolving Credit Note
shall be payable to the order of each Bank in the principal amount equal to such
Bank's Commitment or, if less, the outstanding amount of all Revolving Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Revolving Loan or at the time of
receipt of any payment of principal thereof, an appropriate notation on such
Bank's Record reflecting the making of such Revolving Loan or (as the case may
be) the receipt of such payment. The outstanding amount of the Revolving Loans
set forth on such Bank's Record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Bank, but the failure to record, or any
error in so recording, any such amount on such Bank's Record shall not limit or
otherwise affect the obligations of the Borrower hereunder or under any
Revolving Credit Note to make payments of principal of or interest on any
Revolving Credit Note when due.
ss.2.5. Interest on Revolving Loans.
(a) Each Base Rate Revolving Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the Base Rate.
(b) Each Eurodollar Rate Revolving Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the last day
of the Interest Period with respect thereto at the rate per annum equal to
the sum of the Eurodollar Rate determined for such Interest Period plus the
Applicable Margin from time to time in effect.
(c) The Borrower promises to pay interest on each Revolving Loan in
arrears on each Interest Payment Date with respect thereto.
(d) Base Rate Revolving Loans and Eurodollar Rate Revolving Loans may
be convened to Loans of the other Type as provided in ss.4.1.
ss.2.6. Requests for Revolving Loans. The Borrower shall notify the Banks
of a potential request for a Revolving Loan as soon as possible but not less
than three Business Days prior to the Borrower's proposed Drawdown Date and
shall give to the Banks written notice in the form of Exhibit B hereto (or
telephonic notice confirmed in writing in the form of Exhibit B hereto) of each
Revolving Loan requested hereunder (a "Loan Request") no less than three
Business Days prior to the proposed Drawdown Date. Each such notice shall
specify with respect to the requested Revolving Loan the proposed principal
amount,
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Drawdown Date, Interest Period and Type. Each such notice shall also contain (i)
a calculation showing that after giving effect to such advance the sum of the
principal amount of Revolving Loans to be outstanding plus the Letter of Credit
Exposure shall not exceed either the Total Commitment or the Borrowing Base
Availability then in effect, (ii) a certification by the chief financial or
chief accounting officer of the REIT that the REIT and the Borrower are and will
be in compliance with all covenants under the Loan Documents after giving effect
to the making of such Revolving Loan, and (iii) a Compliance Certificate
prepared on a pro forma basis using the financial statements of the Borrower
most recently provided or required to be provided to the Banks under ss.6.4 or
ss.7.4 adjusted in the best good faith estimate of the Borrower to give effect
to the proposed advance. Promptly upon receipt of any such notice, the Agent
shall notify each of the Banks thereof. Each such notice shall be irrevocable
and binding on the REIT and the Borrower and shall obligate the Borrower to
accept the Revolving Loan requested from the Banks on the proposed Drawdown
Date. Each Loan Request shall be (a) for a Base Rate Revolving Loan in a minimum
aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess
thereof, or (b) for a Eurodollar Rate Revolving Loan in a minimum aggregate
amount of $2,000,000 or an integral multiple of $100,000 in excess thereof;
provided, however, that there shall be no more than five Eurodollar Rate
Revolving Loans outstanding at any one time.
ss.2.7. Funds for Revolving Loans. Not later than 11:00 a.m. (Boston time)
on the proposed Drawdown Date of any Revolving Loans, each of the Banks will
make available to the Agent, at the Agent's Head Office, in immediately
available funds, the amount of such Bank's Commitment Percentage of the amount
of the requested Revolving Loans. Upon receipt from each Bank of such amount,
and upon receipt of the documents required by ss. 11 and the satisfaction of the
other conditions set forth therein, to the extent applicable, the Agent will
make available to the Borrower the aggregate amount of such Revolving Loans made
available to the Agent by the Banks by crediting such amount to the account of
the Borrower maintained at the Agent's Head Office. The failure or refusal of
any Bank to make available to the Agent at the aforesaid time and place on any
Drawdown Date the amount of its Commitment Percentage of the requested Revolving
Loans shall not relieve any other Bank from its several obligation hereunder to
make available to the Agent the amount of such other Bank's Commitment
Percentage of any requested Revolving Loans, including any additional Revolving
Loans that may be requested subject to the terms and conditions hereof to
provide funds to replace those not advanced by the Bank so failing or refusing.
In the event of any such failure or refusal, the Banks not so failing or
refusing shall be entitled to a priority position for such Loans as provided in
ss.12.4(b).
ss.2.8. Issuance of Letters of Credits. Subject to all the terms and
conditions of this Agreement and so long as no Default exists, the Agent on
behalf of the Banks will issue for the account of the Borrower irrevocable
standby letters of credit (the "Letters of Credit") provided, however, that no
more than three Letters of Credit may be outstanding at any one time, that the
Letter of Credit Exposure in effect at any time shall never exceed $4,000,000
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and that at no time shall the sum of the Letter of Credit Exposure plus the
aggregate outstanding principal amount of Revolving Loans exceed the lesser of
the Total Commitment or the Borrowing Base Availability.
ss.2.9. Requests for Letters of Credit. The Borrower may from time to time
request a Letter of Credit to be issued by providing to the Agent a notice which
is actually received no less than five Business Days prior to the requested
Drawdown Date for such Letter of Credit specifying (a) the amount of the
requested Letter of Credit, (b) the beneficiary thereof, (c) the requested
Drawdown Date and (d) the principal terms of the text for such Letter of Credit.
Each Letter of Credit will be issued by forwarding it to the Borrower or to such
other Person as directed in writing by the Borrower. In connection with the
issuance of any Letter of Credit, the Borrower shall furnish to the Agent a
certificate in substantially the form of Exhibit B, the Compliance Certificate
required by ss. 11.5(b) and any customary application forms required by the
Agent.
ss.2.10. Form and Expiration of Letters of Credit. Each Letter of Credit to
be issued under this Section 2 and each draft accepted or paid under such
Letters of Credit shall be issued, accepted or paid, as the case may be, by the
Agent at its principal office. No Letter of Credit shall provide for the payment
of drafts drawn thereunder, and no draft shall be payable, at a date which is
later than the earlier of (a) the date twelve months after the date of issuance
or (b) the Maturity Date. Each Letter of Credit and each draft accepted under a
Letter of Credit shall be in such form and minimum amount, and shall contain
such terms, as the Agent and the Borrower may agree upon at the time such Letter
of Credit is issued, including a requirement of not less than three Banking Days
after presentation of a draft before payment must be made thereunder.
ss.2.11. Banks' Participation in Letters of Credit. Upon the issuance of
each Letter of Credit, a participation therein, in an amount equal to each
Bank's Commitment Percentage, shall automatically be deemed granted by the Agent
to each Bank on the date of such issuance and each Bank shall automatically be
obligated, to reimburse the Agent to the extent of its Commitment Percentage for
all obligations incurred by the Agent to third parties in respect of such
Letters of Credit not reimbursed by the Borrower. The Agent will send to each
Bank on a monthly basis a confirmation regarding the participation in Letters of
Credit outstanding during such month.
ss.2.12. Presentation. The Agent may accept or pay any draft presented to
it, regardless of when drawn and whether or not negotiated, if such draft, the
other required documents and any transmittal advice are presented to the Agent
and dated on or before the expiration date of the Letter of Credit under which
such draft is drawn. Except insofar as instructions actually received may be
given by the Borrower in writing expressly to the contrary with regard to, and
prior to, the Agent's issuance of any Letter of Credit for the account of the
Borrower and such contrary instructions are reflected in such Letter of Credit,
the Agent may honor as complying with the terms of the Letter of Credit and with
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this Agreement any drafts or other documents otherwise in order signed or issued
by an administrator, executor, conservator, trustee in bankruptcy, debtor in
possession, assignee for benefit of creditors, liquidator, receiver or other
legal representative of the party authorized under such Letter of Credit to draw
or issue such drafts or other documents.
ss.2.13. Payment of Drafts. At such time as the Agent makes any payment on
a draft presented or accepted under a Letter of Credit, the Borrower will on
demand pay to the Agent for the benefit of the Banks in immediately available
funds the amount of such payment. Unless the Borrower shall otherwise pay to the
Agent the amount required by the foregoing sentence, such amount shall be
considered a Revolving Loan.
ss.2.14. Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any subsequent revisions thereof approved by a Congress
of the International Chamber of Commerce and adhered to by the Agent (the
"Uniform Customs and Practice"), shall be binding on the Borrower and the Agent
except to the extent otherwise provided herein, in any Letter of Credit or in
any other Loan Document. Anything in the Uniform Customs and Practice to the
contrary notwithstanding:
(a) Neither the Borrower nor any beneficiary of any Letter of Credit
shall be deemed an agent of the Agent.
(b) With respect to any Letter of Credit, neither the Agent nor its
correspondents shall be responsible for or shall have any duty to
ascertain:
(i) the genuineness of any signature;
(ii) the validity, form, sufficiency, accuracy, genuineness or
legal effect of any endorsements;
(iii) delay in giving, or failure to give, notice of arrival,
notice of refusal of documents or of discrepancies in respect of which
the Agent refuses the documents or any other notice, demand or
protest;
(iv) the performance by any beneficiary under any Letter of
Credit of such beneficiary's obligations to the Borrower;
(v) inaccuracy in any notice received by the Agent;
(vi) the validity, form, sufficiency, accuracy, genuineness or
legal effect of any instrument, draft, certificate or other document
required by such Letter of Credit to be presented before payment of a
draft, or the office held by or the authority of any Person signing
any of the same; or
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(vii) failure of any instrument to bear any reference or adequate
reference to such Letter of Credit, or failure of any Person to note
the amount of any instrument on the reverse of such Letters of Credit
or to surrender such Letter of Credit or to forward documents in the
manner required by such Letter of Credit.
(c) The occurrence of any of the events referred to in the Uniform
Customs and Practice or in the preceding clauses of this Section 2.14 shall
not affect or prevent the vesting of any of the Agent's rights or powers
hereunder or the Borrower's obligation to make reimbursement of amounts
paid under any Letter of Credit or any draft accepted thereunder so long as
the Agent has acted without gross negligence or willful misconduct.
(d) The Borrower will promptly examine (i) each Letter of Credit (and
any amendments thereof) sent to it by the Agent and (ii) all instruments
and documents delivered to it from time to time by the Agent. The Borrower
will notify the Agent of any claim of noncompliance by notice actually
received within three Business Days after receipt of any of the foregoing
documents, the Borrower being conclusively deemed to have waived any such
claim against the Agent and its correspondents unless such notice is given.
The Agent shall have no obligation or responsibility to send any such
Letter of Credit or any such instrument or document to the Borrower.
(e) In the event of any conflict between the provisions of this
Agreement and the Uniform Customs and Practice, the provisions of this
Agreement shall govern.
ss.2.15. Subrogation. Upon any payment by the Agent under any Letter of
Credit and until the reimbursement of the Agent by the Borrower with respect to
such payment, the Agent shall be entitled to be subrogated to, and to acquire
and retain, the rights which the Person to whom such payment is made may have
against the Borrower, all for the benefit of the Banks. The Borrower will take
such action as the Agent may reasonably request, including requiring the
beneficiary of any Letter of Credit to execute such documents as the Agent may
reasonably request, to assure and confirm to the Agent such subrogation and such
rights, including the rights, if any, of the beneficiary to whom such payment is
made in accounts receivable, inventory and other properties and assets of any
Obligor.
ss.2.16. Modification, Consent, etc. If the Borrower requests or consents
in writing to any modification or extension of any Letter of Credit, or waives
any failure of any draft, certificate or other document to comply with the terms
of such Letter of Credit, and if the Agent consents thereto, the Agent shall be
entitled to rely on such request, consent or waiver. This Agreement shall be
binding upon the Borrower with respect to such Letter of Credit as so modified
or extended, and with respect to any action taken or omitted by the Agent
pursuant to any such request, consent or waiver.
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ss.2.17. Letter of Credit Fees. The Borrower will pay to the Agent
customary service charges and expenses for its services in connection with the
Letters of Credit at the times and in the amounts from time to time in effect in
accordance with its general rate structure, including fees and expenses relating
to issuance, amendment, negotiation, cancellation and similar operations. The
Borrower will also pay to the Agent for the benefit of the Banks a fee equal to
150 basis points per annum payable quarterly in arrears on the Letter of Credit
Exposure, which fee shall be allocated among the Banks in accordance with their
Commitment Percentage.
ss.2.18. Extension of Maturity Date. Upon the written request of the
Borrower and the Guarantors delivered to the Agent not later than December 31,
1999 and subject to the satisfaction of the conditions set forth below, the
Maturity Date shall be extended to January 31, 2001. The conditions referred to
in the preceding sentence are as follows:
(a) On the date of such written request and on January 31, 2000, no
Default or Event of Default shall have occurred and be continuing.
(b) On or before January 31, 2000, the Borrower shall have executed
and delivered to the Agent a replacement Revolving Credit Note for each
Bank in the principal amount of such Bank's Commitment, which shall be
stated to mature on January 31, 2001.
(c) On or before January 31, 2000, the Borrower shall have delivered
to the Agent the opinion of the Borrower's legal counsel updating and
confirming as of January 31, 2000 the opinion delivered under ss.10.5.
(d) On or before January 31, 2000, the Borrower shall pay to the Agent
an extension fee equal to one-quarter of one percent (.25%) of the Total
Commitments as in effect on such date, such amount to be distributed among
the Banks in accordance with their respective Commitments.
ss.3. REPAYMENT OF THE LOANS.
ss.3.1. Stated Maturity. The Borrower promises to pay on the Maturity Date,
and there shall become absolutely due and payable on the Maturity Date, all of
the Revolving Loans outstanding on such date, together with any and all accrued
and unpaid interest thereon.
ss.3.2. Mandatory Prepayments. If at any time the sum of the aggregate
outstanding principal amount of the Revolving Loans plus the Letter of Credit
Exposure exceeds either the Total Commitment or the Borrowing Base Availability
then in effect, then the Borrower shall immediately pay the amount of such
excess to the Agent for the respective accounts of the Banks for application to
the Revolving Loans.
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ss.3.3. Optional Prepayments. The Borrower shall have the right, at its
election, to prepay the outstanding amount of the Loans, as a whole or in part,
at any time without penalty or premium; provided, that the full or partial
prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to
this ss.3.3 may be made only on the last day of the Interest Period relating
thereto unless the Borrower shall simultaneously pay any amounts due on account
of such prepayment pursuant to ss.4.9 and ss.4.10. The Borrower shall give the
Agent, no later than 10:00 a.m., Boston time, at least three Business Days'
prior written notice of any prepayment pursuant to this ss.3.3 of any Base Rate
Revolving Loans and at least four Eurodollar Business Days' notice of any
proposed repayment pursuant' to this ss.3.3 of Eurodollar Rate Loans, in each
case specifying the proposed date of payment of Loans and the principal amount
to be paid.
ss.3.4. Partial Prepayments. Each partial prepayment of the Loans under
ss.3.2 and ss.3.3 shall be in an integral multiple of $100,000, shall be
accompanied by the payment of accrued interest on the principal prepaid to the
date of payment and, after payment of such interest, shall be applied, in the
absence of instruction by the Borrower, first to the principal of Base Rate
Revolving Loans and then to the principal of Eurodollar Rate Loans.
ss.3.5. Effect of Prepayments. Amounts of the Revolving Loans prepaid under
ss.3.2 and ss.3.3 may be reborrowed as provided in ss.2.
ss.4. CERTAIN GENERAL PROVISIONS.
ss.4.1. Conversion Options.
(a) The Borrower may elect from time to time to convert any
outstanding Loan to a Loan of another Type; provided that (i) with respect
to any such conversion of a Eurodollar Rate Loan to a Base Rate Revolving
Loan, the Borrower shall give the Agent at least three Business Days' prior
written notice of such election, and such conversion shall only be made on
the last day of the Interest Period with respect to such Eurodollar Rate
Loan; (ii) with respect to any such conversion of a Base Rate Revolving
Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent at least
four Eurodollar Business Days' prior written notice of such election, the
principal amount of the Loan so converted shall be in a minimum aggregate
amount of $2,000,000 or an integral multiple of $100,000 in excess thereof
and, after giving effect to the making of such Loan, there shall be no more
than five Eurodollar Rate Loans outstanding at any one time; and (iii) no
Loan may be converted into a Eurodollar Rate Loan when any Default or Event
of Default has occurred and is continuing. All or any part of outstanding
Loans of any Type may be converted as provided herein, provided that no
partial conversion shall result in a Base Rate Revolving Loan in an
aggregate principal amount of less than $1,000,000 or a Eurodollar Rate
Loan in an aggregate principal amount of less than $2,000,000 and that the
aggregate principal amount of each Loan shall be in an integral multiple of
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$100,000. On the date on which such conversion is being made, each Bank shall
take such action as is necessary to transfer its Commitment Percentage of such
Loans to its Domestic Lending Office or its Eurodollar Lending office, as the
case may be. Each Conversion Request relating to the conversion of a Base Rate
Revolving Loan to a Eurodollar Rate Loan shall be irrevocable by the Borrower.
The Agent shall notify the Banks promptly following its receipt of such
Conversion Request.
(b) Any Loans of any Type may be continued as such Type upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the notice provisions contained in ss.4.1; provided that no
Eurodollar Rate Loan may be continued as such when any Default or Event of
Default has occurred and is continuing, but shall be automatically
converted to a Base Rate Revolving Loan on the last day of the first
Interest Period relating thereto ending during the continuance of any
Default or Event of Default of which the officers of the Agent active upon
the Borrower's account have actual knowledge. The Agent shall notify the
Banks promptly when any such automatic conversion contemplated by this
ss.4.1 is scheduled to occur.
(c) In the event that the Borrower does not notify the Agent of its
election hereunder with respect to any Loan, such Loan shall be
automatically converted to a Base Rate Revolving Loan at the end of the
applicable Interest Period.
ss.4.2. Limitation on Eurodollar Rate Loans. Notwithstanding the provisions
of ss.4.1, the Interest Periods for Eurodollar Rate Loans shall be selected so
that all Eurodollar Rate Loans shall terminate on or before March 17, 1998, in
order to facilitate the syndication of the Revolving Loans.
ss.4.3. [Intentionally omitted.]
ss.4.4. [Intentionally omitted.]
ss.4.5. Funds for Payments.
(a) All payments of principal, interest, Letter of Credit
reimbursement payments, facility fees, Agent's fees, closing fees and any
other amounts due hereunder or under any of the other Loan Documents shall
be made to the Agent, for the respective accounts of the Banks and the
Agent, as the case may be, at the Agent's Head Office, in each case in
immediately available funds. The Agent is hereby authorized to charge the
account of the Borrower with BKB, on the dates when the amount thereof
shall become due and payable, with the amounts of the principal of and
interest on the Loans, Letter of Credit reimbursement payments, and all
fees, charges, expenses and other amounts owing to the Agent and/or the
Banks under the Loan Documents.
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(b) All payments by each Obligor hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other
authority therein unless such Obligor is compelled by law to make such
deduction or withholding. If any such obligation is imposed upon any
Obligor with respect to any amount payable by it hereunder or under any of
the other Loan Documents, the Obligor will pay to the Agent, for the
account of the Banks or (as the case may be) the Agent, on the date on
which such amount is due and payable hereunder or under such other Loan
Document, such additional amount in Dollars as shall be necessary to enable
the Banks or the Agent to receive the same net amount which the Banks or
the Agent would have received on such due date had no such obligation been
imposed upon the Obligor. The Obligor will deliver promptly to the Agent
certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Obligor
hereunder or under such other Loan Document.
ss.4.6. Computations. All computations of interest on the Loans and of
other fees to the extent applicable shall be based on a 360-day year and paid
for the actual number of days elapsed. Except as otherwise provided in the
definition of the term "Interest Period" with respect to Eurodollar Rate Loans,
whenever a payment hereunder or under any of the other Loan Documents becomes
due on a day that is not a Business Day, the due date for such payment shall be
extended to the next succeeding Business Day, and interest shall accrue during
such extension. The outstanding amount of the Loans as reflected on the records
of the Agent from time to time shall be considered prima facie evidence of such
amount.
ss.4.7. Inability to Determine Eurodollar Rate. In the event that, prior to
the commencement of any Interest Period relating to any Eurodollar Rate Loan,
the Agent shall determine that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate for such Interest Period, the Agent shall
forthwith give notice of such determination (which shall be conclusive and
binding on each Obligor and the Banks) to the Borrower and the Banks. In such
event (a) any Loan Request with respect to Eurodollar Rate Loans shall be
automatically withdrawn and shall be deemed a request for Base Rate Revolving
Loans and (b) each Eurodollar Rate Loan will automatically, on the last day of
the then current Interest Period thereof, become a Base Rate Revolving Loan, and
the obligations of the Banks to make Eurodollar Rate Loans shall be suspended
until the Agent determines that the circumstances giving rise to such suspension
no longer exist, whereupon the Agent shall so notify the Borrower and the Banks.
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ss.4.8. Illegality. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and thereupon (a) the commitment of such Bank to
make Eurodollar Rate Loans or convert Loans of another type to Eurodollar Rate
Loans shall forthwith be suspended and (b) the Eurodollar Rate Loans then
outstanding shall be converted automatically to Base Rate Revolving Loans on the
last day of each Interest Period applicable to such Eurodollar Rate Loans or
within such earlier period as may be required by law.
ss.4.9. Additional Interest. If any Eurodollar Rate Loan or any portion
thereof is repaid or is converted to a Base Rate Revolving Loan for any reason
on a date which is prior to the last Eurodollar Business Day of the Interest
Period applicable to such Eurodollar Rate Loan, the Borrower will pay to the
Agent for the account of the Banks in accordance with their respective
Commitment Percentages, in addition to any amounts of interest otherwise payable
hereunder, an amount equal to daily interest for the unexpired portion of such
Interest Period on the Eurodollar Rate Loan or portion thereof so repaid or
converted at a per annum rate equal to the excess, if any, of (a) the interest
rate calculated on the basis of the Eurodollar Rate applicable to such
Eurodollar Rate Loan minus (b) the rate of interest obtainable by the Agent upon
the purchase of debt securities customarily issued by the Treasury of the United
States of America which have a maturity date most closely approximating the last
Eurodollar Business Day of such Interest Period. For purposes of this ss.4.9, if
any Eurodollar Rate Loan or portion thereof is not outstanding on the first day
of the Interest Period applicable thereto other than for reasons described in
ss.4.7, the Borrower shall be deemed to have terminated such Eurodollar Rate
Loan or portion thereof.
ss.4.10. Additional Coats, Etc. If any present or future applicable law
which expression, as used herein, includes statutes, rules and regulations
thereunder and legally binding interpretations thereof by any competent court or
by any governmental or other regulatory body or official with appropriate
jurisdiction charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Bank or the Agent by any central
bank or other fiscal, monetary or other authority (whether or not having the
force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Agreement, the other Loan Documents, such Bank's Commitment or the Loans
(other than taxes based upon or measured by the income or profits of such
Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any
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Loans or any other amounts payable to any Bank under this Agreement or the
other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Agreement) any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or commitments of an
office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents, the
Loans, such Bank's Commitment, or any class of loans or commitments of
which any of the Loans or such Bank's Commitment forms a part; and the
result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding, issuing,
renewing, extending or maintaining any of the Loans or such Bank's
Commitment, or
(ii) to reduce the amount of principal, interest or other amount
payable to such Bank or the Agent hereunder on account of such Bank's
Commitment or any of the Loans, or
(iii) to require such Bank or the Agent to make any payment or to
forego any interest or other sum payable hereunder, the amount of
which payment or foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable or deemed received
by such Bank or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as such Bank or the Agent shall determine in good faith and certify in a
notice to the Borrower in reasonable detail to be sufficient to compensate such
Bank or the Agent for such additional cost, reduction, payment or foregone
interest or other sum; provided, however, that the Borrower shall not be
required under this ss.4.10 to reimburse any Bank or the Agent for incremental
additions to administrative overhead and other similar internal costs of
regulatory compliance. Each Bank and the Agent shall allocate the additional
costs, reductions, payments or foregone interest or other sums for which it is
entitled to compensation under this ss.4.10 among its customers in good faith
and on an equitable basis.
ss.4.11. Capital Adequacy. If any present or future law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) or the interpretation thereof by a court or governmental authority with
appropriate jurisdiction
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affects the amount of capital required or expected to be maintained by any Bank
or any corporation controlling such Bank and such Bank reasonably determines
that the amount of capital so required or expected to be maintained is increased
by or based upon the existence of Loans or Letters of Credit made or deemed to
be made or committed to be made under this Agreement, then such Bank may notify
the Borrower of such fact, and the Borrower shall pay to such Bank or the Agent
from time to time on demand, as an additional fee payable hereunder, such amount
as such Bank shall determine in good faith and certify in a notice to the
Borrower in reasonable detail to be an amount that will adequately compensate
such Bank in light of these circumstances for its increased costs of maintaining
such capital. Each Bank shall allocate such cost increases among its customers
in good faith and on an equitable basis.
ss.4.12. Indemnity of Obligors. Each Obligor agrees to indemnify each Bank
and to hold each Bank harmless from and against any loss, cost or expense that
such Bank may sustain or incur as a consequence of (a) default by the Borrower
in payment of the principal amount of or any interest on any Eurodollar Rate
Loans as and when due and payable, including any such loss or expense arising
from interest or fees payable by such Bank to lenders of funds obtained by it in
order to maintain its Eurodollar Rate Loans, or (b) default by the Borrower in
making a borrowing or conversion after the Borrower has given (or is deemed to
have given) a Loan Request or a Conversion Request.
ss.4.13. Interest on Overdue Amounts; Late Charge. Overdue principal,
Letter of Credit reimbursement payments and (to the extent permitted by
applicable law) interest on the Loans and all other overdue amounts payable
hereunder or under any of the other Loan Documents shall bear interest payable
on demand at a rate per annum equal to four and three-quarters percent (4 3/4%)
above the Base Rate until such amount shall be paid in full (after as well as
before judgment). In addition, the Borrower shall pay a Late Charge equal to
three percent (3 %) of any amount of interest, Letter of Credit reimbursement
payments and/or principal payable on the Loans which is not paid within ten days
of the date when due.
ss.4.14. Certificate. A certificate setting forth any amounts payable
pursuant to ss.4.9, ss.4.10, ss.4.11, ss.4.12 or ss.4.13 and a brief explanation
of such amounts which are due, submitted by any Bank or the Agent to the
Borrower, shall be prima facie evidence that such amounts are due and owing.
ss.5. APPRAISALS
The Agent shall require biennial Appraisals of each Borrowing Base Property
which is not Eligible Real Estate, which will be ordered, reviewed and approved
by the appraisal department of the Agent, in order to determine the current
Appraised Value of each such Borrowing Base Property and the Borrower shall pay
to the Agent on demand all reasonable costs of all such Appraisals; provided,
however, that so long as no Default or Event of
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Default shall have occurred and be continuing and regulatory requirements or
internal policies of the Agent generally applicable to real estate loans of the
category made under this Agreement shall not require more frequent Appraisals,
the Borrower shall not be required to pay for an Appraisal of either any
particular item of Borrowing Base Property more often than once in any 24-month
period. Such appraisals shall be adjusted as the Agent shall determine.
At the written request of the Borrower at any time (but not more often than
once in any period of six consecutive calendar months) the Agent shall advise
the Borrower of the current Appraised Value of each of the Borrowing Base
Properties which are not Eligible Real Estate.
ss.5A. GUARANTEES.
ss.5A. 1. Guarantees of Obligations. Each Guarantor unconditionally jointly
and severally guarantees that the Obligations will be performed and will be paid
in full in cash when due and payable, whether at the stated or accelerated
maturity thereof or otherwise, this guarantee being a guarantee of payment and
not of collectability and being absolute and in no way conditional or
contingent. In the event that any part of the Obligations shall not have been so
paid in full when due and payable, each Guarantor will, immediately upon written
notice by the Agent or, without notice, immediately upon the occurrence of an
Event of Default under ss. 12(i), 12(j) or 12(k), pay or cause to be paid to the
Agent for the account of each Bank in accordance with the Banks' respective
Commitment Percentages the amount of such Obligations which are then due and
payable and unpaid. The obligations of each Guarantor hereunder shall not be
affected by the invalidity, unenforceability or irrecoverability of any of the
Obligations as against any Obligor, any other guarantor thereof or any other
Person. For purposes hereof, the Obligations shall be due and payable when and
as the same shall be due and payable under the terms of this Agreement or any
other Loan Document notwithstanding the fact that the collection or enforcement
thereof may be stayed or enjoined under the federal Bankruptcy Code or other
applicable law.
ss.5A.2. Continuing Obligation. Each Guarantor acknowledges that the Banks
have entered into this Agreement (and, to the extent that the Banks may enter
into any future Loan Document, will have entered into such agreement) in
reliance on this Section 5A being a continuing irrevocable agreement, and such
Guarantor agrees that its guarantee may not be revoked in whole or in part. The
obligations of the Guarantors hereunder shall terminate when the commitment of
the Banks to extend credit under this Agreement shall have terminated and all of
the Obligations have been indefeasibly paid in full in cash and discharged;
provided, however, that:
(a) if a claim is made upon the Banks at any time for repayment or
recovery of any amounts or any property received by the Banks from any
source on account of
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any of the Obligations and the Banks repay or return any amounts or
property so received (including interest thereon to the extent required to
be paid by the Banks) or
(b) if the Banks become liable for any part of such claim by reason of
(i) any judgment or order of any court or administrative authority having
competent jurisdiction, or (ii) any settlement or compromise of any such
claim, then the Guarantors shall remain liable under this Agreement for the
amounts so repaid or property so returned or the amounts for which the
Banks become liable (such amounts being deemed part of the Obligations) to
the same extent as if such amounts or property had never been received by
the Banks, notwithstanding any termination hereof or the cancellation of
any instrument or agreement evidencing any of the Obligations. Not later
than five days after receipt of notice from the Agent, the Guarantors shall
jointly and severally pay to the Agent an amount equal to the amount of
such repayment or return for which the Banks have so become liable.
Payments hereunder by a Guarantor may be required by the Agent on any
number of occasions.
ss.5A.3. Waivers with Respect to Obligations. Except to the extent
expressly required by this Agreement or any other Loan Document, each Guarantor
waives, to the fullest extent permitted by the provisions of applicable law, all
of the following (including all defenses, counterclaims and other rights of any
nature based upon any of the following):
(a) presentment, demand for payment and protest of nonpayment of any
of the Obligations, and notice of protest, dishonor or nonperformance;
(b) notice of acceptance of this guarantee and notice that credit has
been extended in reliance on the Guarantor's guarantee of the Obligations;
(c) notice of any Default or of any inability to enforce performance
of the obligations of the Borrower or any other Person with respect to any
Loan Document, notice of any intention to accelerate the maturity of any
Obligations and notice of any acceleration of maturity of any Obligations;
(d) demand for performance or observance of, and any enforcement of
any provision of, the Obligations, this Agreement or any other Loan
Document or any pursuit or exhaustion of rights or remedies with respect
thereto or against the Borrower or any Person in respect of the Obligations
or any requirement of diligence or promptness on the part of the Agent or
the Banks in connection with any of the foregoing;
(e) any act or omission on the part of the Agent or the Banks which
may impair or prejudice the rights of the Guarantor, including subrogation
rights or rights to obtain exoneration, contribution, indemnification or
any other reimbursement from
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the Borrower or any other Person, or otherwise operate as a deemed release
or discharge;
(f) any action which harms or impairs the value of, or any failure to
preserve or protect the value of, any Borrowing Base Property;
(g) any statute of limitations or any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than the obligation of the principal;
(h) the provisions of any "single action" or "anti-deficiency" law
which would otherwise prevent the Banks from bringing any action, including
any claim for a deficiency, against the Guarantor before or after the
Banks' commencement or completion of any foreclosure action, whether
judicially, by exercise of power of sale or otherwise, or any other law
which would otherwise require any election of remedies by the Banks;
(i) all demands and notices of every kind with respect to the
foregoing; and
(j) to the extent not referred to above, (x) all defenses to the
payment of the Obligations of any kind which the Borrower or any Nominee
shall have waived as to itself under this Agreement or any other Loan
Document and (y) all suretyship defenses which could otherwise be asserted
by such Guarantor.
Each Guarantor represents that it has obtained the advice of counsel as to
the extent to which suretyship and other defenses may be available to it with
respect to its obligations hereunder in the absence of the waivers contained in
this Section 5A.3 and that it is the intent of the Guarantor to waive all
suretyship and other defenses of whatever nature (other than payment) that would
otherwise be available to it.
No delay or omission on the part of the Agent or the Banks in exercising
any right under this Agreement or any other Loan Document or under any guarantee
of the Obligations shall operate as a waiver or relinquishment of such right. No
action which the :Agent or the Banks or the Borrower or any other Obligor may
take or refrain from taking with respect to the Obligations, including any
amendments thereto or modifications thereof or waivers with respect thereto,
shall affect the provisions of this Agreement or the obligations of the
Guarantors hereunder. None of the rights of the Agent or the Banks shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of any Obligor, or by any noncompliance by any Obligor with the terms,
provisions and covenants of this Agreement, regardless of any knowledge thereof
which the Agent or the Bank may have or otherwise be charged with.
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ss.5A.4. Banks' Power to Waive, etc. Each Guarantor grants to the Banks
full power in their discretion, without notice to or consent of such Guarantor,
such notice and consent being hereby expressly waived to the fullest extent
permitted by applicable law, and without in any way affecting the liability of
the Guarantor under its guarantee hereunder:
(a) To waive compliance with, and any Default under, and to consent to
any amendment to or modification or termination of any terms or provisions
of, or to give any waiver in respect of, this Agreement, any other Loan
Document, the, Obligations or any guarantee thereof (each as from time to
time in effect);
(b) To grant any extensions of the Obligations (for any duration), and
any other indulgence with respect thereto, and to effect any total or
partial release (by operation of law or otherwise), discharge, compromise
or settlement with respect to the obligations of the Obligors or any other
Person in respect of the Obligations, whether or not rights against the
Guarantor under this Agreement are reserved in connection therewith;
(c) To take security in any form for the Obligations, and to consent
to the addition to or the substitution, exchange, release or other
disposition of, or to deal in any other manner with, any part of any
property contained in such security whether or not the property, if any,
received upon the exercise of such power shall be of a character or value
the same as or different from the character or value of any property
disposed of, and to obtain, modify or release any present or future
guarantees of the Obligations and to proceed against any of such security
or such guarantees in any order;
(d) To collect or liquidate or realize upon any of the Obligations in
any manner or to refrain from collecting or liquidating or realizing upon
any of the Obligations; and
(e) To extend credit under this Agreement, any other Document or
otherwise in such amount as the Banks may determine, even though the
condition of the Obligors (financial or otherwise on an individual or
consolidated basis) may have deteriorated since the date hereof
ss.5A.5. Information Regarding the Borrower, etc. Each Guarantor
acknowledges and agrees that it has made such investigation as it deems
desirable of the risks undertaken by it in entering into this Agreement and is
fully satisfied that it understands all such risks. Each Guarantor hereby waives
any obligation which may now or hereafter exist on the part of the Banks to
inform it of the risks being undertaken by entering into this Agreement or of
any changes in such risks and, from and after the date hereof, each Guarantor
undertakes to keep itself informed of such risks and any changes therein. Each
Guarantor hereby expressly waives any duty which may now or hereafter exist on
the part of the Banks to
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disclose to the Guarantor any matter related to the business, operations,
character, collateral, credit, condition (financial or otherwise), income or
prospects of the REIT, the Borrower or their affiliates or their properties or
management, whether now or hereafter known by the Banks. Each Guarantor
represents, warrants and agrees that it assumes sole responsibility for
obtaining from the Borrower all information concerning this Agreement and all
other Loan Documents and all other information as to the Borrower and its
Affiliates or their properties or management as such Guarantor deems necessary
or desirable.
ss.5A.6. Certain Guarantor Representations. Each Guarantor which is a
Subsidiary of the Borrower represents that (a) it is in its best interest and in
pursuit of the purposes for which it was organized as an integral part of the
business conducted and proposed to be conducted by the Borrower and its
Subsidiaries, and reasonably necessary and convenient in connection with the
conduct of the business conducted and proposed to be conducted by it, to induce
the Banks to enter into this Agreement and to extend credit to the Borrower by
making the Guarantees contemplated by this Section 5A, (b) the credit available
hereunder will directly or indirectly inure to its benefit, and (c) by virtue of
the foregoing it is receiving at least reasonably equivalent value from the
Banks for its Guarantee. Each Guarantor acknowledges that it has been advised by
the Agent that the Banks are unwilling to enter into this Agreement unless the
Guarantees contemplated by this Section 5A are given by it. Each Guarantor
represents that (i) it will not be rendered insolvent as a result of entering
into this Agreement, (ii) after giving effect to the transactions contemplated
by this Agreement, it will have assets having a fair saleable value in excess of
the amount required to pay its probable liability on its existing debts as they
become absolute and matured, (iii) it has, and will have, access to adequate
capital for the conduct of its business and (iv) it has the ability to pay its
debts from time to time incurred in connection therewith as such debts mature.
ss.5A.7. Subrogation. Each Guarantor agrees that, until the Obligations are
paid in full, it will not exercise any right of reimbursement, subrogation,
contribution, offset and other claims against the Obligors arising by contract
or operation of law in connection with any payment made or required to be made
by such Guarantor under this Agreement. After the payment in full of the
Obligations, each Guarantor shall be entitled to exercise against the Borrower
and the other Obligors all such rights of reimbursement, subrogation,
contribution and offset, and all such other claims, to the fullest extent
permitted by law.
ss.5A.8. General Subordination. Each Guarantor covenants and agrees that
after the occurrence of an Event of Default all Indebtedness, claims and
liabilities then or thereafter owing by the Borrower or any other Obligor to
such Guarantor whether arising hereunder or otherwise are hereby subordinated to
the prior payment in full of the Obligations and are so subordinated as a claim
against such Obligor or any of its assets, whether such claim be in the ordinary
course of business or in the event of voluntary or involuntary liquidation,
dissolution, insolvency or bankruptcy, so that no payment with respect to any
such
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Indebtedness, claim or liability will be made or received while any such Event
of Default exists.
ss.5A.9. Future Subsidiaries; Further Assurances. The REIT and the Borrower
will from time to time cause any present or future Subsidiary of the REIT or the
Borrower which is an owner of Eligible Real Estate, within 30 days after any
such Person becomes a Subsidiary, that is not a Guarantor to join this Agreement
as a Guarantor pursuant to a joinder agreement in form and substance
satisfactory to the Agent. Each Guarantor will, promptly upon the request of the
Agent from time to time, execute, acknowledge and deliver, and file and record,
all such instruments, and take all such action, as the Agent deems necessary or
advisable to carry out the intent and purposes of this Section 5A.
ss.6. REPRESENTATIONS AND WARRANTIES.
The REIT and the Borrower represent and warrant to the Agent and the Banks
as follows.
ss.6.1. Authority, Etc.
(a) Good Standing and Authority of REIT. The REIT (i) is a Delaware
corporation duly organized pursuant to its Certificate of Incorporation and
amendments thereto filed with the Secretary of State of Delaware and is
validly existing and in good standing under the laws of Delaware, (ii) has
all requisite power to own its property and conduct its business as now
conducted and as presently contemplated, (iii) is in good standing as a
foreign entity and is duly authorized to do business in The Commonwealth of
Massachusetts and in each other jurisdiction where a failure to be so
qualified in such other jurisdiction could have a materially adverse effect
on the business, assets or financial condition of the REIT and (iv) is a
real estate investment trust in full compliance with and entitled to the
benefits of ss.856 of the Code.
(b) Good Standing and Authority of Borrower. The Borrower (i) is a
Delaware limited partnership duly organized pursuant to the OP Partnership
Agreement and amendments thereto and its Certificate of Limited Partnership
and amendments thereto filed with the Secretary of State of Delaware and is
validly existing and in good standing under the laws of Delaware, (ii) has
all requisite power to own its property and conduct its business as now
conducted and as presently contemplated, (iii) is in good standing as a
foreign entity and is duly authorized to do business in The Commonwealth of
Massachusetts, in the jurisdictions in which Borrowing Base Property owned
by the Borrower is located and in each other jurisdiction where a failure
to be so qualified in such other jurisdiction could have a materially
adverse effect on the business, assets or financial condition of the
Borrower and (iv) is a limited partnership in full compliance with and not
required to pay
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federal income taxes under the Code. The Borrower has provided each of the
Banks with a true and complete copy of each of the OP Partnership Agreement
and the Initial Limited Partner Contribution Agreement, each as in effect
on the Effective Date.
(c) Nominees. Each of the Nominees and each other Subsidiary of the
REIT and/or the Borrower (i) is a corporation, limited partnership, limited
liability company or trust duly organized under the laws of its State of
organization and is validly existing and in good standing under the laws
thereof, (ii) has all requisite power to own its property and conduct its
business as now conducted and as presently contemplated and (iii) is in
good standing and is duly authorized to do business in each jurisdiction
where Borrowing Base Property held by it is located and in each other
jurisdiction where a failure to be so qualified could have a materially
adverse effect on the business, assets or financial condition of the REIT
or the Borrower on such Nominee or Subsidiary.
(d) Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which the REIT or the Borrower or
a Subsidiary or Nominee is to become a party and the transactions
contemplated hereby and thereby (i) are within the authority of the REIT
and the Borrower and any party thereto, (ii) have been duly authorized by
all necessary proceedings on the part of the REIT and the Borrower and each
such Subsidiary or Nominee, (iii) do not conflict with or result in any
breach or contravention of any provision of law, statute, rule or
regulation to which the REIT or the Borrower or any Subsidiary or Nominee
is subject or any judgment, order, writ, injunction, license or permit
applicable to the REIT or the Borrower or any Subsidiary or Nominee and
(iv) do not conflict with any provision of the charter documents,
partnership agreement, declaration of trust or other charter documents or
bylaws of, or any agreement or other instrument binding upon, the REIT or
the Borrower or any Subsidiary or Nominee.
(e) Enforceability. The execution and delivery of this Agreement and
the other Loan Documents to which the REIT or the Borrower or any
Subsidiary or Nominee party thereto is or is to become a party will result
in valid and legally binding obligations of the REIT and the Borrower and
each such Subsidiary and Nominee enforceable against each of them in
accordance with the respective terms and provisions hereof and thereof,
except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor
may be brought.
ss.6.2. Governmental Approvals. The execution, delivery and performance by
the REIT and the Borrower and any Subsidiary or Nominee of this Agreement and
the other Loan Documents to which the REIT or the Borrower or any such
Subsidiary or Nominee
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party thereto is or is to become a party and the transactions contemplated
hereby and thereby do not require the approval or consent of, or filing with,
any governmental agency or authority, except as may be required in connection
with environmental transfer statutes relating to Real Estate acquisitions.
ss.6.3. Title to Properties; Leases. Except as indicated on Schedule 6.3
hereto, the Borrower and its Subsidiaries (or if applicable in the case of Joint
Venture Assets, the relevant joint venture or other entity) own all of the
assets relating to the Borrowing Base Properties, subject to no rights of
others, including any mortgages, leases, conditional sales agreements, title
retention agreements, liens or other encumbrances except Permitted Liens (or in
the case of property owned by such a joint venture or other entity, rights of
others that would be Permitted Liens if such joint venture or other entity were
a Subsidiary).
ss.6.4. Financial Statements. The following financial statements have been
furnished to each of the Banks:
(a) The consolidated balance sheet of the REIT and its Subsidiaries as
of the Balance Sheet Date and their related consolidated statements of
income and cash flows for the fiscal year then ended, accompanied by an
auditor's report prepared without qualification by Coopers & Lybrand,
L.L.P. or another "Big Five" accounting firm. Such balance sheet and
statements of income and cash flows have been prepared in accordance with
generally accepted accounting principles and fairly present the financial
condition of the REIT as at the close of business on the date thereof and
the results of operations for the fiscal year then ended. There are no
contingent liabilities of the Borrower or any of its Subsidiaries as of
such date involving material amounts, known to the officers of the REIT or
the Borrower or any of their Subsidiaries not disclosed in said balance
sheet and the related notes thereto.
(b) An unaudited consolidated balance sheet and an unaudited
consolidated statement of income and cash flows of the REIT and its
Subsidiaries for each of the fiscal quarters of the REIT ended March 31,
June 30 and September 30, 1997 certified by REIT's chief financial or chief
accounting officer to have been prepared in accordance with generally
accepted accounting principles consistent with those used in the
preparation of the annual audited statements delivered pursuant to
subsection (a) above and to fairly present the financial condition of the
REIT and its Subsidiaries as at the close of business on the dates thereof
and the results of operations for the fiscal quarters then ended (subject
to year-end adjustments). There are no contingent liabilities of the REIT,
the Borrower or any of their Subsidiaries as of such dates known to the
officers of the REIT or the Borrower or any of their Subsidiaries that
involve material amounts but are not disclosed in such balance sheets and
the related notes thereto.
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(c) An unaudited statement of operating income for each Borrowing Base
Property for the fiscal year ended December 31, 1997 satisfactory in form
to the Agent and certified by the Borrower's chief financial or chief
accounting officer as fairly presenting the operating income of such
parcels for such period.
ss.6.5. No Material Changes, Etc. Since the Balance Sheet Date, there has
occurred no materially adverse change in the financial condition or business of
the REIT and its Subsidiaries taken as a whole as shown on or reflected in the
consolidated balance sheet of the REIT as of the Balance Sheet Date, or its
consolidated statement of income or cash flows for the fiscal year then ended,
other than changes in the ordinary course of business that have not had any
materially adverse effect either individually or in the aggregate on the
business or financial condition of the REIT or the Borrower.
ss.6.6. Franchises, Patents, Copyrights, Etc. The REIT and its Subsidiaries
possess all franchises, patents, copyrights, trademarks, trade names, licenses
and permits, and rights in respect of the foregoing, adequate for the conduct of
their business substantially as now conducted without known conflict with any
rights of others.
ss.6.7. Litigation. Except as stated on Schedule 6.7 there are no actions,
suits, proceedings or investigations of any kind pending or threatened against
the REIT or the Borrower or any of their Subsidiaries or Nominees before any
court, tribunal or administrative agency or board that, if adversely determined,
might, either in any case or in the aggregate, materially adversely affect the
properties, assets, financial condition or business of the REIT or the Borrower
or materially impair the right of the REIT or the Borrower and their
Subsidiaries or Nominees to carry on business substantially as now conducted by
them, or result in any substantial liability not adequately covered by
insurance, or for which adequate reserves are not maintained on the balance
sheet of the REIT referred to in ss.6.4(a), or which question the validity of
this Agreement or any of the other Loan Documents, or any action taken or to be
taken pursuant hereto or thereto.
ss.6.8. No Materially Adverse Contracts, Etc. Neither the Borrower nor any
of their Subsidiaries or Nominees is subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or regulation that has
or is expected in the future to have a materially adverse effect on the
business, assets or financial condition of the REIT or the Borrower. Neither the
REIT nor the Borrower nor any of their Subsidiaries or Nominees is a party to
any contract or agreement that has or is expected, in the judgment of the
officers of the REIT or the Borrower, to have any materially adverse effect on
the business of any of them.
ss.6.9. Compliance With Other Instruments, Laws, Etc. Neither the REIT nor
the Borrower nor any of their Subsidiaries or Nominees is in violation of any
provision of its charter, partnership agreement or other organizational
documents, by-laws, or any agreement or instrument to which it may be subject or
by which it or any of its properties
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may be bound or any decree, order, judgment, statute, license, rule or
regulation, in any of the foregoing cases in a manner that could result in the
imposition of substantial penalties or materially and adversely affect the
financial condition, properties or business of the REIT or the Borrower or their
Subsidiaries or Nominees.
ss.6.10. Tax Status. The REIT and the Borrower and each of their
Subsidiaries and Nominees (a) has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (b) has paid all taxes and other governmental assessments
and charges shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and by appropriate
proceedings and (c) has set aside on its books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the REIT and the Borrower know of no basis for any such
claim.
ss.6.11. No Event of Default. No Default or Event of Default has occurred
and is continuing.
ss.6.12. Holding Company and Investment Company Acts. Neither the REIT nor
the Borrower nor any of their Subsidiaries or Nominees is a "holding company",
or a "subsidiary company" of a "holding company", or an "affiliate" of a
"holding company", as such terms are defined in the Public Utility Holding
Company Act of 1935; nor is it an "investment company", or an "affiliated
company" or a "principal underwriter" of an "investment company", as such terms
are defined in the Investment Company Act of 1940.
ss.6.13. Absence of UCC Financing Statements, Etc. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry, or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
or security title in, any property of the REIT or the Borrower or their
Subsidiaries or Nominees or rights thereunder.
ss.6.14. Setoff, Etc. The Obligations and the rights of the Agent and the
Banks with respect to the Obligations are not subject to any setoff, claims,
withholdings or other defenses. In the case of all Borrowing Base Property owned
directly by the Borrower, the Borrower is the owner of such Borrowing Base
Property free from any lien, security interest, encumbrance or other claim or
demand, except for Permitted Liens. In the case of all the remaining Borrowing
Base Property, the Borrower is the sole beneficial owner thereof and its Nominee
holds such Borrowing Base Property on behalf of the Borrower free from any lien,
security interest, encumbrance or other claim or demand, except for Permitted
Liens.
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ss.6.15. [Intentionally Omitted].
ss.6.16. Pension Plans. Each Plan (other than a Multiemployer Plan) and, to
the knowledge of the REIT and the Borrower, each Multiemployer Plan is in
material compliance with the applicable provisions of ERISA and the Code. Each
Multiemployer Plan and each Plan that constitutes a "defined benefit plan" (as
defined in ERISA) are set forth in Schedule 6.16. The REIT, the Borrower and
each ERISA Affiliate have met all of the funding standards applicable to all
Plans that are not Multiemployer Plans, and no condition exists which would
permit the institution of proceedings to terminate any Plan that is not a
Multiemployer Plan under section 4042 of ERISA. To the best knowledge of the
REIT and the Borrower, no Plan that is a Multiemployer Plan is currently
insolvent or in reorganization or has been terminated within the meaning of
ERISA.
ss.6.17. Regulations U and X. No portion of any Loan is to be used for the
purpose of purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.
ss.6.18. Environmenta1 Compliance. The REIT and the Borrower have taken all
commercially reasonable steps to investigate the past and present condition and
usage of the Real Estate and the operations conducted thereon and, based upon
such investigation, make the following representations and warranties.
(a) With respect to the Borrowing Base Property, and to the best
knowledge of the REIT and the Borrower with respect to all other Real
Estate, none of the REIT, the Borrower, their Subsidiaries or Nominees or
any operator of the Real Estate, or any operation thereon, is in violation,
or alleged violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, or any state or
local statute, regulation, ordinance, order or decree relating to the
environment (hereinafter "Environmental Laws"), which violation involves
the Borrowing Base Property or involves other Real Estate and would have a
material adverse effect on the environment or the business, assets or
financial condition of the REIT or the Borrower.
(b) Neither the REIT nor the Borrower nor any of its Subsidiaries or
Nominees has received written notice from any third party including,
without limitation, any federal, state or local governmental authority, (i)
that it has been identified by the United States Environmental Protection
Agency ("EPA) as a
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potentially responsible party under CERCLA with respect to a site listed on
the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii)
that any hazardous waste, as defined by 42 U.S.C. ss. 9601(5), any
hazardous substances as defined by 42 U.S.C. ss. 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. ss.9601(33) or any toxic substances,
oil or hazardous materials or other chemicals or substances regulated by
any Environmental Laws ("Hazardous Substances") which it has generated,
transported or disposed of have been found at any site at which a federal,
state or local agency or other third party has conducted or has ordered
that the REIT, the Borrower or any of their Subsidiaries or Nominees
conduct a remedial investigation, removal or other response action pursuant
to any Environmental Law; or (iii) that it is or shall be a named party to
any claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances.
(c) With respect to the Borrowing Base Property, and to the best
knowledge of the REIT and the Borrower with respect to all other Real
Estate, except as set forth in the environmental site assessment reports of
an Environmental Engineer provided to the Agent prior to the Effective
Date: (i) no portion of the Real Estate has been used for the handling,
processing, storage or disposal of Hazardous Substances except in
accordance with applicable Environmental Laws, and no underground tank or
other underground storage receptacle for Hazardous Substances is located on
any portion of the Borrowing Base Property; (ii) in the course of any
activities conducted by the REIT, the Borrower, their Subsidiaries or
Nominees or the operators of their properties, no Hazardous Substances have
been generated or are being used on the Real Estate except in accordance
with applicable Environmental Laws; (iii) there has been no past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping (a "Release") or
threatened Release of Hazardous Substances on, upon, into or from the
Borrowing Base Property, or, to the best knowledge of the REIT or the
Borrower, on, upon, into or from the other properties of the Borrower or
its Subsidiaries or Nominees, which Release would in the case of such other
properties have a material adverse effect on the value of any of the Real
Estate or adjacent properties or the environment; (iv) to the best
knowledge of the REIT or the Borrower, there have been no Releases on,
upon, from or into any real property in the vicinity of any of the Real
Estate which, through soil or groundwater contamination, may have come to
be located on, and which would have a material adverse effect on the value
of, the Real Estate; and (v) any Hazardous Substances that have been
generated on any of the Real Estate have been transported off-site only by
carriers having an identification number issued by the EPA or approved by a
state or local environmental regulatory authority having jurisdiction
regarding the transportation of such substance and, to the best knowledge
of the REIT and the Borrower without independent investigation, treated or
disposed
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of only by treatment or disposal facilities maintaining valid permits as
required under all applicable Environmental Laws, which transporters and
facilities have been and are, to the best knowledge of the REIT or the
Borrower, operating in compliance with such permits and applicable
Environmental Laws.
(d) Neither the REIT nor the Borrower nor any of their Subsidiaries or
Nominees nor any of the Borrowing Base Property is subject to any
applicable Environmental Law requiring the performance of Hazardous
Substances site assessments, or the removal or remediation of Hazardous
Substances, or the giving of notice to any governmental agency or the
recording or delivery to other Persons of an environmental disclosure
document or statement by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the recording of any mortgage,
deed of trust or deed in fee on or to such Borrowing Base Property or to
the effectiveness of any other transactions contemplated hereby, except as
may be required in connection with environmental transfer statutes relating
to Real Estate acquisitions.
ss.6.19. Subsidiaries and Nominees. Schedule 6.19 sets forth all of the
Subsidiaries and Nominees of the REIT and the Borrower. The form and
jurisdiction of organization of each of the Subsidiaries and Nominees, and the
ownership interest therein of the REIT and the Borrower, are set forth in said
Schedule 6.19.
ss.6.20. [Intentionally omitted].
ss.6.21. Loan Documents. All of the representations and warranties of the
REIT, the Borrower and the other Obligors made in the other Loan Documents or
any document or instrument delivered to the Agent or the Banks pursuant to or in
connection with any of such Loan Documents are true and correct in all material
respects.
ss.6.22. Borrowing Base Property. The REIT and the Borrower make the
following representations and warranties concerning each Borrowing Base
Property.
(a) Off-Site Utilities. All water, sewer, electric, gas, telephone and
other utilities are installed to the property lines of the Borrowing Base
Property and, except in the case of drainage facilities, are connected to
the Building located thereon with valid permits and are adequate to service
the Building in compliance with applicable law.
(b) Access, Etc. The streets abutting the Borrowing Base Property are
public roads, to which the Borrowing Base Property has direct access by
trucks and other motor vehicles and by foot, or are private ways (with
direct access by trucks and other motor vehicles and by foot to public
roads) to which the Borrowing Base Property has direct access. All private
ways providing access to the Borrowing Base Property are
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zoned in a manner which will permit access to the Building over such ways
by trucks and other commercial and industrial vehicles.
(c) Independent Building. The Building is fully independent in all
respects including, without limitation, in respect of structural integrity,
heating, ventilating and air conditioning, plumbing, mechanical and other
operating and mechanical systems, and electrical, sanitation and water
systems, all of which are connected directly to off-site utilities located
in public streets or ways. The Building is located on a lot which is
separately assessed for purposes of real estate tax assessment and payment.
The Building, all Building Service Equipment and all paved or landscaped
areas related to or used in connection with the Building are located wholly
within the perimeter lines of the lot or lots on which the Borrowing Base
Property is located.
(d) Condition of Building; No Asbestos. There are no material defects
in the roof, foundation, structural elements and masonry walls of the
heating, ventilating and air conditioning, electrical, sprinkler, plumbing
or other mechanical systems or its Building or its Building Service
Equipment. No asbestos is located in or on the Building, except for
nonfriable asbestos or contained friable asbestos which is being monitored
and/or remediated in accordance with the recommendations of an
Environmental Engineer. An asbestos operation and maintenance program must
be instituted and maintained for all asbestos-containing materials located
in such Borrowing Base Property to the extent required by applicable law or
by the Environmental Engineer.
(e) Building Compliance with Law. The Building as presently
constructed does not violate any applicable federal or state law or
governmental regulation, or any local ordinance, order or regulation,
including but not limited to laws, regulations, or ordinances relating to
zoning, building use and occupancy, subdivision control, fire protection,
health and sanitation. The Building complies with applicable zoning laws
and regulations and is not a so-called non-conforming use. The zoning laws
permit use of the Building for its current use. There is such number of
parking spaces on the lot or lots on which the Borrowing Base Property is
located as is adequate under the zoning laws and regulations to permit use
of the Building for its current use. Such Borrowing Base Property is not in
violation of the federal Americans with Disabilities Act, and the Borrower
or its Nominee has made reasonable efforts to comply with such Act with
respect to such Borrowing Base Property.
(f) No Required Real Property Consents, Permits, Etc. Neither the REIT
nor the Borrower nor any Subsidiary or Nominee has received any notice of,
or has any knowledge of, any approvals, consents, licenses, permits,
utility installations and connections (including, without limitation,
drainage facilities), curb cuts and street openings, required for the
maintenance, operation, servicing and use of the Borrowing Base Property or
the Building for its current use which have not been granted,
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effected, or performed and completed (as the case may be) or any fees or
charges therefor which have not been fully paid. No such approvals,
consents, permits or licenses (including, without limitation, any railway
siding agreements) will terminate, or become void or voidable or terminable
on any foreclosure sale of the Borrowing Base Property. To the best
knowledge of the REIT and the Borrower, there are no outstanding notices,
suits, orders, decrees or judgments relating to zoning, building use and
occupancy, fire, health, sanitation or other violations affecting, against,
or with respect to, the Borrowing Base Property or any part thereof
(g) Insurance. Neither the REIT nor the Borrower nor any Subsidiary or
Nominee has received any notice from any insurer or its agent requiring
performance of any work with respect to the Borrowing Base Property or
canceling or threatening to cancel any policy of insurance, and the
Borrowing Base Property complies with the requirements of all insurance
carriers.
(h) Real Property Taxes; Special Assessments. There are no unpaid or
outstanding real estate or other taxes or assessments on or against the
Borrowing Base Property or any part thereof which are payable by the REIT,
the Borrower or any Subsidiary or Nominee (except only real estate taxes
not yet required to be paid under ss.7.8). There have been delivered to the
Agent true and correct copies of the real estate tax bills for each
Borrowing Base Property for the three fiscal tax years preceding the date
of inclusion of such property in such Borrowing Base Property. There are no
betterment assessments or other special assessments presently pending with
respect to any portion of the Borrowing Base Property, and neither the REIT
nor the Borrower nor any Subsidiary or Nominee has received any notice of
any such special assessment being contemplated, except such assessments as
are included in the Borrower's capital expenditures budget for such
Borrowing Base Property.
(i) Historic Status. The Building is not a historic structure or
landmark and neither the Building nor the Borrowing Base Property is
located within any historic district pursuant to any federal, state or
local law or governmental regulation.
(j) Eminent Domain. There are no material pending eminent domain
proceedings against the Borrowing Base Property or any part thereof, and,
to the knowledge of the REIT, the Borrower and their Subsidiaries and
Nominees, no such proceedings are presently threatened or contemplated by
any taking authority.
(k) Leases. An accurate and complete Rent Roll as of the date of
inclusion of each Borrowing Base Property in the Borrowing Base (or such
other recent date as may be acceptable to the Agent) with respect to all
Leases of any portion of the Borrowing Base Property has been provided to
the Agent. The Leases reflected on such Rent Roll constitute as of the date
thereof the sole agreements and understandings relating to leasing or
licensing of space at such Borrowing Base Property and in the
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Building relating thereto. There are no occupancies, rights, privileges or
licenses in or to any Borrowing Base Property or portion thereof other than
pursuant to the Leases reflected in Rent Rolls previously furnished to the
Agent for such Borrowing Base Property. The Rent Rolls furnished to the
Agent accurately and completely set forth all rents payable by and
security, if any, deposited by tenants, no tenant having paid more than one
month's rent in advance. All tenant improvements or work to be done,
furnished or paid for by the REIT or the Borrower or any Subsidiary or
Nominee, or credited or allowed to a tenant, for, or in connection with,
the Building pursuant to any Lease has been completed and paid for or
provided for in a manner satisfactory to the Agent. No material leasing,
brokerage or like commissions, fees or payments are due from the REIT or
the Borrower or any Subsidiary or Nominee in respect of the Leases.
(1) Other Material Real Property Agreements; No Options. There are no
material agreements pertaining to the Borrowing Base Property, any Building
thereon or the operation or maintenance of either thereof other than as
described in this Agreement (including the Schedules hereto) or otherwise
disclosed in writing to the Agent and the Banks by the REIT or the
Borrower; and no person or entity has any right or option to acquire the
Borrowing Base Property on any Building thereon or any portion thereof or
interest therein.
ss.7. AFFIRMATIVE COVENANTS.
The REIT and the Borrower covenant and agree that, so long as any Loan or
Note is outstanding or any Bank has any obligation to make any Loans:
ss.7.1. Punctual Payment. The Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Loans, Letter of Credit
reimbursement payments and all interest and fees provided for in this Agreement,
all in accordance with the terms of this Agreement and the Notes as well as all
other sums owing pursuant to the Loan Documents.
ss.7.2. Maintenance of Office. Each of the REIT and the Borrower will
maintain its chief executive office in Boston, Massachusetts, or at such other
place in the United States of America as the REIT or the Borrower shall
designate upon written notice to the Agent and the Banks, where notices,
presentations and demands to or upon the REIT or the Borrower in respect of the
Loan Documents may be given or made.
ss.7.3. Records and Accounts. The REIT and the Borrower will (a) keep, and
cause each of their Subsidiaries to keep, true and accurate records and books of
account in which full, true and correct entries will be made in accordance with
generally accepted accounting principles and (b) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation and amortization
of its properties and the properties of their Subsidiaries, contingencies and
other reserves.
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ss.7.4. Financial Statements. Certificates and Information. The REIT and
Borrower will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than 90 days
after the end of each fiscal year of the REIT, the audited consolidated
balance sheet of the REIT and its Subsidiaries at the end of such year, and
the related audited consolidated statements of income and cash flows for
such year, each setting forth in comparative form the figures for the
previous fiscal year, all such statements to be in reasonable detail,
prepared in accordance with generally accepted accounting principles, and
accompanied by an auditor's report prepared without qualification by
Coopers & Lybrand, L.L.P. or by another "Big Five" accounting firm, the
Form 10-K filed with the SEC (unless the SEC has approved an extension, in
which event the REIT and the Borrower will deliver to the Agent and each of
the Banks a copy of the Form 10-K simultaneously with delivery to the SEC),
and any other information the Banks may need to complete a financial
analysis of the REIT and the Borrower, together with a written statement
from such accountants to the effect that they have read a copy of this
Agreement, and that, in making the examination necessary to said
certification, they have obtained no knowledge of any Default or Event of
Default, or, if such accountants shall have obtained knowledge of any then
existing Default or Event of Default they shall disclose in such statement
any such Default or Event of Default; provided that such accountants shall
not be liable to the Agent or the Banks for failure to obtain knowledge of
any Default or Event of Default;
(b) as soon as practicable, but in any event not later than 45 days
after the end of each of the first three fiscal quarters of the REIT,
copies of the unaudited consolidated balance sheet of the REIT and its
Subsidiaries as at the end of such quarter, and the related unaudited
consolidated statements of income and cash flows for the portion of the
REIT's fiscal year then elapsed, all in reasonable detail and prepared in
accordance with generally accepted accounting principles (which may be
provided by inclusion in the Form 10-Q of the REIT for such period provided
pursuant to subsection (e) below), together with a certification by the
principal financial or accounting officer of the REIT that the information
contained in such financial statements fairly presents the financial
position of the REIT and its Subsidiaries on the date thereof (subject to
year-end adjustments);
(c) as soon as practicable, but in any event not later than 90 days
after the end of each fiscal year of the Borrower, the audited consolidated
balance sheet of the Borrower and its Subsidiaries at the end of such year,
and the related audited consolidated statements of income and cash flows
for such year, each setting forth in comparative form the figures for the
previous fiscal year, all such statements to be in reasonable detail,
prepared in accordance with generally accepted accounting principles, and
accompanied by an auditor's report prepared without qualification by
Coopers & Lybrand, L.L.P. or by another "Big Five" accounting firm, and any
other
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information the Banks may need to complete a financial analysis of the
Borrower, together with a written statement from such accountants to the
effect that they have read a copy of this Agreement, and that, in making
the examination necessary to said certification, they have obtained no
knowledge of any Default or Event of Default, or, if such accountants shall
have obtained knowledge of any then existing Default or Event of Default
they shall disclose in such statement any such Default or Event of Default;
provided that such accountants shall not be liable to the Agent or the
Banks for failure to obtain knowledge of any Default or Event of Default;
(d) as soon as practicable, but in any event not later than 45 days
after the end of each of the first three fiscal quarters of the Borrower,
copies of the unaudited consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarter, and the related unaudited
consolidated statements of income and cash flows for the portion of the
Borrower's fiscal year then elapsed, all in reasonable detail and prepared
in accordance with generally accepted accounting principles, together with
a certification by the principal financial or accounting officer of the
Borrower that the information contained in such financial statements fairly
presents the financial position of the Borrower and its Subsidiaries on the
date thereof (subject to year-end adjustments);
(e) as soon as practicable, but in any event not later than 45 days
after the end of each of the first three fiscal quarters of the REIT in
each year, copies of Form 10-Q filed with the SEC (unless the SEC has
approved an extension in which event the REIT and the Borrower will deliver
such copies of the Form 10-Q to the Agent and each of the Banks
simultaneously with delivery to the SEC);
(f) as soon as practicable, but in any event not later than 45 days
after the end of each fiscal quarter of the REIT (including the fourth
fiscal quarter in each year), copies of an income statement for such fiscal
quarter for each Borrowing Base Property, prepared on a basis consistent
with the statement furnished pursuant to ss.6.4(c) together with a
certification by the Borrower's chief financial or chief accounting officer
that the information contained in such income statement fairly presents the
results of operations of the Real Estate for such period; provided, that
capital expenditures information need not be included with respect to any
parcel of Real Estate other than Borrowing Base Property or other Eligible
Real Estate;
(g) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement (a "Compliance
Certificate") certified by the principal financial or accounting officer of
the Borrower in the form of Exhibit C hereto setting forth in reasonable
detail computations evidencing compliance with the covenants contained in
ss.8.3(j), ss.8.8, ss.8.10(c) and ss.9, and (if applicable) reconciliations
to reflect changes in generally accepted accounting principles since the
Balance Sheet Date;
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(h) contemporaneously with the filing or mailing thereof, copies of
all material of a financial nature filed with the SEC or sent to the
stockholders of the REIT or the partners of the Borrower;
(i) as soon as practicable but in any event not later than 45 days
after the end of each fiscal year of the Borrower, updated Rent Rolls with
respect to the Borrowing Base Properties; provided, that at the written
request of the Agent the Borrower will provide the Agent updated Rent Rolls
with respect to the Borrowing Base Properties within 45 days after the end
of each fiscal quarter of the Borrower;
(j) [intentionally omitted];
(k) [intentionally omitted];
(l) [intentionally omitted];
(m) not later than 45 days following the last day of each calendar
quarter, a copy of the report for such calendar quarter substantially in
the form prepared for management and approved by the Agent prior to the
date hereof as to the Net Operating Income and capital expenditures of each
Borrowing Base Property, accompanied by a calculation of the Borrowing Base
Value and Advance Value or J.V. Advance Value of each Borrowing Base
Property and a calculation of the Borrowing Base Availability (a "Borrowing
Base Certificate") certified by the principal financial or accounting
officer of the Borrower in the form of Exhibit D hereto; provided, however,
that if any Default or Event of Default shall have occurred and be
continuing, each such report shall be provided not later than ten Business
Days following the end of the applicable calendar quarter,
(n) when requested by the Agent or any Bank, copies of all annual
federal income tax returns and amendments thereto of the REIT and the
Borrower;
(o) when requested by the Agent, copies of the monthly or other
periodic income statements prepared by the Borrower for each item of
Borrowing Base Property and for each other parcel of Real Estate included
in the determination of Consolidated Total Assets and, when requested by
the Agent with respect to any fiscal year of the Borrower, a report of
Coopers & Lybrand, L.L.P. or another "Big Five" accounting firm providing
as supplemental information to the audited financial statements of the
Borrower and its Subsidiaries for such fiscal year the Net Operating Income
of each item of Borrowing Base Property and of each other parcel of Real
Estate included in the determination of Consolidated Total Assets as of the
last day of such fiscal year;
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(p) when requested by the Agent or any Bank, a certificate of the
Borrower and the REIT evidencing compliance with all requirements of
applicable laws and regulations necessary to maintain REIT Status;
(q) not later than February 28 of each year, commencing February 28,
1998 or such later date as the Agent may approve, the Borrower will provide
to the Agent and the Banks an annual business plan, setting forth its
proposed business prospects for the upcoming year;
(r) not later than ten days following the occurrence thereof, written
notification of each Structural Change and each merger or other event
permitted under Section 8.4 which have a value equal to or greater than
$50,000,000 describing such event in reasonable detail;
(s) from time to time promptly following the request of the Agent,
such evidence as the Agent may request (including real estate title
updates) with respect to the continued compliance of the Borrowing Base
Properties with the requirements of Eligible Real Estate (except that such
evidence shall not be requested more than once in any fiscal year of the
Borrower unless an Event of Default shall have occurred and be continuing);
and
(t) from time to time such other financial data and information in the
possession of the REIT or the Borrower (including without limitation
auditors' management letters, property inspection and environmental reports
and information as to zoning and other legal and regulatory changes
affecting the REIT, the Borrower or any Subsidiary or Nominee) as the Agent
may reasonably request.
ss.7.5. Notices.
(a) Defaults. The REIT and the Borrower will promptly notify the Agent
in writing of the occurrence of any Default or Event of Default, including
without limitation any event or condition which, with the passage of time
or giving of notice or both, could constitute an "Event of Default" as
defined in Article XVI of the FNMA Loan Agreement. If any Person shall give
any notice or take any other action in respect of a claimed default
(whether or not constituting an Event of Default) under this Agreement or
under any note, evidence of indebtedness, indenture or other obligation to
which or with respect to which the REIT or the Borrower or any of their
Subsidiaries is a party or obligor, whether as principal or surety, and
such default would permit the holder of such note or obligation or other
evidence of indebtedness to accelerate the maturity thereof, which
acceleration would have a material adverse effect on the REIT or the
Borrower, the REIT and the Borrower shall forthwith give written notice
thereof to the Agent and each of the Banks, describing the notice or action
and the nature of the claimed default.
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(b) Environmental Events. The REIT and the Borrower will promptly give
notice to the Agent (i) upon the REIT, the Borrower or any Subsidiary or
Nominee obtaining knowledge of any potential or known Release, or threat of
Release, of any Hazardous Substances at or from the Borrowing Base
Property; (ii) of any violation of any Environmental Law that the REIT, the
Borrower or any of their Subsidiaries or Nominees reports in writing or is
reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency and (iii) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any
agency of potential environmental liability, or any federal, state or local
environmental agency or board, that in either case involves the Borrowing
Base Property or has the potential to materially affect the assets,
liabilities, financial conditions or operations of the REIT, the Borrower
or any Subsidiary or Nominee.
(c) Notification of Claims Against Borrowing Base Property. The REIT
and the Borrower will, immediately upon becoming aware thereof, notify the
Agent in writing of any setoff, claims (including, with respect to the
Borrowing Base Property, environmental claims), withholdings or other
defenses to which any of the Borrowing Base Property, or the rights of the
Agent or the Banks with respect to the Borrowing Base Property, are
subject.
(d) Notice of Litigation and Judgments. The REIT and the Borrower will
give notice to the Agent in writing within 15 days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting the REIT, the Borrower or any of their
Subsidiaries or Nominees or to which the REIT, the Borrower or any of their
Subsidiaries or Nominees is or is to become a party involving an uninsured
claim against the Borrower or any of its Subsidiaries or Nominees that
could reasonably be expected to have a materially adverse effect on the
REIT, the Borrower and stating the nature and status of such litigation or
proceedings. The REIT and the Borrower will give notice to the Agent, in
writing, in form and detail satisfactory to the Agent, within ten days of
any judgment not covered by insurance, whether final or otherwise, against
the REIT, the Borrower or any of its Subsidiaries or Nominees in an amount
in excess of $1,000,000.
(e) Notice of Proposed Sales. Encumbrances or Transfer of Borrowing
Base Properties. The REIT and the Borrower will promptly give notice to the
Agent of any proposed sale, encumbrance or transfer of any Borrowing Base
Property, such notice to be accompanied by a Compliance Certificate and a
Borrowing Base Certificate, each prepared on a pro forma basis using the
financial statements of the REIT most recently provided or required to be
provided to the Banks under ss.6.4 or ss.7.4 adjusted in the best
good-faith estimate of the REIT and the Borrower to give effect to such
sale, encumbrance or transfer and demonstrating that no Default or Event of
Default with respect to the covenants referred to therein shall exist after
giving effect to such
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sale, encumbrance or transfer and calculating the Borrowing Base
Availability after giving effect to such sale, encumbrance or transfer.
(f) Notification of Banks. Promptly after receiving any notice under
this ss.7.5, the Agent will forward a copy thereof to each of the Banks,
together with copies of any certificates or other written information that
accompanied such notice.
ss.7.6. Existence; Maintenance of Properties.
(a) The REIT will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence as a Delaware
corporation. The Borrower will do or cause to be done all things necessary
to preserve and keep in full force and effect its existence as a Delaware
limited partnership. The REIT and the Borrower will cause each of their
Subsidiaries and Nominees to do or cause to be done all things necessary to
preserve and keep in full force and effect its legal existence. The REIT
and the Borrower will do or cause to be done all things necessary to
preserve and keep in full force all of their rights and franchises and
those of their Subsidiaries and Nominees. The REIT and the Borrower will,
and will cause each of their Subsidiaries and Nominees to, continue to
engage primarily in the businesses now conducted by them and in related
businesses; provided however, that the REIT shall not own or operate any
Real Estate or other property and shall conduct business solely as a
general or limited partner of the Borrower.
(b) The REIT and the Borrower (i) will cause all of their properties
and those of their Subsidiaries and Nominees used or useful in the conduct
of their businesses or the businesses of their Subsidiaries and Nominees to
be maintained in good condition, repair and working order and supplied with
all necessary equipment in all cases in which the failure so to do would
have a material adverse effect on the condition of the Borrowing Base
Properties taken as a whole or on the financial condition, assets or
operations of the REIT and its Subsidiaries taken as a whole, and (ii) will
cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof in all cases in which the failure so to do would
have a material adverse effect on the condition of the Borrowing Base
Properties taken as a whole or on the financial condition, assets or
operations of the REIT and its Subsidiaries taken as a whole.
ss.7.7. Insurance.
(a) The REIT and the Borrower will, at its expense, procure and
maintain for the benefit of the REIT and the Borrower and the Agent,
insurance policies issued by such insurance companies, in such amounts, in
such form and substance, and with such coverages, endorsements, deductibles
and expiration dates as are acceptable to the Agent, providing the
following types of insurance covering the Real Estate:
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(i) "All Risks" property insurance (including broad form flood,
broad form earthquake and comprehensive boiler and machinery
coverages) on each Building and the contents therein of the REIT, the
Borrower and their Subsidiaries and Nominees in an amount not less
than one hundred percent (100%) of the full replacement cost of each
Building and the contents therein of the REIT, the Borrower and their
Subsidiaries and Nominees, with deductibles not to exceed $100,000 for
any one occurrence, with a replacement cost coverage endorsement, an
agreed amount endorsement, and, if requested by the Agent, a
contingent liability from operation of building laws endorsement, a
demolition cost endorsement and an increased cost of construction
endorsement in such amounts as the Agent may require. Full replacement
cost as used herein means the cost of replacing the Building
(exclusive of the cost of excavations, foundations and footings below
the lowest basement floor) and the contents therein of the REIT, the
Borrower and their Subsidiaries and Nominees without deduction for
physical depreciation thereof.
(ii) During the course of construction or repair of any Building,
the insurance required by clause (i) above shall be written on a
builders risk, completed value, non-reporting form, meeting all of the
terms required by clause (i) above, covering the total value of work
performed, materials, equipment, machinery and supplies furnished,
existing structures, and temporary structures being erected on or near
the Real Estate, including coverage against collapse and damage during
transit or while being stored off-site, and containing a permission to
occupy endorsement; provided that the insurance required by this
clause (ii) may be provided by the construction contractor.
(iii) Flood insurance if at any time any Building is located in
any federally designated "special hazard area" (including any area
having special flood, mudslide and/or flood-related erosion hazards,
and shown on a Flood Hazard Boundary Map or a Flood Insurance Rate Map
published by the Federal Emergency Management Agency as Zone A, AO,
A1-30, AE, A99, AH, VO, Vl-30, VE, V, M or E) and the broad form flood
coverage required by clause (i) above is not available, in an amount
equal to the full replacement cost or the maximum amount then
available under the National Flood Insurance Program.
(iv) Rent loss insurance in an amount sufficient to recover at
least (1) the total estimated gross rent receipts for the Real Estate
for a twelve month period, plus (2) to the extent paid separately by
tenants and not included in clause (1), all taxes, charges, sewer use
fees, water rates, assessments of every name and nature, and any
government charges for a twelve month period.
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(v) Commercial general liability insurance against claims for
personal injury (to include, without limitation, bodily injury and
personal and advertising injury) and property damage liability, all on
an occurrence basis, if commercially available, with such coverages as
the Agent may reasonably request (including, without limitation,
contractual liability coverage, completed operations coverage for a
period of two years following completion of construction of any
improvements on the Real Estate, and coverages equivalent to an ISO
broad form endorsement), with a general aggregate Limit of not less
than $15,000,000, a completed operations aggregate limit of not less
than $1,000,000, and a combined single "per occurrence" limit of not
less than $1,000,000 for bodily injury, property damage and medical
payments.
(vi) During the course of construction or repair of any
improvements on the Real Estate, owner's contingent or protective
liability insurance covering claims not covered by or under the terms
or provisions of the insurance required by clause (v) above.
(vii) Employers liability insurance.
(viii) Umbrella liability insurance with limits of not less than
$50,000,000 to be in excess of the limits of the insurance required by
clauses (v), (vi) and (vii) above, with coverage at least as broad as
the primary coverages of the insurance required by clauses (v), (vi)
and (vii) above, with any excess liability insurance to be at least as
broad as the coverages of the lead umbrella policy. All such policies
shall be endorsed to provide defense coverage obligations.
(ix) Workers' compensation insurance for all employees of the
REIT, the Borrower or their Subsidiaries engaged on or with respect to
the Real Estate.
(x) Such other insurance in such form and in such amounts as may
from time to time be required by the Agent against other insurable
hazards and casualties which at the time are commonly insured against
in the case of properties of similar character and location to the
Real Estate.
The REIT and the Borrower shall pay all premiums on insurance
policies. The REIT and the Borrower shall deliver duplicate originals or
certified copies of all such policies to the Agent, and the REIT and the
Borrower shall promptly furnish to the Agent all renewal notices and, so
requested by the Agent, evidence that all premiums or portions thereof then
due and payable have been paid. At least seven days prior to the expiration
date of the policies, the REIT and the Borrower shall
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deliver to the Agent evidence of continued coverage, including a
certificate of insurance, as may be satisfactory to the Agent.
(b) All policies of insurance required by this Agreement shall contain
clauses or endorsements to the effect that (i) the insurer waives any right
of setoff, counterclaim, subrogation, or any deduction in respect of any
liability of the REIT, the Borrower or any Subsidiary or Nominee, (ii) such
insurance is primary and without right of contribution from any other
insurance which may be available, (iii) such policies shall not be
modified, canceled or terminated prior to the scheduled expiration date
thereof without the insurer thereunder giving at least 30 days prior
written notice to the Agent by certified or registered mail, and (iv) the
Agent or the Banks shall not be liable for any premiums thereon or subject
to any assessments thereunder, and shall in all events be in amounts
sufficient to avoid any coinsurance liability.
(c) The insurance required by this Agreement may be effected through a
blanket policy or policies covering additional locations and property of
the REIT, the Borrower and other Persons not included in the Borrowing Base
Property, provided that such blanket policy or policies comply with all of
the terms and provisions of this ss.7.7.
(d) All policies of insurance required by this Agreement shall be
issued by companies licensed to do business in the State where the policy
is issued and also in The Commonwealth of Massachusetts and having a rating
in Best's Key Rating Guide of at least "A-" and a financial size category
of at least "XI"; provided, that such ratings and financial size categories
as in effect on the date hereof shall be acceptable for the duration of the
periods of any extensions or renewals of policies currently in effect, but
the issuers of any subsequent policies shall be required to meet the rating
and category size requirements set forth above.
(e) Neither the REIT nor the Borrower nor any Subsidiary or Nominee
shall carry separate insurance, concurrent in kind or form or contributing
in the event of loss, with any insurance required under this Agreement
unless such insurance complies with the terms and provisions of this
ss.7.7.
(f) In the event of any loss or damage to the Borrowing Base Property
in excess of the deductible, the REIT and the Borrower shall give immediate
written notice to the insurance carrier and the Agent, and the Agent shall
furnish a copy of such notice promptly to each of the Banks.
ss.7.8. Taxes. The REIT, the Borrower and each Subsidiary and Nominee will
duly pay and discharge, or cause to be paid and discharged, before the same
shall become delinquent, all taxes, assessments and other governmental charges
imposed upon it and upon
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the Borrowing Base Property and the other Real Estate, sales and activities, or
any part thereof, or upon the income or profits therefrom, as well as all claims
for labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; provided that any such tax, assessment, charge,
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the REIT, the
Borrower or such Subsidiary shall have set aside on its books adequate reserves
with respect thereto; and provided, further. that forthwith upon the
commencement of proceedings to foreclose any lien that may have attached as
security therefor, the REIT, the Borrower and each Subsidiary and Nominee either
(i) will provide a bond issued by a surety reasonably acceptable to the Agent
and sufficient to stay all such proceedings or (ii) if no such bond is provided,
will pay each such tax, assessment, charge, levy or claim.
ss.7.9. Inspection of Properties and Banks. The REIT and the Borrower shall
upon two Business Days' notice permit the Banks, through the Agent or any of the
Banks' other designated representatives, at the expense of the REIT and the
Borrower to visit and inspect during business hours any of the REIT, the
properties of the Borrower or any of their Subsidiaries and Nominees to examine
the books of account of the REIT, the Borrower and their Subsidiaries and
Nominees (and to make copies thereof and extracts therefrom) and to discuss the
affairs, finances and accounts of the REIT, the Borrower and their Subsidiaries
and Nominees with, and to be advised as to the same by, their officers, all at
such reasonable times during business hours and intervals as the Agent may
reasonably request.
ss.7.10. Compliance with Laws, Contracts, Licenses, and Permits.
(a) The REIT and the Borrower will comply with, and will cause each of
their Subsidiaries and Nominees to comply in all material respects with (i)
all applicable laws and regulations now or hereafter in effect wherever
their businesses are conducted, including all Environmental Laws, (ii) the
provisions of their respective corporate charters, partnership agreements
or declarations of trust, as the case may be, and other charter documents
and by-laws, (iii) all agreements and instruments to which any of them is a
party or by which they or any of their properties may be bound (other than
those described in ss.7.10(b) below) and (iv) all applicable decrees,
orders, and judgments. If at any time while any Loan or Note is outstanding
or the Banks have any obligation to make Loans hereunder, any
authorization, consent, approval, permit or license from any officer,
agency or instrumentality of any government shall become necessary or
required in order that the REIT or the Borrower may fulfill any of its
obligations hereunder, the REIT and the Borrower will immediately take or
cause to be taken all reasonable steps within their power to obtain such
authorization, consent, approval, permit or license and furnish the Agent
with evidence thereof.
(b) The REIT and the Borrower will comply with, and will cause each of
their Subsidiaries and Nominees to comply in all material respects with,
all agreements and
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instruments to which any of them is a party or by which they or any of
their properties may be bound which relate to the maintenance or operation
of any individual parcel of Real Estate owned by any of them.
ss.7.11. Use of Proceeds. The Borrower may use the proceeds of the Loans to
fund real estate acquisitions, capital improvements and general partnership
needs; provided, however, that the Borrower will not, directly or indirectly,
apply any part of the proceeds of any extension of credit made pursuant to the
Loan Documents to purchase or to carry Margin Stock or to any transaction
prohibited by the Foreign Trade Regulations or by other laws or regulations
applicable to the Banks.
ss.7.12. Further Assurances. The REIT and the Borrower will cooperate with,
and will cause each of their Subsidiaries and Nominees to cooperate with, the
Agent and the Banks and execute such further instruments and documents as the
Banks or the Agent shall reasonably request to carry out to their satisfaction
the transactions contemplated by this Agreement and the other Loan Documents.
ss.7.13. REIT Status; Operation of Business. The REIT at all times will
comply with all requirements of applicable laws and regulations necessary to
maintain REIT Status. The REIT shall continue to be self-advised and
self-managed and to operate its business as currently advised, managed and
conducted and in compliance with the terms and conditions of this Agreement and
the other Loan Documents.
ss.7.14. [Intentionally omitted.]
ss.7.15. Partnership Status. The Borrower shall at all times comply with
all requirements of applicable laws and regulations necessary to maintain its
status as a limited partnership not liable for federal income taxes under the
Code. The REIT or a Wholly Owned Subsidiary of the REIT shall be and remain the
sole general partner of the Borrower, and the REIT and/or one or more Wholly
Owned Subsidiaries of the REIT shall own not less than 51 % of the outstanding
Partnership Units (as defined in the OP Partnership Agreement) of the Borrower.
The Borrower shall not issue limited partnership interests other than to the
REST or a Wholly Owned Subsidiary of the REIT except in exchange for transfers
of Real Estate or of businesses similar to those previously acquired by the
Borrower. The REIT shall, or shall cause any Wholly Owned Subsidiary of the REIT
which acts as sole general partner of the Borrower to, observe and perform all
covenants applicable to it as such sole general partner which are contained in
the OP Partnership Agreement, including without limitation in Section 7.8
thereof, and to perform and observe all covenants applicable to it as a
Subsidiary of the REIT which are contained in this Agreement.
ss.7.16. Public Company Status. The REIT will continue to comply with all
of the requirements of applicable laws, regulations and requirements of the New
York Stock
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Exchange ("NYSE") in order to continue to be listed on the NYSE, and to remain a
publicly-traded company.
ss.7.17. Operation and Control. The Borrower shall carry on all existing
business operations through the Borrower and its Wholly Owned Subsidiaries.
ss.8. CERTAIN NEGATIVE COVENANTS.
The REIT and the Borrower covenant and agree that, so long as any Loam or
Note is outstanding or any of the Banks has any obligation to make any Loans:
ss.8.1. Restrictions on Indebtedness. The REIT and the Borrower will not,
and will not permit any of their Subsidiaries or Nominees to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
(a) Indebtedness to the Banks arising under any of the Loan Documents;
(b) current liabilities of the Borrower or its Subsidiaries incurred
in the ordinary course of business but not incurred through (i) the
borrowing of money, or (ii) the obtaining of credit except for credit on an
open account basis customarily extended and in fact extended in connection
with normal purchases of goods and services;
(c) Indebtedness (i) of the REIT, the Borrower or their Subsidiaries
in respect of taxes, assessments and governmental charges or levies and
(ii) of the Borrower or its Subsidiaries in respect of claims for labor,
materials and supplies, in each case to the extent that payment therefor
shall not at the time be required to be made in accordance with the
provisions of ss.7.8;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the REIT and the
Borrower shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;
(f) subject to the provisions of ss.9.1, Non-recourse Indebtedness of
the Borrower or any Subsidiary of the Borrower;
(g) Indebtedness in respect of reverse repurchase agreements having a
term of not more than 180 days with respect to Investments described in
ss.8.3(d) or (e);
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(h) subject to the provisions of ss.9.1 and ss.9.6, Capitalized Leases
and Indebtedness secured by purchase money security interests on tangible
personal property of the Borrower and its Subsidiaries; provided, that the
amount of such Indebtedness shall not exceed the book value of such
tangible personal property;
(i) [intentionally omitted];
(i) Indebtedness of the Borrower in respect of Qualified Hedge
Agreements and other interest rate protection agreements permitted under
ss.8.10;
(k) Indebtedness of the Borrower in the outstanding principal amount
of not more than $63,345,000 owing under the FNMA Loan Agreement;
(1) Indebtedness existing on the Effective Date and listed on Schedule
8.1 hereto;
(m) Indebtedness not exceeding $13,100,000 in principal amount
outstanding under the Durham Construction Loan Agreement;
(n) Indebtedness of the Borrower to the REIT evidenced by the Amended
and Restated Promissory Note dated September 25, 1997 in the original
principal amount of $68,425,000;
(o) Unsecured Senior Public Debt of the REIT or the Borrower;
provided, that prior to the issuance of any tranche of Unsecured Senior
Public Debt, the Borrower shall deliver to the Agent a Borrowing Base
Certificate demonstrating the Borrowing Base Availability after giving
effect to such issuance and a Compliance Certificate demonstrating
compliance with the covenants set forth therein after giving effect to such
issuance; and
(p) other Indebtedness for borrowed money which does not exceed in
aggregate principal amount outstanding at any time the amount permitted
under ss.9.6.
ss.8.2. Restrictions on Liens, Etc. The REIT and the Borrower will not, and
will not permit any of their Subsidiaries or Nominees to, (a) create or incur or
suffer to be created or incurred or to exist any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest of any kind upon any of
its property or assets of any character whether now owned or hereafter acquired,
or upon the income or profits therefrom; (b) transfer any of its property or
assets or the income or profits therefrom for the purpose of subjecting the same
to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (c) acquire, or agree or have an
option to acquire, any property or assets. upon conditional sale or other tide
retention or purchase money security agreement, device or arrangement; (d)
suffer to exist for a period of more than 30 days after
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whatsoever over its general creditors; (e) sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles, chattel paper or
instruments, with or without recourse; or (f) incur or maintain any obligation
to any holder of Indebtedness of the REIT or the Borrower or such Subsidiary or
Nominee which prohibits the creation or maintenance of any lien securing the
Obligations; provided that the REIT, the Borrower and any Subsidiary or Nominee
may create or incur or suffer to be created or incurred or to exist:
(i) liens in favor of the Borrower on all or part of the assets
of Subsidiaries of the Borrower securing Indebtedness owing by
Subsidiaries of the Borrower to the Borrower;
(ii) liens on properties to secure taxes, assessments and other
governmental charges or claims for labor, material or supplies in
respect of obligations which (A) are not yet due and payable or (B)
are not yet required to be paid under ss.7.8;
(iii) deposits or pledges made in connection with, or to secure
payment of, workers' compensation, unemployment insurance, old age
pensions or other Social Security obligations;
(iv) liens on properties other than the Borrowing Base Property
in respect of judgments or awards, the Indebtedness with respect to
which is permitted by ss.8.1(d);
(v) encumbrances on Real Estate consisting of easements, rights
of way, zoning restrictions, restrictions on the use of real property
and defects and irregularities in the title thereto, landlord's or
lessor's liens under leases to which the Borrower or a Subsidiary or
Nominee of the Borrower is a party and other minor liens or
encumbrances, none of which interferes materially with the use of the
property affected in the ordinary conduct of the business of the
Borrower and its Subsidiaries, which defects do not individually or in
the aggregate have a materially adverse effect on the business of the
Borrower individually or of the Borrower and its Subsidiaries on a
consolidated basis;
(vi) liens on Real Estate (other than the Borrowing Base
Properties) and Short-term Investments securing Non-recourse
Indebtedness permitted by ss.8.1(f);
(vii) Capitalized Leases and purchase money security interests
permitted by ss.8.1(h);
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(viii) liens in favor of the Agent and the Banks under the Loan
Documents;
(ix) [intentionally omitted];
(x) liens securing the Indebtedness permitted by ss.8.1(k) on
Real Estate other than any Borrowing Base Property, personal property
installed on such Real Estate and the gross revenues of such Real
Estate and on notes or bonds evidencing loans secured by mortgages or
deeds of trust on real property;
(xi) the lien on the property known as The Berkshires at Crooked
Creek in Durham, North Carolina and related contract rights and other
assets securing the Indebtedness of the Obligor under the Durham
Construction Loan Agreement;
(xii) other liens on properties other than the Borrowing Base
Property existing on the Effective Date and listed on Schedule 8.2
hereto; and
(xiii) liens securing Indebtedness permitted under ss.8.1(o)
hereof, to the extent that such liens are permitted under ss.9.5.
ss.8.3. Restrictions on Investments. The REIT and the Borrower will not,
and will not permit any of their Subsidiaries to, make or permit to exist or to
remain outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United States
of America;
(b) marketable direct obligations of any of the following: Federal
Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal
Home Loan Barb, FNMA, Government National Mortgage Association, Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Financing Banks,
Export-Import Bank of the United States, Federal Land Banks, or any other
agency or instrumentality of the United States of America;
(c) demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States banks having total assets in excess of
$100,000,000; provided, however, that the aggregate amount at any time so
invested with any single bank having total assets of less than
$1,000,000,000 will not exceed $200,000;
(d) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any State which at the time of purchase are rated by Moody's or
by S&P at not less
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than "P 1" or "P 2" if then rated by Moody's, and not less than "A 1" or "A
2" if then rated by S&P;
(e) mortgage-backed securities guaranteed by the Government National
Mortgage Association, FNMA or the Federal Home Loan Mortgage Corporation
and other mortgage-backed bonds which at the time of purchase are rated by
Moody's or by S&P at not less than "AA" if then rated by Moody's and not
less than "AA" if then rated by S&P;
(f) repurchase agreements having a term not greater than 90 days and
fully secured by securities described in the foregoing subsection (a), (b)
or (e) with banks described in the foregoing subsection (c) or with
financial institutions or other corporations having total assets in excess
of $500,000,000;
(g) shares of so-called "money market funds" registered with the SEC
under the Investment Company Act of 1940 which maintain a level per-share
value, invest principally in Investments described in the foregoing
subsections (a) through (f) and have total assets in excess of $50,000,000;
(h) Investments of the Borrower and its Subsidiaries in fee interests
in Real Estate utilized principally for multifamily housing, including
earnest money deposits relating thereto and transaction costs;
(i) Investments in Subsidiaries of the REIT and the Borrower;
(i) other Investments consisting of (i) loans secured by
mortgages or deeds of trust on real property, (ii) assets included in
clause (a) of the definition of "Development Assets" herein and other
raw land, (iii) Investments in Real Estate included in "Other
Investments" as defined on page 67 of the original Prospectus and (iv)
Investments in entities other than Subsidiaries all of whose assets
consist of Real Estate or other Investments permitted hereunder;
provided that the aggregate value, determined as provided below, of
the Investments of the Borrower and its Subsidiaries permitted under
this subsection (j) at no time shall exceed twenty-five percent (25 %)
of Consolidated Total Assets; and provided, further, that the
aggregate value, as provided below, of the Investments of the Borrower
and its Subsidiaries permitted under clause (ii) of this subsection
(j) at no time shall exceed fifteen percent (15 %) of Consolidated
Total Assets. For the purposes of this subsection (3), the value of
the Investments permitted hereunder shall be calculated as provided in
the definition of "Consolidated Total Assets" in ss. 1.1; provided,
however, that in the event that such definition does not provide a
means of valuing any Investment described in this subsection (3), then
such Investment shall be valued at book value determined in accordance
with generally accepted accounting principles; and
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(k) a loan to GGC L.L.C., a Maryland limited liability company, in the
principal amount of $7,500,000.
ss.8.4. Merger, Consolidation. The REIT and the Borrower will not, and will
not permit any of their Subsidiaries to, become a party to any merger or
consolidation except (i) the merger or consolidation of one or more of the
Subsidiaries or Nominees of the Borrower with and into the Borrower, (ii) the
merger or consolidation of two or more Subsidiaries or Nominees of the Borrower
and (iii) the merger or consolidation of the Borrower with another Person in
which the Borrower is the surviving entity and prior to which the Borrower shall
have provided to each of the Banks a Compliance Certificate prepared on a pro
forma basis using the financial statements of the REIT most recently provided or
required to be provided to the Banks under ss.6.4 or ss.7.4 adjusted in the best
good faith estimate of the Borrower to give effect to such merger or
consolidation and demonstrating that no Default or Event of Default with respect
to the covenants referred to therein shall exist after giving effect to such
merger or consolidation.
ss.8.5. Sale and Leaseback. The REIT and the Borrower will not, and will
not permit any of their Subsidiaries or Nominees to, enter into any arrangement,
directly or indirectly, whereby the REIT, the Borrower or any Subsidiary or
Nominee shall sell or transfer any Real Estate owned by it in order that then or
thereafter the REIT, the Borrower or any Subsidiary or Nominee shall lease back
such Real Estate.
ss.8.6. Compliance with Environmental Laws. The REIT and the Borrower will
not, and will not permit any of their Subsidiaries or Nominees to, do any of the
following: (a) use any of the Real Estate or any portion thereof as a facility
for the handling, processing, storage or disposal of Hazardous Substances,
except for small quantities of Hazardous Substances used in the ordinary course
of business and in compliance with all applicable Environmental Laws, (b) cause
or permit to be located on any of the Real Estate any underground tank or other
underground storage receptacle for Hazardous Substances except in full
compliance with Environmental Laws, (c) generate any Hazardous Substances on any
of the Real Estate except in full compliance with Environmental Laws, (d)
conduct any activity at any Real Estate or use any Real Estate in any manner so
as to cause a Release of Hazardous Substances on, upon or into the Real Estate
or any threatened Release of Hazardous Substances which might give rise to
liability under CERCLA or any other Environmental Law, or (e) directly or
indirectly transport or arrange for the transport of any Hazardous Substances
(except in compliance with all Environmental Laws).
The REIT and the Borrower shall:
(i) in the event of any change in Environmental Laws governing
the assessment, release or removal of Hazardous Substances, which
change would lead a prudent lender to require additional testing to
avail itself of any statutory insurance or limited liability, take all
action (including, without
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limitation, the conducting of engineering tests at the sole expense of
the REIT and the Borrower) to confirm that no Hazardous Substances are
or ever were Released or disposed of on the Borrowing Base Property;
and
(ii) if any Release or disposal of Hazardous Substances shall
occur or shall have occurred on the Borrowing Base Property (including
without limitation any such Release or disposal occurring prior to the
acquisition of such Borrowing Base Property by the REIT, the Borrower
or any Subsidiary or Nominee), cause the prompt containment and
removal of such Hazardous Substances and remediation of the Borrowing
Base Property in full compliance with all applicable laws and
regulations; provided, that all such actions shall be required to be
taken only by or pursuant to the advice of an Environmental Engineer;
and provided, further, that the REIT and the Borrower shall be deemed
to be in compliance with Environmental Laws for the purpose of this
clause (ii) so long as either of them or a responsible third party
with sufficient financial resources is taking reasonable action to
remediate or manage any event of noncompliance in accordance with the
advice of an Environmental Engineer and no action shall have been
commenced by any enforcement agency.
All costs related to environmental compliance requirements shall be
included in the Borrower's capital expenditures budget (unless a third party as
described above is responsible for such costs of compliance and is taking
reasonable action to remediate or manage any event of noncompliance as described
above).
The Agent may engage its own Environmental Engineer to review the
environmental assessments and the compliance of the REIT and the Borrower with
the covenants contained herein and the recommendations of the Borrower's
Environmental Engineer. The REIT and the Borrower will take all reasonable
precautions to identify environmental liabilities and not to incur environmental
liabilities unless they are limited and manageable.
At any time after an Event of Default shall have occurred hereunder, or,
whether or not an Event of Default shall have occurred, at any time after the
Agent or the Majority Banks shall receive notice from the REIT or the Borrower
of a Release or threatened Release of Hazardous Substances, or shall have
received notice from any other source deemed reliable by the Agent or the
Majority Banks that a Release of Hazardous Substances may have occurred,
relating to any Borrowing Base Property, the Agent may at its election (and will
at the request of the Majority Banks) after five days prior notice to the REIT
and the Borrower obtain such environmental assessments of such Borrowing Base
Property prepared by an Environmental Engineer as may be necessary or advisable
for the purpose of evaluating or confirming (i) whether any Hazardous Substances
are present in the soil or water at or adjacent' to such Borrowing Base Property
and (ii) whether the use and operation of such Borrowing Base Property comply
with all Environmental Laws. Environmental
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assessments may include detailed visual inspections of such Borrowing Base
Property including, without limitation, any and all storage areas, storage
tanks, drains, dry wells and leaching areas, and the taking of soil samples, as
well as such other investigations or analyses as are necessary or appropriate
for a complete determination of the compliance of such Borrowing Base Property
and the use and operation thereof with all applicable Environmental Laws. All
such environmental assessments shall be at the sole cost and expense of the REIT
and the Borrower.
ss.8.7. REIT Distributions. The REIT will not make any Distributions which
would cause it to violate any of the following covenants:
(a) In the event that an Event of Default shall have occurred and be
continuing, the REIT shall make no Distributions in respect of its Series
1997-A Convertible Preferred Stock and shall make no other Distributions
except dividends declared prior to such occurrence and other Distributions
required under the Code to maintain the REIT Status of the REIT, as
evidenced by a certification of the principal financial or accounting
officer of the REIT containing calculations in reasonable detail
satisfactory in form and substance to the Agent.
(b) Notwithstanding the foregoing, at any time when an Event of
Default under ss.12.1(a) or ss.12.1(b) or an Event of Default under
ss.12.1(d) (with respect to the covenants contained in ss.9 or this ss.8.7)
shall have occurred and be continuing beyond the applicable cure period and
the Agent has accelerated the maturity of the Obligations, the REIT shall
not make any Distributions whatsoever, directly or indirectly.
ss.8.8. Borrower Distributions. The Borrower will not make any
Distributions except (a) Distributions necessary to enable the REIT to make a
Distribution which at the time is permitted under ss.8.7 and (b) Distributions
to partners of the Borrower other than the REIT in proportion to Distributions
permitted under clause (a); provided, however, that in any Test Period the
aggregate amount of Distributions by the Borrower shall not exceed 90% of the
consolidated Funds From Operations of the Borrower and its Subsidiaries for such
Test Period, except to the extent necessary to enable the REIT to pay
Distributions required under the Code to maintain the REIT Status of the REIT.
ss.8.9. Asset Sales. Neither the REIT nor the Borrower nor any Subsidiary
or Nominee shall sell, transfer or otherwise dispose of any Borrowing Base
Property (except as the result of a condemnation or casualty and except for the
granting of Permitted Liens) unless there shall have been delivered to the Banks
(a) a statement that no Default or Event of Default exists, (b) a pro forma
Compliance Certificate demonstrating that the REIT and the Borrower will be in
compliance with their covenants referred to therein after giving effect to such
sale, transfer or other disposition and (c) a Borrowing Base Certificate setting
forth in reasonable detail the computation of the Borrowing Base Availability
after giving
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effect to such sale, transfer or other disposition. In the event that any
proposal to sell or liquidate the REIT, the Borrower or their assets shall be
pending before, or shall have been approved by, the shareholders of the REIT,
then the proceeds (net of customary broker fees and other transaction costs and,
in the case of assets other than Borrowing Base Properties, net of any debt
secured by a lien thereon) of the sales of any of their assets shall be applied
first to the reduction of the Revolving Loans and the cash collateralization of
any Letter of Credit Exposure before being applied to any other purposes of the
REST or the Borrower.
ss.8.10. Interest Rate Protection. The REIT and the Borrower shall obtain
interest rate protection satisfactory to the Agent, with respect to all
Revolving Loans and other floating rate and short-term debt amounts that exceed
20% of Consolidated Total Assets.
ss.8.11. Certain Guarantees. None of the Non-recourse Indebtedness of the
Borrower or any Subsidiary or Nominee shall be guaranteed by the REIT or the
Borrower or any Subsidiary or Nominee; provided, however, that two or more
issues of Non-recourse Indebtedness of Special Purpose Subsidiaries may be
cross-guaranteed and cross-collateralized if, and only if, each of such
guarantees would be Non-recourse Indebtedness if incurred as direct debt; and
provided, that the Borrower may guarantee the Indebtedness referred to in
ss.8.1(j). In addition, none of the REIT, the Borrower, any Subsidiary or any
Nominee shall guarantee any Indebtedness of any Person in which the Borrower is
not a direct or indirect investor as permitted under ss.8.3.
ss.8.12. ERISA. etc. Each of the Borrower and the REIT shall comply, and
shall cause all ERISA Affiliates to comply, in all material respects, with the
provisions of ERISA and the Code applicable to each Plan. Each of the Borrower
and the REIT shall meet, and shall cause all ERISA Affiliates to meet, all
minimum funding requirements applicable to them with respect to any Plan
pursuant to section 302 of ERISA or section 412 of the Code, without giving
effect to any waivers of such requirements or extensions of the related
amortization periods which may be granted. At no time shall the Accumulated
Benefit Obligations under any Plan that is not a Multiemployer Plan exceed the
fair market value of the assets of such Plan allocable to such benefits by more
than $500,000. The Borrower and the REIT shall not withdraw, and shall cause all
other ERISA Affiliates not to withdraw, in whole or in part, from any
Multiemployer Plan so as to give rise to withdrawal liability exceeding $500,000
in the aggregate. At no time shall the actuarial present value of unfunded
liabilities for post-employment health care benefits, whether or not provided
under a Plan, calculated in a manner consistent with Statement No. 106 of the
Financial Accounting Standards Board, exceed $500,000.
ss.8.13. Structural Change. The Borrower and its Subsidiaries shall not
undertake or participate in any Structural Change which has the effect of
committing or altering the status of more than 15% of the consolidated total
assets determined in accordance with generally accepted accounting principles of
the Borrower and its Subsidiaries as shown on their consolidated balance sheet
as of the most recent fiscal quarter end for which financial
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statements are required to have been furnished to the Banks pursuant to ss.6.4
or ss.7.4, except upon the prior written consent of the Majority Banks.
ss.9. FINANCIAL COVENANTS
The REIT and the Borrower covenant and agree that, so long as any Loan or
Note is outstanding or any Bank has any obligation to make any Loans each of
them will comply with the following:
ss.9.1. Leverage Ratio. The REIT and the Borrower will not permit the
Leverage Ratio as of the last day of any fiscal quarter to exceed fifty-five
percent (55%).
ss.9.2. Interest Coverage. The REIT and the Borrower will not permit the
consolidated EBITDA of the Borrower and its Subsidiaries for any period of four
consecutive fiscal quarters (treated as a single accounting period) (the "Test
Period") to be less than 2.0 times the consolidated Interest Expense of the
Borrower and its Subsidiaries for the Test Period.
ss.9.3. Debt Service Coverage. The REIT and the Borrower will not permit
the Debt Service Coverage Ratio for any Test Period to be less than 175%.
ss.9.4. Minimum Consolidated Tangible Net Worth. The Borrower will not
permit the Consolidated Tangible Net Worth of the Borrower and its Subsidiaries
on the last day of any fiscal quarter to be less than the sum of (a) (i)
$300,000,000 for the period January 1, 1998 through December 31, 1998, (ii)
$275,000,000 for the period January 1, 1999 through December 31, 1999, or (iii)
$250,000,000 for the period January 1, 2000 through December 31, 2000, plus (b)
in each case 75 % of the consolidated amount realized by the REIT, the Borrower
and their Subsidiaries (net of issuance costs) from the issuance of equity
securities and the receipt of capital contributions (measured in the case of
payments or contributions of assets other than cash by the initial book value of
such assets recorded in the books of the REIT, the Borrower or the applicable
Subsidiary) after December 31, 1997.
ss.9.5. Secured Debt. At no time shall the aggregate outstanding principal
amount of Indebtedness of the Borrower and its Subsidiaries secured by liens
permitted by ss.ss.8.2(vi), 8.2(vii), 8.2(x) and 8.2(xi), determined on a
consolidated basis, exceed 40% of Consolidated Total Assets.
ss.9.6. Recourse Debt. At no time shall the aggregate outstanding amount of
Indebtedness of the Borrower and its Subsidiaries permitted by ss.8. 1(h),
8.1(k), [8.1(1)], 8.1(m) or 8.1(j), determined on a consolidated basis, exceed
$80,000,000; provided, however, that Indebtedness permitted under ss.8.1(k)
shall not be included in the foregoing calculations and so long as such
Indebtedness constitutes Non-recourse Indebtedness.
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ss. 10. CLOSING CONDITIONS.
The obligations of the Agent and the Banks to make the Revolving Credit
Loans and issue Letters of Credit from and after the Effective Date shall be
subject to the satisfaction of the following conditions precedent on or prior to
the Effective Date:
ss. 10.1. Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to the Majority
Banks. Each Bank shall have received a fully executed copy of each such
document. Replacement Revolving Credit Notes satisfactory in form and substance
to the Banks shall have been executed on behalf of the Borrower and delivered to
the Banks.
ss. 10.2. Certified Copies of Organizational Documents. Each of the Banks
shall have received from the REIT and the Borrower a copy, certified as of a
recent date by the appropriate officer of each State in which the REIT, the
Borrower or any Subsidiary or Nominee is organized and a duly authorized officer
of the REIT to be true and complete, of the certificate of incorporation of the
REIT, the certificate of limited partnership of the Borrower and each
organizational document of each Subsidiary and Nominee, in each case as amended
through the Effective Date. Each of the Banks shall have received from the
Borrower a copy, certified as of the Effective Date, by a duly authorized
officer of the REIT as general partner of the Borrower, of the OP Partnership
Agreement as amended through the Effective Date.
ss. 10.3. Bylaws; Resolutions. All action on the part of the REIT, the
Borrower and each Subsidiary and Nominee necessary for the valid execution,
delivery and performance by each of the REIT, the Borrower and such Subsidiary
and Nominee of this Agreement and the other Loan Documents to which it is or is
to become a party shall have been duly and effectively taken, and evidence
thereof satisfactory to the Agent shall have been provided to each of the Banks.
Each of the Banks shall have received from each of the REIT, the Borrower and
each applicable Subsidiary and Nominee true copies of its by-laws and the
resolutions adopted by its shareholders and board of directors, partners,
beneficiaries and trustees, as the case may be, authorizing the transactions
described herein, each certified by its clerk, secretary, trustee or authorized
partner as of a recent date to be true and complete.
ss. 10.4. Incumbency Certificate; Authorized Signers. Each of the Banks
shall have received from the REIT, the Borrower and each applicable Subsidiary
and Nominee an incumbency certificate, dated as of the Effective Date, signed by
a duly authorized officer of the REIT or officer, trustee or partner of each
applicable Subsidiary and Nominee and giving the name and bearing a specimen
signature of each individual who shall be authorized: (a) to sign, in the name
and on behalf of the REIT, the Borrower and each such Subsidiary and Nominee,
each of the Loan Documents to which the REIT, the Borrower or such Subsidiary or
Nominee is or is to become a party; (b) to make Loan and Conversion
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Requests; and (c) to give notices and to take other action on behalf of the REIT
or the Borrower under the Loan Documents.
ss. 10.5. Opinions of Counsel Concerning Loan Documents. Each of the Banks
shall have received the favorable opinions addressed to the Banks and the Agent
and dated as of the Effective Date, in form and substance satisfactory to the
Agent, from Scott D. Spelfogel, Senior Vice President and General Counsel of the
REIT and the Borrower.
ss. 10.6. Swap Assignment. The Collateral Assignment of Interest Rate Swap
dated as of November 21, 1995 (as from time to time amended, the "Swap
Assignment") between the Borrower and BKB as Agent under the Prior Credit
Agreement shall have confirmed by Borrower to benefit the Agent and the Banks
with respect to the Obligations.
ss. 10.7. Performance; No Default. The REIT and the Borrower shall have
performed ~and complied with all terms and conditions herein required to be
performed or complied with by it on or prior to the Effective Date, and on the
Effective Date there shall exist no Default or Event of Default; and the Banks
shall have received a certificate to these effects signed on behalf of the REIT
and the Borrower by their respective chief financial officers.
ss. 10.8. Representataions and Warranties. The representations and
warranties made by the REIT and the Borrower and any Subsidiaries and Nominees
in the Loan Documents or otherwise made by or on behalf of the REIT, the
Borrower or any Subsidiaries or Nominees in connection therewith or after the
date thereof shall have been true and correct in all material respects when made
and shall also be true and correct in all material respects on the Effective
Date.
ss. 10.9. Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be reasonably satisfactory to the Agent and the Agent's Special Counsel in form
and substance, and the Agent shall have received all information and such
counterpart originals or certified copies of such documents and such other
certificates, opinions or documents as the Agent and the Agent's Special Counsel
may reasonably require.
ss. 10.10. Compliance Certificate. A Compliance Certificate dated as of the
date of the Effective Date demonstrating compliance with each of the covenants
calculated therein as of the fiscal quarter ended September 30, 1997 (after
giving effect, on a pro forma basis, to changes in the capital structure of the
Borrower effected since that date), shall have been delivered to the Agent.
ss. 10.11. Other. The Agent shall have reviewed such other documents,
instruments, certificates, opinions, assurances, consents and approvals as the
Agent or the Agent's Special Counsel may reasonably have requested.
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ss. 11. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan or to issue any Letter of
Credit, whether on or after the Effective Date, shall also be subject to the
satisfaction of the following conditions precedent:
ss. 11.1. Representations True; No Default. Each of the representations and
warranties of the REIT, the Borrower and their Subsidiaries contained in this
Agreement, the other Loan Documents or in any document or instrument delivered
pursuant to or in connection with this Agreement shall be true as of the date as
of which they were made and shall also be true at and as of the time of the
making of such Loan, with the same effect as if made at and as of that time
(except to the extent of changes resulting from transactions contemplated or
permitted by this Agreement and the other Loan Documents and changes occurring
in the ordinary course of business that singly or in the aggregate are not
materially adverse, and except to the extent that such representations and
warranties relate expressly to an earlier date) and no Default or Event of
Default shall have occurred and be continuing. Each of the Banks shall have
received a certificate of the REIT and the Borrower signed by an authorized
officer of the REIT to such effect.
ss. 11.2. No Legal Impediment. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Loan or to issue
any Letter of Credit.
ss. 11.3. Governmental Regulation. Each Bank shall have received such
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
ss. 11.4. Proceedings and Documents. All proceedings in connection with the
Loan shall be satisfactory in substance and in form to the Majority Banks, and
the Majority Banks shall have received all information and such counterpart
originals or certified or other copies of such documents as the Majority Banks
may reasonably request.
ss. 11.5. Borrowing Documents. In the case of any request for a Revolving
Loan, each of the Banks shall have received each of the following:
(a) the request for a Revolving Loan required by ss. 2.6 or, as the
case may be, for a request Letter of Credit required by ss. 2.9 in the form
of Exhibit B hereto, fully completed; and
(b) the pro forma Compliance Certificate required by clause (iii) of
ss. 2.6 or ss. 2.9, as the case may be, prepared in a manner reasonably
acceptable to the Agent.
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ss. 12. EVENTS OF DEFAULT; ACCELERATION; ETC.
ss. 12.1. Events of Default and Acceleration. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(a) the Borrower shall fail to pay any principal of the Loans or
reimbursement of payments under Letters of Credit when the same shall
become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
(b) the Borrower shall fail to pay any interest on the Loans or any
other sums due hereunder or under any of the other Loan Documents, when the
same shall become due and payable, whether at the stated date of maturity
or any accelerated date of maturity or at any other date fixed for payment;
(c) [intentionally omitted];
(d) the REIT or the Borrower shall fail to comply with any covenant
contained in ss. 7.4, ss. 8.3(j), ss. 8.7, ss. 8.8, ss. 9.1, ss. 9.2, ss.
9.3, ss. 9.4, ss. 9.5 or ss. 9.6, and such failure shall continue for 30
days after written notice thereof shall have been given to the REIT and the
Borrower by the Agent;
(e) the REIT or the Borrower shall fail to comply with any covenant
contained in ss. 7.5(b) through (e), ss. 7.6(b), ss. 7.8 or ss. 7.10, and
such failure shall continue for 15 days after written notice thereof shall
have been given to the REIT and the Borrower by the Agent (or, in the case
of ss. 7.5(b) through (e) for 15 days after any of the chief executive
officer, chief operating officer, chief financial officer, chief accounting
officer or general counsel of the REIT or the Borrower shall have actual
notice of any event or condition of which notice is required to be given
thereunder), provided, that such 15-day period shall terminate before the
close of business on the 15th day in the event that the REIT and the
Borrower shall not be using diligent best efforts to cure such default;
(f) the REIT, the Borrower or any of their Subsidiaries or Nominees
shall fail to perform any other term, covenant or agreement contained
herein or in any of the other Loan Documents (other than those specified
above in this ss. 12);
(g) any representation or warranty of the REIT, the Borrower or any of
their Subsidiaries or Nominees in this Agreement or any other Loan Document
or in any other document or instrument delivered pursuant to or in
connection with this Agreement shall prove to have been false in any
material respect upon the date when made or deemed to have been made or
repeated;
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(h) with respect to any indebtedness valued in excess of $5,000,000,
the REIT, the Borrower or any of their Subsidiaries or Nominees shall fail
to pay at maturity, or within any applicable period of grace, any
obligation for borrowed money or credit received or in respect of any
Capitalized Leases, or fail to observe or perform any material term,
covenant or agreement contained in any agreement by which it is bound,
evidencing or securing any such borrowed money or credit received or in
respect of any Capitalized Leases for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder or
holders thereof or of any obligations issued thereunder to accelerate the
maturity thereof;
(i) the REIT, the Borrower or any of their Subsidiaries or Nominees
(A) shall make an assignment for the benefit of creditors, or admit in
writing its general inability to pay or generally fail to pay its debts as
they mature or become due, or shall petition or apply for the appointment
of a trustee or other custodian, liquidator or receiver of the REIT, the
Borrower or any of their Subsidiaries or Nominees or of any substantial
part of the assets of any thereof, (B) shall commence any case or other
proceeding relating to the REIT, the Borrower or any of their Subsidiaries
or Nominees under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or (C) shall take any action to
authorize or in furtherance of any of the foregoing;
(j) a petition or application shall be filed for the appointment of a
trustee or other custodian, liquidator or receiver of the REIT, the
Borrower or any of their Subsidiaries or Nominees or any substantial part
of the assets of any thereof, or a case or other proceeding shall be
commenced against the REIT, the Borrower or any of their Subsidiaries or
Nominees under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, and the REIT, the Borrower or any
of their Subsidiaries or Nominees shall indicate its approval thereof,
consent thereto or acquiescence therein or such petition, application, case
or proceeding shall not have been dismissed within 60 days following the
filing or commencement thereof;
(k) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the REIT, the Borrower or
any of their Subsidiaries or Nominees bankrupt or insolvent, or approving a
petition in any such case or other proceeding, or a decree or order for
relief is entered in respect of the REIT, the Borrower or any of its
Subsidiaries or Nominees in an involuntary case under federal bankruptcy
laws as now or hereafter constituted;
(l) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than 30 days, whether or not consecutive, any uninsured
final judgment against
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the REIT, the Borrower or any of their Subsidiaries or Nominees that, with
other outstanding uninsured final judgments, undischarged, against the
REIT, the Borrower or any of their Subsidiaries or Nominees exceeds in the
aggregate $2,000,000;
(m) if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof or
with the express prior written agreement, consent or approval of the Banks,
or any action at law, suit or in equity or other legal proceeding to
cancel, revoke or rescind any of the Loan Documents shall be commenced by
or on behalf of the REIT, the Borrower or any of their Subsidiaries or
Nominees or any of their respective holders of Voting Interests, or any
court or any other governmental or regulatory authority or agency of
competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of
the Loan Documents is illegal, invalid or unenforceable in accordance with
the terms thereof;
(n) with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have occurred and the Majority Banks shall have determined in
their reasonable discretion that such event reasonably could be expected to
result in liability of the REIT, the Borrower or any of their Subsidiaries
or Nominees to the PBGC or such Guaranteed Pension Plan in an aggregate
amount exceeding $1,000,000 and such event in the circumstances occurring
reasonably could constitute grounds for the termination of such Guaranteed
Pension Plan by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such Guaranteed Pension
Plan; or a trustee shall have been appointed by the United States District
Court to administer such Plan; or the PBGC shall have instituted
proceedings to terminate such Guaranteed Pension Plan;
(o) the REIT, the Borrower or any of their Subsidiaries or Nominees
shall be indicted for a federal crime, a punishment for which could include
the forfeiture of any assets of the Borrower or such Subsidiaries or
Nominees included in the Borrowing Base Property;
(p) there shall occur any "Event of Default" is defined in Section
12.1 of the Durham Construction Loan Agreement;
(q) there shall occur any "Event of Default" as defined in Article XVI
of the FNMA Loan Agreement; or
(r) any Person or a number of Persons acting as a group shall acquire
direct or indirect ownership of more than 30% of the issued and outstanding
common stock of the REIT;
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then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the REIT and the Borrower declare all amounts owing with respect to this
Agreement, the Notes and the other Loan Documents to be, and they shall
thereupon forthwith become, immediately due and payable and require the Borrower
immediately to deposit with the Agent in cash an amount equal to the then Letter
of Credit Exposure (which cash shall be held and applied to reimbursement of
Letter of Credit payments, in each case) without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the
Borrower; provided that in the event of any Event of Default specified in ss.
12(i), ss. 12(j) or ss. 12(k), all such amounts shall become immediately due and
payable automatically and without any requirement of notice from any of the
Banks or the Agent.
ss. 12.1A. Limitation of Cure Periods. Notwithstanding the provisions of
subsections (c), (d) and (e) of ss. 12.1, the cure periods provided therein
shall not be allowed and the occurrence of a Default thereunder immediately
shall constitute an Event of Default for all purposes of this Agreement and the
other Loan Documents if, within the period of twelve months immediately
preceding the occurrence of such Default, there shall have occurred two periods
of cure or portions thereof under any one or more than one of said subsections
(excluding, however, any period of cure with respect to any Default or Defaults
under ss.7.4).
ss. 12.2. Termination of Commitments. If any one or more Events of Default
specified in ss. 12(i), ss. 12(j) or ss. 12(k) shall occur, then immediately and
without any action on the part of the Agent or any Bank any unused portion of
the credit hereunder shall terminate and the Banks shall be relieved of all
obligations to make Loans or issue Letters of Credit to the Borrower. If any
other Event of Default shall have occurred and be continuing, any Bank may by
notice to the REIT and the Borrower terminate its obligations to make Loans or
issue Letters of Credit to the Borrower. No termination under this ss. 12.2
shall relieve the REIT or the Borrower of any of the Obligations or any of its
existing obligations to such Bank arising under other agreements or instruments.
ss. 12.3. Remedies. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to ss. 12.1, each Bank, if owed
any amount with respect to the Loans may, with the consent of the Majority Banks
but not otherwise, proceed to protect and enforce its rights and remedies under
this Agreement, the Notes or any of the other Loan Documents by suit in equity,
action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement and the
other Loan Documents or any instrument pursuant to which the Obligations to such
Bank are evidenced, including to the full extent permitted by applicable law the
obtaining of the ex parte appointment of a receiver, and, if such amount shall
have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of such Bank. No remedy herein
conferred upon any Bank or the Agent or
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the holder of any Note is intended to be exclusive of any other remedy and each
and every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or any other provision of law.
ss. 12.4. Distribution of Proceeds. In the event that, following the
occurrence or during the continuance of any Event of Default, the Agent or any
Bank, as the case may be, collects or receives any monies for application to any
of the Obligations, such monies shall be applied as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of, the Agent or the Banks for or in respect of all
reasonable costs, expenses, disbursements and losses which shall have been
incurred or sustained by the Agent or any Bank to protect or preserve the
collateral or in connection with the collection of such monies by the Agent
or any Bank, for the exercise, protection or enforcement by the Agent or
any Bank of all or any of the rights, remedies, powers and privileges of
the Agent or any Bank under this Agreement or any of the other Loan
Documents or in support of any provision of adequate indemnity to the Agent
or any Bank against any taxes or liens which by law shall have, or may
have, priority over the rights of the Agent or such Bank to such monies;
(b) Second, to all other Obligations (except Obligations in respect of
Qualified Hedge Agreements) in such order or preference as the Majority
Banks shall determine; provided, however, that (i) distributions in respect
of such Obligations shall be made pari passu among Obligations with respect
to the Agent's fee payable pursuant to ss. 4.3 and all other Obligations,
(ii) in the event that any Bank shall have wrongfully failed or refused to
make an advance under ss. 2.3 and such failure or refusal shall be
continuing, advances made by other Banks during the pendency of such
failure or refusal shall be entitled to be repaid as to principal and
accrued interest in priority to the other Obligations described in this
subsection (b), and (iii) Obligations owing to the Banks with respect to
each type of obligation such as interest, principal, fees and expenses,
shall be made among the Banks pro rata; and provided, further that the
Majority Banks may in their discretion make proper allowance to take into
account any Obligations not then due and payable;
(c) Third, to Obligations in respect of Qualified Hedge Agreements in
such order or preference as the Majority Banks shall determine; provided,
that such Obligations owing to the Banks party to Qualified Hedge
Agreements with respect to each type of obligation such as interest,
principal, fees and expenses, shall be made among the Banks pro rata; and
(d) Fourth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
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ss. 13. SETOFF.
During the continuance of any Event of Default, any deposits (general or
specific, time or demand, provisional or final, regardless of currency,
maturity, or the branch of where such deposits are held) or other sums credited
by or due from any of the Banks to the REIT or the Borrower and any securities
or other property of the REIT or the Borrower in the possession of such Bank may
be applied to or set off against the payment of Obligations and any and all
other liabilities, direct, or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, of the REIT and the Borrower to such
Bank. Each of the Banks agrees with each other Bank that (a) if an amount to be
set off is to be applied to Indebtedness of the REIT or the Borrower to such
Bank, other than Indebtedness evidenced by the Notes held by such Bank, such
amount shall be applied ratably to such other Indebtedness and to the
Indebtedness evidenced by all such Notes held by such Bank, and (b) if such Bank
shall receive from the REIT or the Borrower, whether by voluntary payment,
exercise of the right of setoff, counterclaim, cross action, enforcement of the
claim evidenced by the Notes held by such Bank by proceedings against the REIT
or the Borrower at law or in equity or by proof thereof in bankruptcy,
reorganization, liquidation, receivership or similar proceedings, or otherwise,
and shall retain and apply to the payment of the Note or Notes held by such Bank
any amount in excess of its ratable portion of the payments received by all of
the Banks with respect to the Notes held by all of the Banks, such Bank will
make such disposition and arrangements with the other Banks with respect to such
excess, either by way of distribution, pro tanto assignment of claims,
subrogation or otherwise as shall result in each Bank receiving in respect of
the Notes held by it its proportionate payment as contemplated by this
Agreement; provided that if all or any part of such excess payment is thereafter
recovered from such Bank, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
ss. 14. THE AGENT.
ss. 14.1. Authorization. The Agent is authorized to take such action on
behalf of each of the Banks and to exercise all such powers as are hereunder and
under any of the other Loan Documents and any related documents delegated to the
Agent, together with such powers as are reasonably incident thereto, provided
that no duties or responsibilities not expressly assumed herein or therein shall
be implied to have been assumed by the Agent. The relationship between the Agent
and the Banks is and shall be that of agent and principal only, and nothing
contained in this Agreement or any of the other Loan Documents shall be
construed to constitute the Agent as a trustee for any Bank.
ss. 14.2. Employees and Agents. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice
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of counsel concerning all matters pertaining to its rights and duties under this
Agreement and the other Loan Documents. The Agent may utilize the services of
such Persons as the Agent in its sole discretion may reasonably determine, and
all reasonable fees and expenses of any such Persons shall be paid by the
Borrower.
ss. 14.3. No Liability. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent, or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
ss. 14.4. No Representation. The Agent shall not be responsible for the
execution or validity or enforceability of this Agreement, the Notes, any of the
other Loan Documents or any instrument at any time constituting, or intended to
constitute, collateral security for the Notes, or for the value of any such
collateral security or for the validity, enforceability or collectability of any
such amounts owing with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan Documents
or in any certificate or instrument hereafter furnished to it by or on behalf of
the REIT, the Borrower or any of their Subsidiaries, or be bound to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
covenants or agreements herein or in any instrument at any time constituting, or
intended to constitute, collateral security for the Notes. The Agent shall not
be bound to ascertain whether any notice, consent, waiver or request delivered
to it by the REIT, the Borrower or any holder of any of the Notes shall have
been duly authorized or is true, accurate and complete. The Agent has not made
nor does it now make any representations or warranties, express or implied, nor
does it assume any liability to the Banks, with respect to the creditworthiness
or financial condition of the REIT, the Borrower or any of their Subsidiaries or
Nominees. Each Bank acknowledges that it has, independently and without reliance
upon the Agent or any other Bank, and based upon such information and documents
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement.
ss. 14.5. Payments.
(a) A payment in immediately available funds by the REIT or the
Borrower to the Agent hereunder or under any of the other Loan Documents
for the account of any Bank shall constitute a payment to such Bank. The
Agent agrees to distribute to each Bank not later than one Business Day
after the Agent's receipt of good funds, determined in accordance with the
Agent's customary practices, such Bank's pro rata share of payments
received by the Agent for the account of the Banks except as otherwise
expressly provided herein or in any of the other Loan Documents.
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(b) If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the `Notes or under any of
the other Loan Documents might involve it in liability, it may refrain from
making distribution until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the
Agent is to be repaid, each Person to whom any such distribution shall have
been made shall either repay to the Agent its proportionate share of the
amount so adjudged to be repaid or shall pay over the same in such manner
and to such Persons as shall be determined by such court.
(c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Bank that fails (i) to
make available to the Agent its pro rata share of any Loan or (ii) to
comply with the provisions of ss. 12 with respect to making dispositions
and arrangements with the other Banks, where such Bank's share of any
payment received, whether by setoff or otherwise, is in excess of its pro
rata share of such payments due and payable to all of the Banks, in each
case as, when and to the full extent required by the provisions of this
Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be
deemed a Delinquent Bank until such time as such delinquency is satisfied.
A Delinquent Bank shall be deemed to have assigned any and all payments due
to it from the REIT and the Borrower, whether on account of outstanding
Loans, interest, fees or otherwise, to the remaining nondelinquent Banks
for application to, and reduction of, their respective pro rata shares of
all outstanding Loans. The Delinquent Bank hereby authorizes the Agent to
distribute such payments to the nondelinquent Banks in proportion to their
respective pro rata shares of all outstanding Loans. A Delinquent Bank
shall be deemed to have satisfied in full a delinquency when and if, as a
result of application of the assigned payments to all outstanding Loans of
the nondelinquent Banks, the Banks' respective pro rata shares of all
outstanding Loans have returned to those in effect immediately prior to
such delinquency and without giving effect to the nonpayment causing such
delinquency.
ss. 14.6. Holders of Notes. The Agent may deem and treat the payee of any
Note as the absolute owner or purchaser thereof for all purposes hereof until it
shall have been furnished in writing with a different name by such payee or by a
subsequent holder, assignee or transferee.
ss. 14.7. Indemnity. The Banks ratably agree hereby to indemnify and hold
harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent has not been reimbursed by the Borrower as
required by ss. 15), and liabilities of every nature and character arising out
of or related to this Agreement, the Notes, or any of the other Loan Documents
or the transactions contemplated or evidenced hereby or thereby, or the
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Agent's actions taken hereunder or thereunder, except to the extent that any of
the same shall be directly caused by the Agent's willful misconduct or gross
negligence.
ss. 14.8. Agent as Bank. In its individual capacity, BKB shall have the
same obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes as it
would have were it not also the Agent.
ss. 14.9. Resignation. The Agent may resign at any time by giving 60 days'
prior written notice thereof to the Banks, the REIT and the Borrower. Upon any
such resignation, the Majority Banks shall have the right to appoint as a
successor Agent any bank whose senior debt obligations are rated not less than
"A" or its equivalent by Moody's or not less than "A" or its equivalent by S&P
and which has total assets in excess of $10 billion. Unless a Default or Event
of Default shall have occurred and be continuing, such successor Agent shall be
reasonably acceptable to the REIT and the Borrower. If no successor Agent shall
have been so appointed by the Majority Banks and shall have accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation, then the Banks other than the Agent may appoint a successor Agent,
which shall be a bank whose debt obligations are rated not less than "A" or its
equivalent by Moody's or not less than "A" or its equivalent by S&P and which
has total assets in excess of $10 billion. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation, the provisions of this Agreement and the other Loan Documents shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Agent.
ss. 14.10. Notification of Defaults and Events of Default. Each Bank hereby
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this ss. 14.10 it shall promptly notify the other
Banks of the existence of such Default or Event of Default.
ss. 14.11. Duties in the Case of Enforcement. In case one of more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (a) so requested by
the Majority Banks and (b) the Banks have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of this Agreement to
exercise all or any such other legal and equitable and other rights or remedies
as it may have in respect of such Borrowing Base Property. The Majority Banks
may direct the Agent in writing as to the method and the extent of any sale or
other disposition, the Banks hereby agreeing to indemnify and hold the Agent
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such
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directions, provided that the Agent need not comply with any such direction to
the extent that the Agent reasonably believes the Agent's compliance with such
direction to be unlawful or commercially unreasonable in any applicable
jurisdiction.
ss. 15. EXPENSES.
The REIT and the Borrower agree to pay (a) the reasonable costs of
producing and reproducing this Agreement, the other Loan Documents and the other
agreements and instruments mentioned herein, (b) any taxes (including any
interest and penalties in respect thereto) payable by the Agent or any of the
Banks (other than taxes based upon the Agent's or any Bank's net income, except
that the Agent and the Banks shall be entitled to indemnification for any and
all amounts paid by them in respect of taxes based on income or other taxes
assessed by any State in which Borrowing Base Property is located, or other
taxes payable on or with respect to the transactions contemplated by this
Agreement, including any taxes payable by the Agent or any of the Banks after
the Effective Date (the REIT and the Borrower hereby agreeing to indemnify the
Agent and each Bank with respect thereto), (c) all title insurance premiums,
appraisal fees, engineer's fees, reasonable internal charges of the Agent
(determined in good faith and in accordance with the Agent's internal policies
applicable generally to its customers) for commercial finance exams and
engineering and environmental reviews and the reasonable fees, expenses and
disbursements of the Agent's Special Counsel and any local counsel to the Agent
incurred in connection with the preparation, administration or interpretation of
the Loan Documents and other instruments mentioned herein (excluding, however,
the preparation of agreements evidencing participation granted under ss. 18.5),
each closing hereunder, and amendments, modifications, approvals, consents or
waivers hereto or hereunder, (d) the reasonable fees, expenses and disbursements
of the Agent incurred by the Agent in connection with the preparation,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, (e) all reasonable out-of-pocket expenses (including travel,
reasonable attorneys' fees and costs, which attorneys may be employees of any
Bank or the Agent and the fees and costs of appraisers, engineers, investment
bankers or other experts retained by any Bank or the Agent) incurred by any Bank
or the Agent in connection with the enforcement of or preservation of rights
under any of the Loan Documents against the REIT, the Borrower or any of their
Subsidiaries or the administration thereof after the occurrence of a Default or
Event of Default and (f) all reasonable fees, expenses and disbursements of any
Bank or the Agent incurred in connection with UCC searches, UCC filings or
mortgage recordings. All invoices for expenses over $25,000 shall be reviewed by
the Borrower prior to payment. The covenants of this ss. 15 shall survive
payment or satisfaction of payment of amounts owing with respect to the Notes.
ss. 16. INDEMNIFICATION.
Each of the REIT and the Borrower agree to indemnify and hold harmless the
Agent and the Banks and each director, officer, employee, agent and Person who
controls the
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Agent or any Bank from and against any and all claims, actions and suits whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out of or relating to
this Agreement or any of the other Loan Documents or the transactions
contemplated hereby and thereby including, without limitation, (a) any actual or
proposed use by the REIT, the Borrower or any of their Subsidiaries of the
proceeds of any of the Loans, (b) any actual or alleged infringement of any
patent, copyright, trademark, service mark or similar right of the REIT, the
Borrower or any of their Subsidiaries comprised in the Borrowing Base Property,
(c) the REIT, the Borrower or any of their Subsidiaries entering into or
performing this Agreement or any of the other Loan Documents or (d) with respect
to the REIT, the Borrower and their Subsidiaries and their respective properties
and assets, the violation of any Environmental Law, the Release or threatened
Release of any Hazardous Substances or any action, suit, proceeding or
investigation brought or threatened with respect to any Hazardous Substances
(including, but not limited to claims with respect to wrongful death, personal
injury or damage to property), in each case including, without limitation, the
reasonable fees and disbursements of counsel and allocated costs of internal
counsel (determined in good faith and in accordance with internal policies of
the Agent or a Bank, as the case may be, applicable generally to its customers)
incurred in connection with any such investigation, litigation or other
proceeding; provided, however, that the Borrower shall not be obligated under
this ss. 16 to indemnify any Person for liabilities arising from such Person's
own gross negligence, willful misconduct or breach of this Agreement. In
litigation, or the preparation therefor, the Banks and the Agent shall be
entitled to select a single law firm as their own counsel and, in addition to
the foregoing indemnity, the REIT and the Borrower agree to pay promptly the
reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the REIT and the Borrower under this ss. 16 are unenforceable for
any - reason, the REIT and the Borrower hereby agree to make the maximum
contribution to the payment in satisfaction of such obligations which is
permissible under applicable law. The provisions of this ss. 16 shall survive
the repayment of the Loan and the termination of the obligations of the Banks
hereunder.
ss. 17. SURVIVAL OF COVENANTS ETC.
All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the REIT, the Borrower or any of their
Subsidiaries pursuant hereto shall be deemed to have been relied upon by the
Banks and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Banks of any of the
Loans, as herein contemplated, and shall continue in full force and effect so
long as any amount due under this Agreement or the Notes or any of the other
Loan Documents remains outstanding or any Bank has any obligation to make any
Loans. The indemnification obligations of the REIT and the Borrower provided
herein and the other Loan Documents shall survive the full repayment of amounts
due and the termination of the obligations of the Banks hereunder and thereunder
to the extent provided herein and therein.
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All statements contained in any certificate or other paper delivered to any Bank
or the Agent at any time by or on behalf of the REIT, the Borrower or any of
their Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the REIT,
the Borrower or such Subsidiary hereunder.
ss. 18. ASSIGNMENT AND PARTICIPATION.
ss. 18.1. Conditions to Assignment by Banks. Except as provided herein,
each Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of its Commitment Percentage and Commitment and the same portion of the
Loans at the time owing to it, and the Notes held by it and its share of Letter
of Credit Exposure); provided that (a) each of the and the Borrower shall have
given its prior written consent to such assignment, which shall not unreasonably
be withheld, (b) each such assignment shall be of a constant, and not varying,
percentage of all the assigning Bank's rights and obligations under this
Agreement, (c) each assignment shall be in an amount that is a whole multiple of
$1,000,000, and (d) the parties to such assignment shall execute and deliver to
the Agent, for recording in the Register (as hereinafter defined), an Assignment
and Acceptance, substantially in the form of Exhibit E hereto (an "Assignment
and Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five Business Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder,
and (ii) the assigning Bank shall, to the extent provided in such assignment and
upon payment to the Agent of the registration fee referred to in ss. 18.3, be
released from its obligations under this Agreement.
ss. 18.1A. Assignment Among Banks. Notwithstanding the provisions of ss.
18.1, in the event that the debt obligations of any Bank shall be rated less
than "Ba2" by Moody's or less than "BB" by S&P, each other Bank party hereto or
any two or more of them acting together shall be entitled on ten Business Days'
prior written notice to the Agent, the REIT, the Borrower and such Bank to
purchase the interest of such Bank hereunder, in whole and not in part, at a
purchase price equal to the outstanding principal amount of such Bank's
Commitment Percentage in the Loans advanced hereunder and its share of Letter of
Credit Exposure plus accrued and unpaid interest thereon to the purchase date,
together with any fees or other amounts that may be owing to such Bank
hereunder, including without limitation additional interest with respect to such
Bank's Commitment Percentage in any Eurodollar Rate Loan calculated as provided
in ss. 4.9. Such transfer shall be effected by the execution and delivery of an
Assignment and Acceptance.
ss. 18.2. Certain Reprsentations and Warranties; Limitations; Covenants. By
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows: (a)
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other than the representation and warranty that it is the legal and beneficial
owner of the interest being assigned thereby free and clear of any adverse
claim, the assigning Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
the other Loan Documents or any other instrument or document furnished pursuant
hereto; (b) the assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the REIT, the
Borrower and their Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations, or the performance or observance by
the REIT, the Borrower and their Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations of any of their
obligations under this Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (c) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the most recent financial statements referred to in ss. 6.4 and ss. 7.4 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (d)
such assignee will, independently and without reliance upon the assigning Bank,
the Agent or any other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (e) such assignee represents
and warrants that it is an Eligible Assignee; (f) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto; (g) such assignee agrees that it will perform in
accordance with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Bank; and (h) such assignee
represents and warrants that it is legally authorized to enter into such
Assignment and Acceptance.
ss. 18.3. Register. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentages of, and principal amount of the Loans owing to the Banks from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
and the Banks at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Bank agrees to pay to the
Agent a registration fee in the sum of $2,000.
ss. 18.4. New Notes. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
such assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt
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notice thereof to the REIT, the Borrower and the Banks (other than the assigning
Bank). Within five Business Days after receipt of such notice, the Borrower, at
its own expense, shall execute and deliver to the Agent, in exchange for each
surrendered Note, a new Note to the order of such Eligible Assignee in an amount
equal to the amount assumed by such Eligible Assignee pursuant to such
Assignment and Acceptance and, if the assigning Bank has retained some portion
of its obligations hereunder, a new Note to the order of the assigning Bank in
an amount equal to the amount retained by it hereunder. Such new Notes shall
provide that they are replacements for the surrendered Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the assigned
Notes. The surrendered Notes shall be canceled and returned to the Borrower.
ss. 18.5. Participation. Each Bank may sell participation to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Agreement and the other Loan Documents; provided that (a)
each such participation shall be in an amount of not less than $5,000,000, (b)
any such sale or participation shall not affect the rights and duties of the
selling Bank hereunder to the Borrower, (c) the only rights granted to the
participant pursuant to such participation arrangements with respect to waivers,
amendments or modifications of the Loan Documents shall be the rights to approve
waivers, amendments or modifications that would reduce the principal of or the
interest rate on any Loans, extend the term or increase the amount of the
Commitment of such Bank as it relates to such participant, reduce the amount of
any fees to which such participant is entitled or extend any regularly scheduled
payment date for principal or interest and (d) no participant shall have the
right to grant further participation or assign its rights, obligations or
interests under such participation to other Persons without the prior written
consent of the Majority Banks.
ss. 18.6. Pledge by Bank. Any Bank may at any time pledge all or any
portion of its interest and rights under this Agreement (including all or any
portion of its Note) to any of the twelve Federal Reserve Banks organized under
ss. 4 of the Federal Reserve Act, 12 U.S.C. ss. 341. No such pledge or the
enforcement thereof shall release the pledgor Bank from its obligations
hereunder or under any of the other Loan Documents.
ss. 18.7. No Assignment by REIT or Borrower. Neither the REIT nor the
Borrower shall assign or transfer any of its rights or obligations under any of
the Loan Documents without the prior written consent of each of the Banks.
ss. 18.8. Disclosure. The REIT and the Borrower agree that in addition to
disclosures made in accordance with standard banking practices any Bank may
disclose information obtained by such Bank pursuant to this Agreement to
assignees or participants and potential assignees or participants hereunder.
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ss. 19. NOTICES, ETC..
Except as otherwise expressly provided in this Agreement, all notices and
other communications made or required to be given pursuant to this Agreement or
the Note shall be in writing and shall be delivered in hand, mailed by United
States registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, telefax or telex and
confirmed by delivery via courier or postal service, addressed as follows:
(a) if to the REIT or the Borrower, c/o Berkshire Realty Company,
Inc., 470 Atlantic Avenue, Boston, Massachusetts 02210, Attention: Legal
Department, Telecopy No. (617) 556-1408, or at such other address for
notice as the REIT or the Borrower shall last have furnished in writing to
the Agent and the Banks;
(b) if to the Agent or BKB, at 100 Federal Street, Boston,
Massachusetts 02110, Attention: Real Estate Division, Telecopy No. (617)
434-0645 or such other address for notice as the Agent or BKB,
respectively, shall last have furnished in writing to the REIT, the
Borrower and the other Banks; or
(c) if to any Bank, at such Bank's address set forth on Schedule 1
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice. Any such notice or
demand shall be deemed to have been duly given or made and to have become
effective (i) if delivered by hand, overnight courier or facsimile to a
responsible officer of the party to which it is directed, at the time of
the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid,
on the third Business Day following the mailing thereof
ss. 20. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.
THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SUCH COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). THE REIT, THE BORROWER AND EACH GUARANTOR AGREE
THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR
ANY FEDERAL COURT SITTING THEREIN AND CONSENT TO THE NONEXCLUSIVE JURISDICTION
OF SUCH COURT AND TO SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
REIT, THE BORROWER OR SUCH
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GUARANTOR BY MAIL AT THE ADDRESS SPECIFIED IN ss. 19. THE REIT, THE BORROWER AND
SUCH GUARANTOR HEREBY WAIVE ANY OBJECTION THAT ANY OF THEM MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS
BROUGHT IN AN INCONVENIENT COURT.
ss. 21. HEADINGS.
The captions in this Agreement are for convenience of reference only and
shall not define or limit the provisions hereof
ss. 22. COUNTERPARTS.
This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
ss. 23. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Agreement nor any term hereof may
be changed, waived, discharged or terminated, except as provided in ss. 25.
ss. 24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.
EACH OF THE REIT, THE BORROWER, THE GUARANTORS, THE AGENT AND THE BANKS
HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF
THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY
PROHIBITED BY LAW, THE REIT, THE BORROWER AND EACH GUARANTOR HEREBY WAIVE ANY
RIGHT ANY OF THEM MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN
THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES
OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE REIT, THE
BORROWER AND EACH GUARANTOR (A) CERTIFY THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY BANK OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH BANK OR
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THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS AND (B) ACKNOWLEDGE THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES
BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS ss. 24.
ss. 25. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given, and any term of
this Agreement or of any other instrument related hereto or mentioned herein may
be amended, and the performance or observance by the Borrower of any terms of
this Agreement or such other instrument or the continuance of any Default or
Event of Default may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written consent
of the Majority Banks. Notwithstanding the foregoing, (a) the REIT and the
Borrower from time to time may provide supplements amending Schedule 6.19 hereto
(but not any other Schedule hereto) without the consent of the Majority Banks
and (b) the rate of interest on and the term of the Notes, the amount of the
Commitments of the Banks, and the amount of any fee payable to a Bank hereunder
may not be changed without the written consent of each Bank affected thereby;
the definition of Majority Banks may not be amended without the written consent
of all of the Banks; and the amount of the Agent's fee payable for the Agent's
account and the provisions of ss. 14 may not be amended without the written
consent of the Agent. No waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon. No course of dealing or
delay or omission on the part of the Agent or any Bank in exercising any right
shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice
to or demand upon the REIT or the Borrower shall entitle the REIT or the
Borrower to other or further notice or demand in similar or other circumstances.
The Majority Banks agree to respond in a timely fashion to any request for a
consent, approval, amendment, waiver or other action made by the REIT or the
Borrower hereunder.
ss. 26. SEVERABILITY.
The provisions of this Agreement are severable, and if any one clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
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ss. 27. CONFIDENTIALITY.
Neither the Agent nor any Bank will make any disclosure of confidential
information furnished to it under this Agreement or any other Loan Document by
the REIT, the Borrower or any Subsidiary or Nominee unless such information
shall have become public, except:
(a) in connection with operations under or the enforcement of this
Agreement or any other Loan Document;
(b) pursuant to any statutory or regulatory requirement or any
mandatory court order, subpoena or other legal process;
(c) to any parent or corporate affiliate of the Agent or such Bank, to
any participant or proposed participant under ss. 18.5 or to any proposed
assignee under ss. 18.1; provided, however, that before receiving any such
information (i) any such Person shall have agreed to comply with the
restrictions set forth in this ss. 27 with respect to such information and
(ii) in addition, in the case of a proposed assignee, the consent of the
REIT to such proposed assignee shall have been received as provided in ss.
18.1;
(d) to its independent counsel, auditors and other professional
advisors with an instruction to such Person to keep such information
confidential; and
(e) with the prior written consent of the REIT, to any other Person.
ss. 28. NO UNWRITTEN AGREEMENTS.
The written loan documents represent the final agreement between the
parties and may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties.
ss. 29. OBLIGATIONS JOINT AND SEVERAL.
The obligations and agreements of the REIT and the Borrower under this
Agreement and the other Loan Documents are joint and several.
-93-
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
-94-
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument as of the date first set forth above.
BERKSHIRE REALTY COMPANY, INC.
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
BRI OP LIMITED PARTNERSHIP
By Berkshire Apartments, Inc.,
its General Partner
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
BANKBOSTON, N.A., individually
and as Agent
By: /s/ [ILLEGIBLE]
-----------------------------------------
Authorized Officer
-95-
<PAGE>
BRI TEXAS APARTMENTS LIMITED PARTNERSHIP
By BRI Texas Apartments-II, Inc.,
its General Partner
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Vice President and Treasurer
BRI BENCHMARK LIMITED PARTNERSHIP
BRI COMMONS LIMITED PARTNERSHIP
By Berkshire Apartments, Inc., the
General Partner of each
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
BRI HUNTERS GLEN LIMITED
PARTNERSHIP
By BRI Hunters Glen - II, Inc.
its General Partner
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Vice President and Treasurer
-95-A
<PAGE>
BRI RIDGEVIEW CHASE
LIMITED PARTNERSHIP
By BRI Emerald, Inc.
its General Partner
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Senior Vice President and Treasurer
BRI DIAMOND RIDGE ASSOCIATES
LIMITED PARTNERSHIP
By BRI Baltimore - 31, L.L.C.
its General Partner
By Berkshire Apartments, Inc.,
its Manager
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Senior Vice President and Chief
Financial Officer
BRI FOXGLOVE ASSOCIATES, L.L.C.
By Berkshire Apartments, Inc.
its Manager
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Senior Vice President/Chief
Financial Officer
-96-
<PAGE>
BERKSHIRE APARTMENTS, INC.
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
BRI TEXAS APARTMENTS-II, INC.
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Vice President/Treasurer
BRI HUNTERS GLEN -II, INC.
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Vice President and Treasurer
BRI EMERALD, INC.
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Senior Vice President and Treasurer
-97-
<PAGE>
BRI BALTIMORE - 31, L.L.C.
By: Berkshire Apartments, Inc.
its Manager
By: /s/ MARIANNE PRITCHARD
-----------------------------------------
Marianne Pritchard
Senior Vice President and Chief
Financial Officer
-98-
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT A
FORM OF REVOLVING CREDIT NOTE
$ __________,1998
FOR VALUE RECEIVED, the undersigned BRI OP LIMITED PARTNERSHIP, a Delaware
limited partnership, hereby promises to pay to _______________ or order, in
accordance with the terms of the Credit Agreement hereinafter referred to, to
the extent not sooner paid, on January 31, 2000, ________________ DOLLARS ($ ),
or such amount as may be advanced by the payee hereof under said Credit
Agreement with daily interest from the date hereof, computed as provided in said
Credit Agreement, on the principal amount hereof from time to time unpaid, at a
rate per annum on each portion of the principal amount which shall at all times
be equal to the rate of interest applicable to such portion in accordance with
said Credit Agreement, and with interest on overdue principal and, to the extent
permitted by applicable law, on overdue installments of interest and late
charges at the rates provided in said Credit Agreement. Interest shall be
payable on the dates specified in said Credit Agreement, except that all accrued
interest shall be paid at the stated or accelerated maturity hereof or upon the
prepayment in full hereof.
Payments hereunder shall be made to BankBoston, N.A., as Agent for the
payee hereof, 100 Federal Street, Boston, Massachusetts 02110.
This Revolving Credit Note is one of one or more Revolving Credit Notes
evidencing borrowings under and is entitled to the benefits and subject to the
provisions of a certain Revolving Credit Agreement dated as of January 30, 1998,
as from time to time in effect, among the undersigned, Berkshire Realty Company,
Inc., a Delaware corporation, certain Guarantors named therein, BankBoston,
N.A., for itself and as Agent, and such other Banks as may be from time to time
named therein. The principal of this Revolving Credit Note may be due and
payable in whole or in part prior to the maturity date stated above and is
subject to mandatory prepayment in the amounts and under the circumstances set
forth in said Credit Agreement, and may be prepaid in whole or from time to time
in part, all as set forth in said Credit Agreement.
In case an Event of Default, as defined in said Credit Agreement, shall
occur, the entire principal amount of this Revolving Credit Note may become or
be declared due and payable in the manner and with the effect provided in said
Credit Agreement.
A-1
<PAGE>
This Revolving Credit Note shall be governed by and construed in accordance
with the laws of The Commonwealth of Massachusetts (without giving effect to the
conflict of laws rules of any jurisdiction).
The undersigned maker and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Revolving Credit Note, except as specifically otherwise provided in said Credit
Agreement, and assent to extensions of time of payment or forbearance or other
indulgence without notice.
BRI OP LIMITED PARTNERSHIP
By Berkshire Apartments, Inc.,
its General Partner
By
-------------------------------------
Title:
A-2
<PAGE>
EXHIBIT B
FORM OF LOAN OR CREDIT REQUEST
BankBoston, N.A., for Itself
and as Agent
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Ladies and Gentlemen:
Pursuant to the provisions of ss. 2.6 or ss. 2.9 of the Revolving Credit
Agreement dated as of January 30, 1998 (the "Credit Agreement"), among BRI OP
Limited Partnership (the "Borrower"), Berkshire Realty Company, Inc., certain
Guarantors named therein, BankBoston, N.A., for itself and as Agent, and the
other Banks from time to time party thereto, the Borrower hereby requests and
certifies as follows:
1. Revolving Loan. The Borrower hereby requests a Revolving Loan under ss.
2.1 of the Credit Agreement:
rincipal Amount: $
ype (Eurodollar, Base Rate):
rawdown Date: , 19
nterest Period:
by credit to the general account of the Borrower with the Agent at the Agent's
Head Office.
2. Letter of Credit. The Borrower hereby requests a Letter of Credit under
ss. 2.9 of the Credit Agreement:
Stated Amount: $
Issue Date:
Termination Date:
Beneficiary:
<PAGE>
Delivery Address:
3. No Default. The undersigned chief financial or chief accounting officer
of the Borrower certifies that the Borrower is and will be in compliance with
all covenants under the Loan Documents after giving effect to the making of the
Revolving Loan or the issuance of the Letter of Credit requested hereby.
Attached to this Loan or Credit Request is a Compliance Certificate prepared on
a pro forma basis using the financial statements of the Borrower most recently
provided or required to be provided under ss.6.4 or ss.7.4 of the Credit
Agreement adjusted in the best good-faith estimate of the Borrower to give
effect to the making of the Revolving Loan or the issuance of the Letter of
Credit requested hereby.
4. Representations True. Each of the representations and warranties of the
Borrower and its Subsidiaries contained in the Credit Agreement, in the other
Loan documents or in any document or instrument delivered pursuant to or in
connection with the Credit Agreement was true as of the date as of which it was
made and shall also be true at and as of the Drawdown Date for the Revolving
Loan or the date of issue of the Letter of Credit requested hereby, with the
same effect as if made at and as of such Drawdown Date or date of issue (except
to the extent of changes resulting from transactions contemplated or permitted
by the Credit Agreement and the other Loan Documents and changes occurring in
the ordinary course of business that singly or in the aggregate are not
materially adverse, and except to the extent that such representations and
warranties relate expressly to an earlier date) and no Default or Event of
Default has occurred and is continuing.
5. Other Conditions. All other conditions to the making of the Revolving
Loan or the issuance of the Letter of Credit requested hereby set forth in ss.
11 of the Credit Agreement have been satisfied.
6. Drawdown Date. Except to the extent, if any, specified by notice
actually received by the Agent prior to the Drawdown Date specified above, the
foregoing representations and warranties shall be deemed to have been made by
the Borrower on and as of such Drawdown Date.
7. Definitions. Terms defined in the Credit Agreement are used herein with
the meanings so defined.
B-2
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this ________ day of _____
199_.
BRI OP LIMITED PARTNERSHIP
By Berkshire Apartments, Inc.,
its General Partner
By
------------------------------------
Chief Financial or Chief
Accounting Officer
B-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT C
FORM OF
COMPLIANCE CERTIFICATE
BankBoston, N.A., for Itself and
as Agent
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Ladies and Gentlemen:
Reference is made to the Revolving Credit Agreement dated as of January 30,
1998 (the "Credit Agreement") by and among BRI OP Limited Partnership, a
Delaware limited partnership (the "Borrower"), Berkshire Realty Company, Inc., a
Delaware corporation, certain Guarantors named therein, BankBoston, N.A., for
itself and as Agent, and the other Banks from time to time party thereto. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as defined in the Credit Agreement.
Pursuant to ss.6.4 or ss.7.4 of the Credit Agreement, the Borrower is
furnishing to you herewith [or has most recently furnished to you] the financial
statements of the Borrower and its Subsidiaries for the fiscal period ended
__________ (the "Balance Sheet Date"). Such financial statements have been
prepared in accordance with generally accepted accounting principles and present
fairly, in all material respects, the financial position of the Borrower and the
Subsidiaries covered thereby at the date thereof and the results of their
operations for the periods covered thereby, subject in the case of interim
statements only to normal year-end audit adjustments and the addition of
footnotes.
This certificate is submitted in compliance with the requirements of ss.
2.6, ss. 2.9, ss.7.4(g), ss.7.5(e), ss.8.1(o), ss.8.9 or ss. 11.5(b) of the
Credit Agreement. If this certificate is provided under a provision other than
ss.7.4(z), the calculations provided below are made on a pro forma basis using
the financial statements of the Borrower and its Subsidiaries as of the Balance
Sheet Date adjusted in the best good-faith estimate of the Borrower to give
effect to the making of a Revolving Loan or disposition of property that
occasions the preparation of this certificate; and the nature of such event and
the Borrower's estimate of its effects are set forth in reasonable detail in an
attachment hereto. The undersigned officer of the Borrower is its chief
financial or chief accounting officer.
The undersigned officer has caused the provisions of the Credit Agreement
to be reviewed and has no knowledge of any Default or Event of Default. [Note:
If the signer does have knowledge of any Default or Event of Default, the form
of certificate should be revised
C-1
<PAGE>
to specify the Default or Event of Default, the nature thereof and the actions
taken, being taken or proposed to be taken by the Borrower with respect
thereto.]
The Borrower is providing the following information to demonstrate
compliance as of the Balance Sheet Date with the following covenants:
1. ss. 8.3(j)). Other Investments.
A. Consolidated Total Assets
Consolidated Total Assets (from Schedule 1, Part A) $_________
B. Other Investments (value to be calculated as
provided in the definition of "Consolidated Total
Assets" in ss. 1.1 if applicable, otherwise at book
value)
(i) Loans secured by mortgages or deeds of trust on
real property, referred to in clause (i) of ss.
8.3(j) (per balance sheet) $_________
(ii) Multifamily housing facilities "Under
Development" and raw land, referred to in
clause (ii) of ss. 8.3(j) (per balance sheet) _________
(iii) "Other Investments" in Real Estate (per
balance sheet) _________
(iv) Investments in real estate companies other than
Subsidiaries _________
Total (i) through (iv) $_________
B divided by A equals (may not exceed 25%): ________%
Item B (ii) divided by A equals (may not exceed 15%): ________%
2. ss. 8.8. Borrower Distributions.
A. Consolidated Funds From Operations
Consolidated net income for most recent quarter
(per income statement) $_________
C-2
<PAGE>
Minus gains (or losses) from debt restructuring
and sales of property (________)
Plus depreciation and amortization __________
Adjustments for unconsolidated partnerships and
joint ventures __________
Subtotal for most recent quarter $_________
Consolidated Funds From Operations for three prior
quarters:
Quarter ended _________ _________
Quarter ended _________ _________
Quarter ended _________ _________
Total $_________
B. Distributions for Test Period
Subtotal for most recent quarter $_________
Distributions for three prior quarters:
Quarter ended _________ _________
Quarter ended _________ _________
Quarter ended _________ _________
Total $_________
B divided by A equals (may not exceed 90% except
to extent that Distributions are required to
maintain REIT Status): _________%
3. ss. 8.10(c). Interest Rate Protection.
A. Consolidated Total Assets
Consolidated Total Assets (per Schedule 1, Part A) $_________
C-3
<PAGE>
Times 20% __________
B. Floating Rate and Short-Term Debt
Revolving Loans $_________
Other floating rate debt __________
Other short-term debt __________
Total $_________
C. B minus A = $_________
D. Notional amount of interest rate protection $_________
D must exceed C.
4. ss. 9.1. Leverage Ratio.
A. Consolidated Total Indebtedness
Consolidated Total Indebtedness (per Schedule 1,
Part B) $_________
B. Consolidated Total Assets
Consolidated Total Assets (per Schedule 1, Part A) __________
A divided by B (may not exceed 55%): _________%
5. ss. 9.2. Interest Coverage.
A. Consolidated EBITDA for Test Period
Consolidated Net Income for most recent quarter
(per income statement) $_________
Plus depreciation and amortization __________
Plus Interest Expense __________
Plus taxes __________
C-4
<PAGE>
Plus extraordinary or nonrecurring losses __________
Minus extraordinary or nonrecurring gains (________)
Subtotal for most recent quarter $_________
Consolidated EBITDA for three prior quarters:
Quarter ended _________ _________
Quarter ended _________ _________
Quarter ended _________ _________
Total $_________
B. Consolidated Interest Expense
Subtotal for most recent quarter (per income statement) $_________
Consolidated Interest Expense for three prior quarters:
Quarter ended _________ __________
Quarter ended _________ __________
Quarter ended _________ __________
Total $_________
A divided by B equals (may not be less than 200%): _________%
6. ss. 9.3. Debt Service Coverage.
A. Consolidated Operating Cash Flow for Test Period
Consolidated net income for most recent quarter
(per income statement) $_________
Minus gains (or losses) from debt restructuring
and sales of property (________)
C-5
<PAGE>
Plus depreciation and amortization __________
Adjustments for unconsolidated partnerships and
joint ventures __________
Subtotal = Funds From Operations $_________
Plus Interest Expense __________
Minus an allowance for capital expenditure
requirements computed at the annual rate of $200
per unit for multifamily housing projects as
provided in the definition of "Operating Cash
Flow" in ss. 1.1 (________)
Subtotal for most recent quarter $_________
Consolidated Operating Cash Flow for three prior
quarters:
Quarter ended _________ _________
Quarter ended _________ _________
Quarter ended _________ _________
Total $_________
B. Consolidated Fixed Charges for Test Period
Consolidated Interest Expense for most recent
quarter (per income statements) $_________
Plus principal payments (excluding principal paid
from proceeds of permitted refunding debt) __________
Plus preferred Distributions __________
Subtotal for most recent quarter $_________
Consolidated Fixed Charges for three prior
quarters:
C-6
<PAGE>
Quarter ended _________ __________
Quarter ended _________ __________
Quarter ended _________ __________
Total $_________
A divided by B equals (may not be less than 175 %):
7. ss. 9.4. Minimum Consolidated Tangible Net Worth
A. Consolidated Tangible Net Worth
Partners equity (per balance sheet) $_________
Minus adjustments for certain increases in
partners' equity (________)
Minus treasury stock, ESOP receivables
and guarantees of ESOP debt (________)
Minus goodwill and other intangibles (________)
Total $_________
B. Certain Increases in Consolidated Capital
(since December 31, 1997)
Net amount realized from issuance of equity
securities $_________
Plus amount realized from receipt of
capital contributions __________
Total $_________
A minus ($__________ plus 75 % of B) equals: __________
(A must equal or exceed $__________ plus 75% of B.)
8. Secured Debt
A. Secured Debt
C-7
<PAGE>
Secured Non-recourse Indebtedness $_________
Capitalized Leases and purchase money debt __________
FNMA secured debt __________
Durham construction loan __________
Other permitted secured debt __________
Total $_________
B. Consolidated Total Assets
From item 1(A)above $_________
A divided by B (may not exceed 40%) = _________%
9. Recourse Debt
Capitalized Leases and purchase money debt $_________
FNMA debt (unless non-recourse) __________
Certain existing debt __________
Durham construction loan __________
Other permitted debt __________
Total (may not exceed $80,000,000)= $_________
C-8
<PAGE>
IN WITNESS WHEREOF, the undersigned, officer of the Borrower has set his or
her hand and seal this ______ day of _______, 199_.
BRI OP LIMITED PARTNERSHIP
By Berkshire Apartments, Inc.,
its General Partner
By:
-----------------------------------
Chief Financial or Chief
Accounting Officer
C-9
<PAGE>
Compliance Certificate Schedule 1
Calculation of Consolidated Total Assets and
Consolidated Total Indebtedness as of
Balance Sheet Date
A. Consolidated Total Assets
1. Aggregate value of Real Estate owned in fee (from
Worksheet #1, attached): $_________
Plus
2. Aggregate value of Real Estate owned by joint
venture or unconsolidated subsidiary (from
Worksheet #2, attached): $_________
Plus
3. Aggregate book value of mortgage loans owned
(excluding loans on properties owned in fee by the
Borrower or a Consolidated Subsidiary) (from
balance sheet) $_________
Minus (without double counting) related reserves (________)
Total $_________
Plus
4. Aggregate book value of raw land and construction
work in progress (not included above) (from
balance sheet) $_________
Plus
5. Aggregate book value of other tangible or
financial assets (from balance sheet) $_________
Minus (without double counting) related reserves (________)
C-10
<PAGE>
Total $_________
Subtotal of Items 1 through 5 $_________
Minus
6. All intangible assets included above, including
without limitation any goodwill or deferred debt
cost (________)
7. Mortgage-backed securities securing Indebtedness
excluded from Consolidated Total Indebtedness (________)
8. Any other deductions (________)
Subtotal deductions (________)
Total= $_________
B. Consolidated Total Indebtedness
All liabilities (from balance sheet) $_________
Minus minority interests recorded as liabilities on the
balance sheet of any Subsidiary (________)
Minus Indebtedness secured solely by mortgage-backed
securities (________)
Plus additional contingent liabilities not included
above __________
Plus guarantees of debt of joint ventures not included
above __________
Total $_________
Note: If any guarantee is valued at less than the full principal amount
thereof pursuant to the last sentence of the definition of
"Consolidated Total Indebtedness", provide a full explanation below or
on a separate sheet.
C-11
<PAGE>
Compliance Certificate Schedule I -- Worksheet #1:
Value of Real Estate Owned in Fee by Borrower or Consolidated Subsidiary
A. Properties Held for More Than One Year
Name Adjusted N.O.I. Capitalization Rate Va1ue
- ---- --------------- ------------------- -----
$______________ 9% $____
Total Value of
Category A: $_______
C-12
<PAGE>
B. Properties Held for Less Than One Year
Cost
(including
Acquisition completed
Name Date improvements Value
---- ---- ------------ -----
$___________ $______
Total Value of
Category B: $_______
Total Item 1: $
========
C-13
<PAGE>
Compliance Certificate Schedule I -- Worksheet #2:
Value of Real Estate Owned in Part by Joint Venture or Unconsolidated
Subsidiary
A. Properties Held for More Than One Year
<TABLE>
<CAPTION>
Joint
Venture Property Adjusted Capitalization Gross Net BRI
Discount* Value N.O.I. Rate Value Debt Value* Percentage*
--------- ----- ------ -------------- ----- ---- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$______ __% $___ $___ ___% ___% $______
Total Value of
Category A: $______
</TABLE>
- ----------
* If applicable.
C-14
<PAGE>
B. Properties Held for Less Than One Year
<TABLE>
<CAPTION>
Cost
(including Actual
Joint Acquisition completed Adjusted Gross Net BRI
Venture Property Date improvements) N.O.I. Value Debt Value* %* Discount* Value
------- -------- ---- ------------- ------ ----- ------ ------ --- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$_________ $______ $______ $_____ $_____ __% 10% $_____
Total Value of
Category B: $________
Total Item 2 = $
=========
</TABLE>
- ----------
* If applicable.
C-15
<PAGE>
EXHIBIT D
FORM OF
BORROWING BASE CERTIFICATE
BankBoston, N.A., for Itself and
as Agent
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Ladies and Gentlemen:
Reference is made to the Revolving Credit Agreement dated as of January 30,
1998 (the "Credit Agreement") by and among BRI OP Limited Partnership, a
Delaware limited partnership (the "Borrower"), Berkshire Realty Company, Inc., a
Delaware corporation, certain Guarantors named therein, BankBoston, N.A., for
itself and as Agent, and the other Banks from time to time party thereto. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as defined in the Credit Agreement.
Pursuant to ss. 6.4 or ss. 7.4 of the Credit Agreement, the Borrower is
furnishing to you herewith [or has most recently furnished to you] the financial
statements of the Borrower and its Subsidiaries for the fiscal period ended
__________ (the "Balance Sheet Date").
This certificate is submitted in compliance with the requirements of ss.
2.6, ss. 2.9, ss. 7.4(m), ss. 7.5(e), ss. 8.1(o) or ss. 8.9 of the Credit
Agreement. If this certificate is provided under a provision other than ss.
7.4(m), the calculations provided below are made on a pro forma basis using the
financial statements of the Borrower and its Subsidiaries as of the Balance
Sheet Date adjusted in the best good-faith estimate of the Borrower to give
effect to the disposition of property that occasions the preparation of this
certificate; and the nature of such event and the Borrower's estimate of its
effects are set forth in reasonable detail in an attachment hereto. The
undersigned officer of the Borrower is its chief financial or chief accounting
officer.
D-1
<PAGE>
I. BORROWING BASE VALUES
A. Eligible Real Estate
Adjusted Net
Operating Income
for Four Quarters
Ending Balance Capitalized Value
Name Sheet Date @ 9% Rate
- ---- ---------- ---------
$ $
B. Eligible Real Estate Recently Acquired
Purchase Capitalized
Name Price Improvements Total
- ---- ----- ------------ -----
$ $ $
C. Other Borrowing Base Property
Name Appraised Value
---- ---------------
$
D-2
<PAGE>
II. ADVANCE VALUES
A. Borrowing Base Properties
Lesser
60% of Cash of Values
Borrowing Flow Tax minus Tax
Name Base Value Value Adjustment Adjustment
- ---- ---------- ----- ---------- ----------
$ $ ($ ) $
Total= $
==========
B. Borrowing Base Properties Recently Approved
60% of
Borrowing
Name Base Value
---- ----------
$
Total= $
=========
D-3
<PAGE>
III. J.V. ADVANCE VALUES
40% or 5O% J.V.
Appraisal Percentage Tax Advance
Name (as applicable} Ownership Adjustment Maine
- ---- --------------- --------- ---------- -----
$ % ($ )
Total= $
=========
D-4
<PAGE>
IV. BORROWING BASE AVAILABILITY
Advance Values of Borrowing
Base Properties (item IIA) $____________
Advance Values of Borrowing
Base Properties recently
acquired (item IIB)
________________
J.V. Advance Values (item III) _____________
Subtotal $
=============
Minus amount by which any individual
Advance Value or J.V. Advance
Value exceeds 15% of Subtotal (____________)
Minus amount by which aggregate
Advance Values and/or J.V.
Advance Values of properties
that are not multifamily
having facilities exceed 10%
of Subtotal (____________)
Minus amount by which J.V.
Advance Values (item III)
exceed 10% of Subtotal (____________)
Total= $
============
In connection with the foregoing, the undersigned certifies that each of
the Borrowing Base Properties listed above, as of the date hereof, meets all
requirements of being Eligible Real Estate, except only for requirements which
were specifically excepted by the Majority Banks in their approval of Real
Estate that is not Eligible Real Estate to become Borrowing Base Property under
the Credit Agreement.
D-5
<PAGE>
IN WITNESS WHEREOF, the undersigned officer of the Borrower has set his or
her hand and seal this __ day of _______,199_
BRI OP LIMITED PARTNERSHIP
By Berkshire Apartments, Inc.,
its General Partner
By:_______________________________
Chief Financial or Chief
Accounting Officer
D-6
<PAGE>
EXHIBIT E
FORM OF
ASSIGNMENT AND ACCEPTANCE
Dated as of ____________, 19__
Reference is made to the Revolving Credit Agreement dated as of January 30,
1998 (as amended and in effect from time to time, the "Credit Agreement"), by
and among BRI OP Limited Partnership, a Delaware limited partnership (the
"Borrower") Berkshire Realty Company, Inc., a Delaware corporation (the "REIT"),
certain Guarantors named therein, the financial institutions listed from time to
time party thereto (collectively, the "Banks") and BankBoston, N.A., as agent
(in such capacity, the "Agent") for the Banks. Terms defined in the Credit
Agreement and used herein without definition shall have the respective meanings
herein assigned to such terms in the Credit Agreement.
[Name of Assigning Lender] (the "Assignor") and [Name of Assignee] (the
"Assignee") hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee and the Assignee
hereby purchases and assumes from the Assignor, a ___________ percent (___%)
interest in all of the Assignor's rights and obligations under the Credit
Agreement as of the Assignment Date (as defined in paragraph 4 below),
including, without limitation, (a) the Assignor's obligation to make Loans
thereunder and (b) the Assignor's interest in all unpaid interest and commitment
fees accrued as of the Assignment Date.
2. (a) The Assignor (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) represents that as
of the date hereof, before giving effect to the assignment contemplated hereby,
its Commitment is $__________ and the aggregate outstanding principal balance of
the Loans made by it equals $________; (iii) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of any Loan Document or any other instrument or document furnished pursuant
thereto, other than that it is the legal and beneficial owner of the interest
being assigned by it hereunder and that such interest is free and clear of any
adverse claim; (iv) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
REIT or the performance or observance by the Borrower or the REIT of its
obligations under the other Loan Documents to which it is a party or any other
instrument or document delivered or executed pursuant thereto; and (v) attaches
to the copy hereof forwarded to the Agent the Note held by it.
E-1
<PAGE>
(b) The Assignor requests that the Agent exchange its Note for new
Notes executed by the Borrower and payable to each of the Assignor and the
Assignee as follows:
Notes Payable to
the Order of: Amount of Notice
------------- ----------------
[Assignor] $_________________
[Assignee] $_________________
3. The Assignee (a) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (b) confirms that it has received
a copy of the Loan Documents, together with copies of the most recent financial
statements delivered pursuant to ss. 7.4 of the Credit Agreement and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (c) agrees
that it will, independently and without reliance upon the Assignor, any other
Bank, or the Agent and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents; (d) appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers as
are reasonably incidental thereto pursuant to the terms of the Loan Documents;
(e) agrees that it will perform in accordance with their terms all the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Bank; and (f) agrees not to disclose confidential
information of the Borrower or any Subsidiary, Nominee or Indemnitor as and to
the extent provided in ss. 27 of the Credit Agreement.
4. The effective date for this Assignment and Acceptance shall
be__________, 19__ (the "Assignment Date"). Following the execution of this
Assignment and Acceptance, each party hereto and each Person consenting hereto
shall deliver its duly executed counterpart hereof to the Agent for acceptance
and recording in the Register by the Agent.
5. Upon such acceptance and recording, from and after the Assignment Date,
(i) the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Bank thereunder, and (ii) the Assignor shall, with respect to that portion of
its interest under the Credit Agreement assigned hereunder, relinquish its
rights and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording, from and after the Assignment Date,
the Agent shall make all payments in respect of the rights and interests
assigned hereby (including payments of principal, interest, fees and other
amounts) to the Assignee. On the Assignment Date, the Assignee wil1 pay to the
Agent for the pro rata account of the Assignor an amount
E-2
<PAGE>
equal to the percentage of the Assignor's interest assumed by the Assignee
hereunder, times the aggregate outstanding principal amount of the Loans made by
the Assignor.
7. THIS ASSIGNMENT AND ACCEPTANCE IS INTENDED TO TAKE EFFECT AS A SEALED
INSTRUMENT FOR ALL PURPOSES TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICT OF
LAWS).
8. This Assignment and Acceptance may be executed in any number of
counterparts which shall together constitute but one and the same agreement.
IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned
has caused this Assignment and Acceptance to be executed on its behalf by its
officer thereunto duly authorized, as of the date first above written.
[ASSIGNOR]
By: _________________________
Title:
[ASSIGNEE]
By: _________________________
Title:
CONSENTED TO:
BANKBOSTON, N.A.,
as Agent
By: _________________________
Authorized Officer
E-3
<PAGE>
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<PAGE>
SCHEDULE 1
BANKS AND COMMITMENTS
Name and Commitment
Address Commitment Percentage
------- ---------- ----------
BankBoston, N.A. $130,000,000 100%
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Fax: (617) 434-0645
Eurodollar Lending Office:
Same as above
------------ ----
$130,000,000 100%
<PAGE>
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<PAGE>
SCHEDULE 2 BORROWING BASE PROPERTIES
<TABLE>
<CAPTION>
Borrowing
Name Location Base Values Advance Values Owner
---- -------- ----------- -------------- -----
<S> <C> <C> <C> <C>
Benchmark Irving, Texas $ 9,450,941 $ 5,670,565 BRI Benchmark Limited Partnership
Hunters Glen Plano, Texas 11,812,909 7,087,745 BRI Hunters Glen Limited Partnership
Providence Dallas, Texas 6,909,097 4,145,458 BRI Commons Limited Partnership
Stoneledge Plantation Greenville, South Carolina 13,100,281 7,860,169 BRI OP Limited Partnership
Sun Chase Bradenton, Florida 5,905,495 3,543,297 BRI OP Limited Partnership
Huntington Brook Dallas, Texas 12,312,479 7,387,487 BRI Texas Apartments Limited Partnership
Huntington Lake Dallas, Texas 18,333,529 11,000,117 BRI Texas Apartments Limited Partnership
Huntington Ridge Irving, Texas 9,621,428 5,772,857 BRI Texas Apartments Limited Partnership
Summer Place Dallas, Texas 7,542,865 4,525,719 BRI Texas Apartments Limited Partnership
Sweetwater Richardson, Texas 20,732,895 12,439,737 BRI Texas Apartments Limited Partnership
Liriope Belcamp, Maryland 7,623,956 4,574,374 BRI Foxglove Associates L.L.C.
Ridgeview Chase Westminster, Maryland 11,923,488 7,154,093 BRI Ridgeview Chase Limited Partnership
Diamond Ridge Baltimore, Maryland 4,646,934 2,788,160 BRI Diamond Ridge Associates Limited Partnership
Hilltop Baltimore, Maryland 1,259,502 755,701 BRI OP Limited Partnership
----------- -----------
$141,175,799 $84,705,479
============ ===========
</TABLE>
<PAGE>
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<PAGE>
SCHEDULE 6.3 BALANCE SHEET EXCEPTIONS
NONE
<PAGE>
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<PAGE>
SCHEDULE 6.7 LITIGATION
NONE
<PAGE>
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<PAGE>
SCHEDULE 6.16 BENEFIT PLANS
(I) Berkshire Realty Company, Inc. 401(k) Plan
Plan 100
(II) Berkshire Group's Employee and Dependent Group Medical and Dental Plan
Plan 501
(III) Berkshire Financial Company Limited Partnership Employee Group Life and
Accidental Death and Dismemberment Plan
Plan 502
(IV) Berkshire Group Employee Group Long Term Disability Plan
Plan 503
(V) Berkshire Group Employee Group Business Travel Life Insurance Plan
Plan 504
(VI) BRI OP Limited Partnership Supplemental Executive Retirement Plan
(VII) BRI OP Limited Partnership Deferred Compensation Plan
<PAGE>
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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SCHEDULE 6.19
BERKSHIRE REALTY COMPANY, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
ENTITY NAME PURPOSE/OWNER OF GENERAL PARTNER(S) LIMITED PARTNER(S)
====================================================================================================================================
<S> <C> <C> <C>
BRI OP Limited Partnership Arbors at Breckinridge Apartments, Arbors Berkshire Apartments, Inc. Berkshire Realty
at Breckinridge Land, The Avalon on Company, Inc. and others
Abernathy, The Berkshires Apartments,
British Woods Apartments, Brookfield
Trace Apartments, Brookwood Valley
Apartments, Chestnut Hill Villa
Apartments, College Plaza Shopping
Center, Cumberland Cove Apartments,
Cumberland Cove II, Durham Land, East
Lake Village Apartments, Hilltop
Apartments, Highland Ridge Apartments,
Huntington Downs Apartments, The Lakes
at Jacaranda Apartments, The Oaks
Apartments, Polos West Apartments,
Roper Mountain Woods Apartments,
Southpoint at Massapequa Apartments,
Stoneledge Plantation Apartments,
Sunchase Apartments, Tara Crossing
Shopping Center, Windover Apartments
and Woodland Meadows Land
- ------------------------------------------------------------------------------------------------------------------------------------
Bill Altamonte Limited Altamonte Bay Club Apartments BRI Altamonte-II, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Arborview Associates Arborview Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Benchmark Limited Benchmark Apartments Berkshire Apartments, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Calvert's Walk Associates Calvert's Walk Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Commons Limited The Providence Apartments Berkshire Apartments, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Conventry Park Limited Golf Side Apartments Berkshire Apartments, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SCHEDULE 6.19
BERKSHIRE REALTY COMPANY, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
ENTITY NAME PURPOSE/OWNER OF GENERAL PARTNER(S) LIMITED PARTNER(S)
====================================================================================================================================
<S> <C> <C> <C>
BRI Countrywood General Countrywood Apartments BRI River Oaks Limited N/A
Partnership Partnership
BRI Texas Apartments Limited
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Diamond Ridge Associates Diamond Ridge Apartments BRI Baltimore - 31, L.L.C. BRI OP Limited Partnership
Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Fairbrook Associates Stratton Meadows Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Fourth Rolling Road Courtleigh Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Associates Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Frederick Road Associates Jamestown Apartments BRI Baltimore - 22, L.L.C. N/A
BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Frederick Road II General Maker of note collateralized by BRI Baltimore- 22, L.L.C. N/A
Partnership Jamestown Apartments BRI Frederick Road Associates
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Harper's Mill Limited BRI Harper's Mill Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Henley Associates Limited Rolling Wind Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Heritage Hill Limited The Channel Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Hidden Oaks Partnership Pleasant Wood Apartments BRI River Oaks Limited N/A
Partnership
BRI Texas Apartments Limited
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Hunters Glen Limited Hunters Glen Apartments BRI Hunters Glen-II, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Huntington Chase Limited Huntington Chase at Indian Trail BRI Huntington Chase-II, BRI OP Limited Partnership
Partnership Apartments Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Lamplighter Ridge Limited The Lighthouse Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Newport Limited Newport Apartments BRI Newport-II, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SCHEDULE 6.19
BERKSHIRE REALTY COMPANY, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
ENTITY NAME PURPOSE/OWNER OF GENERAL PARTNER(S) LIMITED PARTNER(S)
====================================================================================================================================
<S> <C> <C> <C>
BRI OP Management Limited Employer of certain BRI Apartments, Inc. BRI OP Limited Partnership
Partnership management personnel
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Park Colony-Woodland Park Colony Apartments BRI Park Colony-Woodland-II, BRI OP Limited Partnership
Limited Partnership and Woodland Meadows Apartments Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Plainfleld Associates Hazelcrest Apartments BRI Baltimore-23, L.L.C. N/A
BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Plaintield II General Maker of note collateralized by BRI Baltimore-23, L.L.C, N/A
Partnership Hazelcrest Apartments BRI Plainfield Associates
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Plantation Colony Limited Plantation Colony Apartments BRI Plantation Colony-II, BRI OP Limited Partnership
Partnership Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Purnell Associates Fairway Ridge Apartments BRI Baltimore-24, L.L.C. N/A
BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Purnell Associates II Maker of note collateralized by Fairway BRI Baltimore - 24, L.L.C. N/A
General Partnership Ridge Apartments BRI Purnell Associates
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Ridgeview Chase Associates Ridgeview Chase Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI River Oaks Limited River Oaks Apartments BRI River Oaks-II, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Rolling Road Associates Heraldry Square Apartments BRI Baltimore - 25, L.L.C. N/A
BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Rolling Road II General Maker of note collateralized by BRI Baltimore - 25, L.L.C. N/A
Partnership Heraldry Square Apartments BRI Rolling Road Associates
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Second Kingswood Common Maker of note collateralized by BRI Baltimore - 26, L.L.C. N/A
II General Partnership Kingswood Common II Apartments BRI Second Kingwood
Common Associates
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SCHEDULE 6.19
BERKSHIRE REALTY COMPANY, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
ENTITY NAME PURPOSE/OWNER OF GENERAL PARTNER(S) LIMITED PARTNER(S)
====================================================================================================================================
<S> <C> <C> <C>
BRI Second Kingswood Common Kingswood Common II Apartments BRI Baltimore - 26, L.L.C. BRI OP Limited Partnership
Associates Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Second Rolling Road Kingswood Common I Apartments BRI Baltimore - 27, L.L.C. N/A
Associates BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Second Rolling Road II Maker of note collateralized by BRI Baltimore - 27, L.L.C. N/A
General Partnership Kingswood Common I Apartments BRI Second Rolling Road
Associates
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Southwest Apartments Indigo Land Berkshire Apartments, Inc. BRI OP Limited Partnership
Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Texas Apartments Limited Huntington, Brooks, Huntington Lakes, BRI Texas Apartments-II, BRI OP Limited Partnership
Partnership Huntington Ridge, Kings Crossing Inc.
Apartments, Kingwood Lakes Apartments,
The Indigo on Forest, Prescott Place
Apartments, Prescott Place-II Apartments,
Summer Apartments and Sweetwater
- ------------------------------------------------------------------------------------------------------------------------------------
BRI The Estates Limited The Estates Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI The Point Limited The Point Apartments BRI Texas Apartments BRI OP Limited Partnership
Partnership Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Third RollIng Road Coventry Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Associates Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Timbers Limited The Timbers Apartments BRI Timbers - II, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Warren Park Associates Warren Park Apartments BRI Baltimore - 29, L.L.C. N/A
BRI 0P Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Warren Park II General Maker of note collateralized by Warren BRI Baltimore -29, L.L.C. N/A
Partnership Park Apartments BRI Warren Park Associates
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Washington Square Limited The Cove Apartments BRI Emerald, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SCHEDULE 6.19
BERKSHIRE REALTY COMPANY, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
ENTITY NAME PURPOSE/OWNER OF GENERAL PARTNER(S) LIMITED PARTNER(S)
====================================================================================================================================
<S> <C> <C> <C>
BRI Westchester Limited Westchester Apartments BRI Westchester, Inc. BRI OP Limited Partnership
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Williston Associates Williston Apartments BRI Baltimore - 28, L.L.C. N/A
BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Williston II General Maker of note collateralized by BRI Baltimore - 28, L.L.C. N/A
Partnership Williston Apartments BRI Williston Associates
- ------------------------------------------------------------------------------------------------------------------------------------
Spring Valley Partnership Spring Valley Marketplace Krupp Cash Plus-V N/A
Limited Partnership
BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SCHEDULE 6.19
BERKSHIRE REALTY COMPANY, INC.
CORPORATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
ENTITY NAME PURPOSE/OWNER OF STOCKHOLDER(S) MEMBER(S)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Berkshire Realty Company, Real estate investment trust Traded on the NYSE N/A
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Berkshire Apartments, Inc. General partner of Berkshire Realty Company, N/A
BRI Southwest Apts. Limited Partnership, Inc.
BRI Coventry Park Limited Partnership,
BRI Commons Limited Partnership and
BRI Benchmark Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Altamonte-II, Inc. General partner of Berkshire Realty Company, Inc. N/A
BRI Altamonte Limited Partnership Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Baltimore - 22, L.L.C. General partner of N/A Berkshire Realty Company, Inc.
BRI Frederick Associates BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Baltimore - 23, L.L.C. General partner of N/A Berkshire Realty Company, Inc.
BRI Plainfleld Associates BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Baltimore - 24, L.L.C. General partner of N/A Berkshire Realty Company, Inc.
BRI Purnell Associates BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Baltimore -25, LILC. General partner of N/A Berkshire Realty Company, Inc.
BRI Rolling Road Associates BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI BaltImore - 26, L.L.C. General partner of BRI Second N/A Berkshire Realty Company, Inc.
Kingswood Common Associates BRI OP LimIted Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Baltimore - 27, L.L.C. General partner of N/A Berkshire Realty Company, Inc.
BRI Second Rolling Road Associates BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Baltimore - 28, L.L.C. General partner of N/A Berkshire Realty Company, Inc.
BRI Williston Associates BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Baltimore - 29, L.L.C. General partner of N/A Berkshire Realty Company, Inc.
BRI Warren Associates BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SCHEDULE 6.19
BERKSHIRE REALTY COMPANY, INC.
CORPORATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
ENTITY NAME PURPOSE/OWNER OF STOCKHOLDER(S) MEMBER(S)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BRI Baltimore - 31, L.L.C. General partner of BRI Diamond Ridge N/A Berkshire Realty Company, Inc.
Associates Limited Partnership BRI OP Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Emerald, Inc. General partner of Berkshire Realty Company, Inc. N/A
BRI Harper's Mill Limited Partnership
BRI Heritage Hill Limited Partnership
BRI Lamplighter Ridge Limited Partnership
BRI Washington Sq. Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Foxglove Associates Owner of Liriope Apartments N/A BRI OP Limited Partnership
L.L.C.
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Huntington Chase-II, General partner of BRI Huntington Berkshire Realty Company, Inc. N/A
Inc. Chase Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Newport-II, Inc. General partner of Berkshire Realty Company, Inc. N/A
BRI Newport Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Park Colony-Woodland- General partner of BRI Park Colony - Berkshire Realty Cotnpauy, Inc. N/A
II, Inc. Woodland Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Plantation Colony-II, General partner of BRI Berkshire Realty Company, Inc. N/A
Inc. Plantation Colony Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI River Oaks-II Inc. General partner of BRI River Berkshire Realty Company, Inc. N/A
Oaks Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Texas Apartments-II, General partner of BRI Texas Berkshire Realty Company, Inc. N/A
Inc. Apartments Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Timbers-II, Inc. General partner of BRI Timbers Berkshire Realty Company, Inc. N/A
Limited Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
BRI Westchester, Inc. General partner of Berkshire Realty Company, Inc. N/A
BRI Westchester Limited Partnership
====================================================================================================================================
</TABLE>
<PAGE>
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<PAGE>
SCHEDULE 8.1 OUTSTANDING INDEBTEDNESS
NONE
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SCHEDULE 8.2 OUTSTANDING LIENS
NONE
BRI OP LIMITED PARTNERSHIP
470 Atlantic Avenue
Boston, Massachusetts 02210
AMENDMENT NO. 1 OF
REVOLVING CREDIT AGREEMENT
As of April 15, 1998
BANKBOSTON, N.A.,
for Itself and as Agent
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Ladies and Gentlemen:
Each of BRI OP Limited Partnership, a Delaware limited partnership (the
"Borrower"), and Berkshire Realty Company Inc., a Delaware corporation (the
"REIT"), and the undersigned Guarantors hereby agrees with you as follows:
1. Reference to Credit Agreement and Definitions. Reference is made to the
Revolving Credit Agreement dated as of January 30, 1998 (the "Credit
Agreement"), among the Borrower, Berkshire Realty Company, Inc., certain
Guarantors named therein and you. Capitalized terms defined in the Credit
Agreement and not otherwise defined herein are used herein with the meanings
given to them in the Credit Agreement.
2. Reason for Amendment. The parties have agreed to correct or clarify certain
provisions of the Credit Agreement by amending the Credit Agreement accordingly.
3. Amendments. On the basis of the representations and warranties of the REIT
and the Borrower set forth herein, the Credit Agreement is hereby amended,
effective as of the date hereof, as follows:
3.1. Section 1.1 of the Credit Agreement is amended by amending paragraph
(b) of the definition of "Eligible Real Estate" to read in its entirety as
follows:
(b) which is owned in fee by the Borrower or any Wholly Owned
Subsidiary which is a Guarantor or title to which is held for the benefit
of the Borrower or any Wholly Owned Subsidiary which is a Guarantor in the
name of a Nominee which is a Wholly Owned Subsidiary;
<PAGE>
3.2. Section 1.1 of the Credit Agreement is further amended by amending the
definition of "Interest Expense" to read in its entirety as follows:
Interest Expense. With respect to any Person for any fiscal period,
the interest expense of such Person for such fiscal period determined in
accordance with generally accepted accounting principles plus, without
duplication, all capitalized interest of such Person for such fiscal
period.
3.3. Section 1.1 of the Credit Agreement is further amended by amending the
definition of "Majority Banks" to read in its entirety as follows:
Majority Banks. Banks holding 66%% of the Commitments; provided,
however, that in the event the obligations of the Banks to make Loans or
issue Letters of Credit hereunder shall have been terminated, Banks holding
66%% of the sum of the outstanding principal amount of the Loans plus the
participations under ss. 2.11 in the Letter of Credit Exposure; and
provided, further, that the Commitment or, as the case may be, Loans and
Letter of Credit Exposure participations of any Delinquent Bank (as defined
in ss. 14.5(c)) shall not be included in the calculation of Majority Banks.
3.4. Section 1.1 of the Credit Agreement is further amended by amending the
definition of "Operating Cash Flow" to read in its entirety as follows:
Operating Cash Flow. With respect to any Person for any fiscal period,
an amount equal to EBITDA for such fiscal period minus an allowance for
capital expenditure requirements computed at the annual rate of $200 per
unit for multifamily housing projects and minus such allowance for capital
expenditure requirements on properties other than multifamily housing
projects in such amounts as may be agreed between the Borrower and the
Majority Banks.
3.5. Section 8.11 of the Credit Agreement is amended to read in its
entirety as follows:
ss. 8.11. Certain Guarantees. None of the Non-recourse Indebtedness of
the Borrower or any Subsidiary or Nominee shall be guaranteed by the REIT
or the Borrower or any Subsidiary or Nominee; provided, however, that two
or more issues of Non-recourse Indebtedness of Special Purpose Subsidiaries
may be cross-guaranteed and cross-collateralized if, and only if, each of
such guarantees constitutes Non-recourse Indebtedness and the loan-to-value
ratio of each item of Non-recourse Indebtedness so cross-guaranteed shall
not exceed 75% as of the date of its incurrence; and provided, that the
Borrower or the REIT may guarantee the Indebtedness referred to in ss.
8.1(j). In addition, none of the REIT, the Borrower, any Subsidiary or any
Nominee shall guarantee any Indebtedness of any Person in which the
Borrower is not a direct or indirect investor as permitted under ss. 8.3.
-2-
<PAGE>
3.6. Section 9.6 is amended by deleting the bracketed reference to ss.
8.3(1).
3.7. Section 14.9 of the Credit Agreement is amended to read in its
entirety as follows:
ss. 14.9. Resignation and Removal. The Agent may resign at any time by
giving 60 days' prior written notice thereof to the Banks, the REIT and the
Borrower. In addition, in the event that none of the Commitments shall be
held by the Agent or a corporate affiliate of the Agent or that the Agent
shall have engaged in willful misconduct in the performance of its duties
under the Loan Documents, the Agent may be removed by 30 days' written
notice executed on behalf of the Majority Banks. Upon any such resignation
or removal, the Majority Banks shall have the right to appoint as a
successor Agent any bank whose senior debt obligations are rated not less
than "A" or its equivalent by Moody's or not less than "A" or its
equivalent by S&P and which has total assets in excess of $10 billion.
Unless a Default or Event of Default shall have occurred and be continuing,
such successor Agent shall be reasonably acceptable to the REIT and the
Borrower. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
or removed Agent, and the retiring or removed Agent shall be discharged
from its duties and obligations hereunder. After any Agent's resignation or
removal, the provisions of this Agreement and the other Loan Documents
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
3.8. Section 18.1 is amended by amending clause (a) thereof to read in its
entirety as follows:
(a) the Agent shall have given its prior written consent to such
assignment, which shall not unreasonably be withheld, and (but only so long
as no Default or Event of Default shall have occurred and be continuing)
the Borrower also shall have given its prior written consent to such
assignment, which shall not unreasonably be withheld.
4. Conditions to Effectiveness of Amendment. Acceptance of the foregoing
amendments by the Banks shall be subject, without limitation, to the following
conditions:
(a) No Default or Event of Default under the Credit Agreement shall have
occurred and be continuing (other than a Default or Event of Default
which shall have been waived in writing by the Banks).
(b) All proceedings in connection with the transactions contemplated by
this Amendment shall be reasonably satisfactory in form and substance
to the Majority Banks and the Agent's Special Counsel, and the Agent
shall have received all information and such counterpart originals or
certified copies of
-3-
<PAGE>
such documents and such other certificates, opinions or documents as
the Majority Banks and the Agent's Special Counsel may reasonably
require.
5. Representations and Warranties. In order to induce you to enter into this
Amendment, the Borrower hereby represents and warrants that each of the
representations and warranties contained in Section 6 of the Credit Agreement is
true and correct on the date hereof, after giving effect to the amendments
effected hereby.
6. Miscellaneous. This Amendment may be executed in any number of counterparts,
which together shall constitute one instrument, shall be a Loan Document, shall
be governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts (without giving effect to the conflict of laws rules of any
jurisdiction) and shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns, including as such successors and
assigns all holders of any Obligation.
If the foregoing corresponds with your understanding of our agreement,
please sign this letter and the accompanying copies thereof in the appropriate
space below and return the same to the undersigned. This letter shall become a
binding agreement among each of you and the Borrower when both the Borrower and
you shall have one or more copies hereof executed by the Borrower, you and each
of the Guarantors listed below.
BRI OP LIMITED PARTNERSHIP
By Berkshire Apartments, Inc.,
its General Partner
By: /s/ Marianne Pritchard
------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial Officer
The foregoing Amendment is
hereby agreed to.
BANKBOSTON, N.A.,
for Itself and as Agent
By:______________________
Authorized Officer
-4-
<PAGE>
such documents and such other certificates, opinions or documents as
the Majority Banks and the Agent's Special Counsel may reasonably
require.
5. Representations and Warranties. In order to induce you to enter into this
Amendment, the Borrower hereby represents and warrants that each of the
representations and warranties contained in Section 6 of the Credit Agreement is
true and correct on the date hereof, after giving effect to the amendments
effected hereby.
6. Miscellaneous. This Amendment may be executed in any number of counterparts,
which together shall constitute one instrument, shall be a Loan Document, shall
be governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts (without giving effect to the conflict of laws rules of any
jurisdiction) and shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns, including as such successors and
assigns all holders of any Obligation.
If the foregoing corresponds with your understanding of our agreement,
please sign this letter and the accompanying copies thereof in the appropriate
space below and return the same to the undersigned. This letter shall become a
binding agreement among each of you and the Borrower when both the Borrower and
you shall have one or more copies hereof executed by the Borrower, you and each
of the Guarantors listed below.
BRI OP LIMITED PARTNERSHIP
By Berkshire Apartments, Inc.,
its General Partner
By:
------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial Officer
The foregoing Amendment is
hereby agreed to.
BANKBOSTON, N.A.,
for Itself and as Agent
By:/s/ [ILLEGIBLE]
-----------------------------------
Authorized Officer Vice President
-4-
<PAGE>
BERKSHIRE REALTY COMPANY, INC.
BERKSHIRE APARTMENTS, INC.
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
BRI TEXAS APARTMENTS LIMITED
PARTNERSHIP
By BRI Texas Apartments-II, Inc., its
General Partner
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Vice President and Treasuer
BRI BENCHMARK LIMITED PARTNERSHIP
BRI COMMONS LIMITED PARTNERSHIP
By Berkshire Apartments, Inc., the General
Partner of each
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
BRI HUNTERS GLEN LIMITED PARTNERSHIP
By BRI Hunters Glen-II, Inc.,
its General Partner
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President and Treasurer
Officer
-5-
<PAGE>
BRI RIDGEVIEW CHASE LIMITED
PARTNERSHIP
By BRI Emerald, Inc., its General Partner
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President and Treasurer
BRI DIAMOND RIDGE ASSOCIATES
LIMITED PARTNERSHIP
By BRI Baltimore - 31, L.L.C.,
its General Partner
By Berkshire Apartments, Inc.,
its Manager
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President and Chief
Financial Officer
BRI FOXGLOVE ASSOCIATES, L.L.C.
By Berkshire Apartments, Inc.
its Manager
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
BRI TEXAS APARTMENTS-II, INC.
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Vice President and Treasurer
-6-
<PAGE>
BRI HUNTERS GLEN - II, INC.
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Vice President and Treasurer
BRI EMERALD, INC.
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Vice President and Treasurer
BRI BALTIMORE - 31, L.L.C.
By: Berkshire Apartments, Inc., its Manager
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
-7-
BRI OP LIMITED PARTNERSHIP
470 Atlantic Avenue
Boston, Massachusetts 02210
AMENDMENT NO. 2 OF
REVOLVING CREDIT AGREEMENT
As of July 21, 1998
BANKBOSTON, N.A.,
for Itself and as Agent
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Ladies and Gentlemen:
Each of BRI OP Limited Partnership, a Delaware limited partnership (the
"Borrower"), and Berkshire Realty Company Inc., a Delaware corporation (the
"REIT"), and the undersigned Guarantors hereby agrees with you as follows:
1. Reference to Credit Agreement and Definitions. Reference is made to the
Revolving Credit Agreement dated as of January 30, 1998, as amended by Amendment
No. 1 thereto dated as of April 15, 1998 (as so amended, the "Credit
Agreement"), among the Borrower, Berkshire Realty Company, Inc., certain
Guarantors named therein and you. Capitalized terms defined in the Credit
Agreement and not otherwise defined herein are used herein with the meanings
given to them in the Credit Agreement.
2. Reason for Amendment. The Borrower has requested that the aggregate
Commitments of all the Banks be increased to $180,000,000. BKB has agreed,
subject to the terms and conditions set forth in this Amendment, to provide the
additional credit, which it may assign or participate to Eligible Assignees as
provided in ss. 18 of the Credit Agreement.
3. Amendments. On the basis of the representations and warranties of the REIT
and the Borrower set forth herein and subject to the satisfaction of the terms
and conditions set forth herein, the Credit Agreement is hereby further amended,
effective as of August 7, 1998 or such earlier date of which the Borrower shall
have given the Agent three Business Days' advance written notice (the "Effective
Date"), to amend Schedule I to the Credit Agreement to read in its entirety as
provided in Schedule I attached hereto.
<PAGE>
4. Conditions to Effectiveness of Amendment. Acceptance by the Banks of the
foregoing amendments shall be subject, without limitation, to the following
conditions:
(a) No Default or Event of Default under the Credit Agreement shall have
occurred and be continuing (other than a Default or Event of Default
which shall have been waived in writing by the Banks).
(b) All proceedings in connection with the transactions contemplated by
this Amendment shall be reasonably satisfactory in form and substance
to the Majority Banks and the Agent's Special Counsel, and the Agent
shall have received all information and such counterpart originals or
certified copies of such documents and such other certificates,
opinions or documents as the Majority Banks and the Agent's Special
Counsel may reasonably require.
(c) The Borrower shall have executed and delivered to the Agent for
redistribution to each of the Banks a replacement Revolving Credit
Note in the amount of each Bank's Commitment as set forth in Schedule
I hereto.
(d) Each of the Banks shall have received the favorable opinions addressed
to the Banks and the Agent and dated the Effective Date, in form and
substance satisfactory to the Agent, of Scott D. Spelfogel, Senior
Vice President and General Counsel of the REIT and the Borrower.
(e) The Borrower shall have paid to the Agent for the benefit of the Banks
all amounts owing by the Borrower on the Effective Date pursuant to
ss. 4.9 of the Credit Agreement on account of the modification of the
Commitments on that date effected by this Amendment.
(f) BKB shall have received the compensation contemplated in the third
paragraph of the letter dated June 4, 1998 from BKB to the REIT.
5. Representations and Warranties. In order to induce you to enter into this
Amendment, each of the Borrower and the REIT hereby represents and warrants that
each of the representations and warranties contained in Section 6 of the Credit
Agreement is true and correct on the date hereof, after giving effect to the
amendments effected hereby.
6. Miscellaneous. This Amendment may be executed in any number of counterparts,
which together shall constitute one instrument, shall be a Loan Document, shall
be governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts (without giving effect to the conflict of laws rules of any
jurisdiction) and shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns, including as such successors and
assigns all holders of any Obligation.
-2-
<PAGE>
] If the foregoing corresponds with your understanding of our agreement,
please sign this letter and the accompanying copies thereof in the appropriate
space below and return the same to the undersigned. This letter shall become a
binding agreement among each of you and the Borrower when both the Borrower and
you shall have one or more copies hereof executed by the Borrower, you and each
of the Guarantors listed below.
BRI OP LIMITED PARTNERSHIP
By Berkshire Apartments, Inc.,
its General Partner
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial Officer
BERKSHIRE REALTY COMPANY, INC.
BERKSHIRE APARTMENTS, INC.
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
BRI TEXAS APARTMENTS LIMITED
PARTNERSHIP
By BRI Texas Apartments-II, Inc., its
General Partner
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Vice President and Treasurer
-3-
<PAGE>
BRI BENCHMARK LIMITED PARTNERSHIP
BRI COMMONS LIMITED PARTNERSHIP
By Berkshire Apartments, Inc., the General
Partner of each
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
BRI HUNTERS GLEN LIMITED
PARTNERSHIP
By BRI Hunters Glen - II, Inc.,
its General Partner
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President and Treasurer
Officer
BRI RIDGEVIEW CHASE LIMITED
PARTNERSHIP
By BRI Emerald, Inc., its General Partner
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President and Treasurer
-4-
<PAGE>
BRI DIAMOND RIDGE ASSOCIATES
LIMITED PARTNERSHIP
By BRI Baltimore - 31, L.L.C.,
its General Partner
By Berkshire Apartments, Inc.,
its Manager
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President and Chief Financial
Officer
BRI FOXGLOVE ASSOCIATES, L.L.C.
By Berkshire Apartments, Inc.
its Manager
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President/Chief Financial
Officer
BRI TEXAS APARTMENTS-II, INC.
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Vice President and Treasurer
BRI HUNTERS GLEN - II, INC.
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Vice President and Treasurer
-5-
<PAGE>
BRI EMERALD, INC.
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President and Treasurer
BRI BALTIMORE - 31, L.L.C.
By: Berkshire Apartments, Inc., its Manager
By: /s/ Marianne Pritchard
---------------------------------
Marianne Pritchard
Senior Vice President and Chief Financial
Officer
The foregoing Amendment is
hereby agreed to.
BANKBOSTON, N.A.,
for Itself and as Agent
By:
---------------------------------
Authorized Officer
KEYBANK NATIONAL ASSOCIATION
By:
---------------------------------
Authorized Officer
PNC BANK, NATIONAL ASSOCIATION
By:
---------------------------------
Authorized Officer
-6-
<PAGE>
BRI EMERALD, INC.
By:
---------------------------------
Marianne Pritchard
Senior Vice President and Treasurer
BRI BALTIMORE - 31, L.L.C.
By: Berkshire Apartments, Inc., its Manager
By:
---------------------------------
Marianne Pritchard
Senior Vice President and Chief Financial
Officer
The foregoing Amendment is
hereby agreed to.
BANKBOSTON, N.A.,
for Itself and as Agent
By: /s/ [ILLEGIBLE] VP
---------------------------------
Authorized Officer
KEYBANK NATIONAL ASSOCIATION
By:
---------------------------------
Authorized Officer
PNC BANK, NATIONAL ASSOCIATION
By:
---------------------------------
Authorized Officer
-6-
<PAGE>
BRI EMERALD, INC.
By:
---------------------------------
Marianne Pritchard
Senior Vice President and Treasurer
BRI BALTIMORE - 31, L.L.C.
By: Berkshire Apartments, Inc., its Manager
By:
---------------------------------
Marianne Pritchard
Senior Vice President and Chief Financial
Officer
The foregoing Amendment is
hereby agreed to.
BANKBOSTON, N.A.,
for Itself and as Agent
By:
---------------------------------
Authorized Officer
KEYBANK NATIONAL ASSOCIATION
By: /s/ [ILLEGIBLE]
---------------------------------
Authorized Officer
PNC BANK, NATIONAL ASSOCIATION
By:
---------------------------------
Authorized Officer
-6-
<PAGE>
BRI EMERALD, INC.
By:
---------------------------------
Marianne Pritchard
Senior Vice President and Treasurer
BRI BALTIMORE - 31, L.L.C.
By: Berkshire Apartments, Inc., its Manager
By:
---------------------------------
Marianne Pritchard
Senior Vice President and Chief Financial
Officer
The foregoing Amendment is
hereby agreed to.
BANKBOSTON, N.A.,
for Itself and as Agent
By:
---------------------------------
Authorized Officer
KEYBANK NATIONAL ASSOCIATION
By:
---------------------------------
Authorized Officer
PNC BANK, NATIONAL ASSOCIATION
By: /s/ [ILLEGIBLE]
---------------------------------
Authorized Officer
-6-
<PAGE>
CITIZENS BANK OF RHODE ISLAND
By: /s/ [ILLEGIBLE]
-------------------------------
Authorized Officer
MELLON BANK, N.A.
By:
-------------------------------
Authorized Officer
CRESTAR BANK
By:
-------------------------------
Authorized Officer
-7-
<PAGE>
CITIZENS BANK OF RHODE ISLAND
By:
-------------------------------
Authorized Officer
MELLON BANK, N.A.
By: /s/ Ronald J. Bloch
-------------------------------
Authorized Officer Ronald J. Bloch
First Vice President
CRESTAR BANK
By:
-------------------------------
Authorized Officer
-7-
<PAGE>
CITIZENS BANK OF RHODE ISLAND
By:
-------------------------------
Authorized Officer
MELLON BANK, N.A.
By:
-------------------------------
Authorized Officer
CRESTAR BANK
By: /s/ Emz A. Lawrence
-------------------------------
Authorized Officer Emz A. Lawrence
Senior Vice President
-7-
<PAGE>
SCHEDULE 1
BANKS AND COMMITMENTS
Name and Commitment
Address Commitment Percentage
------- ---------- ----------
BankBoston, N.A. $80,000,000 44.44%
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Fax: (617) 434-0645
Eurodollar Lending Office:
Same as above
KeyBank National Association 25,000,000 13.89%
127 Public Square
Cleveland, Ohio 44114-1306
Attn:
Fax:
Eurodollar Lending Office:
PNC Bank, National Association 25,000,000 13.89%
One PNC Plaza
249 Fifth Avenue
PI-POPP-19-2
Pittsburgh, Pennsylvania 15222-2707
Attn: Jan Dotchin
Fax: (412) 768-5454
Eurodollar Lending Office:
Same as above
-8-
<PAGE>
Citizens Bank of Rhode Island 20,000,000 11.11 %
One Citizens Plaza
Providence, Rhode Island 02903-1339
Attn:
Fax:
Eurodollar Lending Office:
Mellon Bank, N.A. 20,000,000 11.11%
1735 Market Street
Philadelphia, Pennsylvania 19103
Attn: Real Estate Loan Administration
Fax: (215) 553-3742
Eurodollar Lending Office:
Same as above
Attn: Eurodollar Funds Management
Crestar Bank 10,000,000 5.56%
8245 Boone Boulevard
Vienna, Virginia 22182-3871
Attn: Constance Dores
Fax: (703) 902-9245
Eurodollar Lending Office:
Same as above
------------ ----
$180,000,000 100%
-9-
SECOND AMENDMENT
TO MASTER CREDIT FACILITY AGREEMENT
THIS SECOND AMENDMENT TO MASTER CREDIT FACILITY AGREEMENT (the "Second
Amendment") is made as of the 1st day of March, 1997, by and among (i) BRI OP
LIMITED PARTNERSHIP, a Delaware limited partnership (the "Borrower"), (ii)
BERKSHIRE REALTY COMPANY, INC., a Delaware corporation (the "REIT"), (iii) BRI
RIVER OAKS LIMITED PARTNERSHIP, a Delaware limited partnership (the "Existing
Subsidiary Guarantor"), BRI HIDDEN OAKS PARTNERSHIP, a Texas general partnership
and BRI TEXAS APARTMENTS LIMITED PARTNERSHIP, a Delaware limited partnership
(collectively, with the Existing Subsidiaxy Guarantor, the "Subsidiary
Guarantors"), (iv) WASHINGTON MORTGAGE FINANCIAL GROUP, LTD., a Delaware
corporation (the "Lender") and (v) FANNIE MAE, a federally-chartered and
stockholder-owned corporation organized and existing under the Federal National
Mortgage Association Charter Act, 12 U.S.C. ss. l716 et seq.
RECITALS
A. The Borrower, the REIT, the Existing Subsidiary Guarantor and the Lender
are parties to that certain Master Credit Facility Agreement, dated as of
November 17, 1995 (as amended from time to time, the "Master Agreement").
B. All of the Lender's right, title and interest in the Master Agreement
and the Loan Documents executed in connection with the Master Agreement or the
transactions contemplated by the Master Agreement have been assigned to Federal
National Mortgage Association (which now operates for substantially all purposes
under the name Fannie Mae) pursuant to that certain Assignment of Master Credit
Facility Agreement and Other Loan Documents, dated as of November 17, 1995 (the
"Assignment"). Fannie Mae has not assumed any of the obligations of the Lender
under the Master Agreement or the Loan Documents as a result of the Assignment.
Fannie Mae has designated the Lender as the servicer of the Advances
contemplated by the Master Agreement, and the Lender acts as Fannie Mae's agent
with respect to the making of certain decisions under the Master Agreement.
C. The Borrower has requested that the Lender and Fannie Mae consent to the
withdrawal of the REIT as the General Partner of the Borrower, the addition of
Berkshire Apartments, Inc. (the "New General Partner") as a substitute General
Partner of the Borrower, the admission of the REIT as a Limited Partner of the
Borrower and certain other transactions, all as more particularly described in
that certain Amendment No. 11 to BRI OP Limited Partnership Agreement dated as
of March 1, 1997, a copy of which has been furnished to the Lender and Fannie
Mae (collectively, the "GP Substitution Transaction").
<PAGE>
D. The parties are executing this Second Amendment to evidence the Lender's
and Fannie Mae's consent to the Borrower's request and the amendment of certain
provisions of the Master Agreement required by the Lender and Fannie Mae as a
condition to its consent.
NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
and agreements contained in this Second Amendment and the Master Agreement, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, hereby agree as follows:
1. Representations and Warranties. The Borrower, the REIT and the
Subsidiary Guarantors hereby represent and warrant to the Lender and Fannie Mae
as follows:
(a) Continuation of the Borrower. The GP Substitution Transaction has
not effected a dissolution or termination of the Borrower and the Borrower
will maintain its existence immediately before and after the GP
Substitution Transaction.
(b) Due Organization of New General Partner. The New General Partner
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and is qualified to transact
business as a foreign corporation in good standing in each jurisdiction in
which it transacts business.
2. Covenants. The Borrower and the Guarantors each agrees and covenants
with the Lender, with respect to itself, that, at all times during the Term of
the Master Agreement.
(a) Correction in the event of a dissolution. To the extent the GP
Substitution Transaction effects, or is deemed to effect, a dissolution or
termination of the Borrower, such dissolution shall constitute an Event of
Default under the Loan Documents unless (i) the Borrower gives the Lender
notice of the dissolution within 15 days after the REIT, as general partner
of the Borrower, first obtains knowledge that either the dissolution of the
Borrower has occurred or that a claim of such dissolution has been asserted
by any Person, (ii) the Borrower re-forms itself as a limited partnership
under Delaware law within 30 days after the REIT, as general partner of the
Borrower, first obtains knowledge of the dissolution, (iii) the re-formed
Borrower owns the same assets as it did prior to the dissolution or
termination, (iv) the re-formed Borrower continues the business that the
Borrower conducted prior to the dissolution or termination, (v) the
re-formed Borrower assumes and confirms all of the obligations of the
Borrower under the Loan Documents pursuant to documents approved by the
Lender and Fannie Mae and (vi) the REIT and the Subsidiary Guarantors
confirm their continuing liability under the Loan Documents pursuant to
documents approved by the Lender and Fannie Mae.
Second Amendment
to Master Credit Facility Agreement
-2-
<PAGE>
(b) Costs. It shall pay all legal, recording and other fees and
expenses incurred by Fannie Mae and the Lender in connection with the GP
Substitution Transaction.
3. Amendments to the Master Agreement. Section 13.01(e) of the Master
Agreement is hereby amended as follows:
"(e) Ownership. (1) the REIT shall own 100% of the outstanding
stock in Berkshire Apartments, Inc. (the "New General Partner"), (2) the
New General Partner shall be the sole general partner of the Borrower, the
REIT shall be a Limited Partner of the Borrower and the REIT shall own a
partnership interest as Limited Partner of not less than 51%, (3) the
Borrower and the Subsidiary Guarantors shall be the sole owners of all of
the Collateral and own all of the Mortgaged Properties in fee simple or as
tenant under a ground lease meeting all of the requirements of the DUS
Guide, (4) BRI Hidden Oaks Partnership shall be a general partnership, the
sole partners of which shall be BRI Texas Apartments Limited Partnership
and BRI River Oaks Limited Partnership, (5) BRI River Oaks Limited
Partnership and BRI Texas Apartments Limited Partnership shall each be a
limited partnership, the sole general partner of which shall be a corporate
general partner and the sole limited partner of which shall be the
Borrower, (6) except as the Lender may otherwise agree, each Subsidiary
Guarantor (other than BRI Hidden Oaks Partnership, BRI River Oaks Limited
Partnership and BRI Texas Apartments Limited Partnership) shall be a
limited partnership, the sole general partners of which shall be a
corporate general partner and the Borrower and the sole limited partner of
which shall be the Borrower and (7) the REIT shall own 100% of the
outstanding stock in the corporate general partner of each Subsidiary
Guarantor."
4. Consent. Subject to the satisfaction of each of the following
conditions, the Lender and Fannie Mae hereby consent to the GP Substitution
Transaction:
(a) The REIT and the Subsidiary Guarantors will execute the
Confirmation of Liability attached as Exhibit A to this Second Amendment.
(b) The Borrower, the REIT and the Subsidiary Guarantors will execute
a Compliance Certificate in the form attached as Exhibit B to this Second
Amendment.
(c) The Secretary or Assistant Secretary of the REIT shall deliver an
Organizational Certificate in the form attached as Exhibit C to this
Second Amendment.
(d) The Borrower will deliver favorable opinions of counsel (which may
be in-house counsel) to the Borrower and the Guarantors, as to the due
organization and
Second Amendment
to Master Credit Facility Agreement
-3-
<PAGE>
qualification of the New General Partner, the Borrower and the Guarantors,
the due authorization, execution, delivery and enforceability of this
Second Amendment, the failure of the GP Substitution Transaction to effect
a dissolution of the Borrower under Delaware law, and such other matters as
the Lender or Fannie Mae may require.
(e) The Borrower will deliver a letter from Coopers & Lybrand, as
accountants for the REIT and its Affiliates, advising that the consummation
of the GP Substitution Transaction will not adversely affect the status
of the REIT as a real estate investment trust.
(f) The REIT will deliver all of the Organizational Documents and
good standing certificates of New General Partner, and, if requested by the
Lender or Fannie Mae, the Borrower, the REIT and the Subsidiary Guarantors.
(g) The Borrower, the REIT and the Subsidiary Guarantors shall deliver
such other documents, instruments, approvals (and, if requested by the
Lender or Fannie Mae, certified duplicates of executed copies thereof) or
opinions as the Lender or Fannie Mae may request.
5. Capitalized Terms. All capitalized terms used in this Second Amendment
which are not specifically defined herein shall have the respective meanings set
forth in the Master Agreement.
6. Full Force and Effect. Except as expressly modified by this Second
Amendment, all terms and conditions of the Master Agreement shall continue in
full force and effect.
7. Counterparts. This Second Amendment may be executed in counterparts by
the parties hereto, and each such counterpart shall be considered an original
and all such counterparts shall constitute one and the same instrument.
(The rest of the page has been left blank intentionally.]
Second Amendment
to Mastcr Credit Facility Agreement
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE BORROWER:
BRI OP LIMITED PARTNERSHIP, a Delaware limited
partnership
By: Berkshire Realty Company, Inc., a
Delaware corporation, its General Partner
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
BRI OP LIMITED PARTNERSHIP, a Delaware limited
partnership
By: Berkshire Apartments, Inc., a Delaware
corporation, its new General Partner
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
THE REIT:
BERKSHIRE REALTY COMPANY, INC., a Delaware
corporation
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
Second Amendment
-5- to Master Credit Facility Agreement
<PAGE>
TEE EXISTING SUBSIDIARY GUARANTOR:
BRI RIVER OAKS LIMITED PARTNERSHIP
By: BRI River Oaks-II, Inc., General Partner
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
Second Arncndxncnt
-6- to Master Credit Facility Agreement
<PAGE>
THE SUBSIDIARY GUARANTORS:
BRI HIDDEN OAKS PARTNERSHIP (formerly known as L
& V Hidden Oaks Partnership), a Texas general partnership
By: BRI Texas Apartments Limited Partnership, a
Delaware limited partnership, a General Partner
By: BRI Texas Apartments-II, Inc., an Alabama
corporation, General Partner
By: /s/ Marianne Pritchard (SEAL)
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
BRI TEXAS APARTMENTS LIMITED PARTNERSHIP, a
Delaware limited partnership
By: BRI Texas Apartments-II, Inc., an Alabama
corporation, General Partner
By: /s/ Marianne Pritchard (SEAL)
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
Second Amendment
-7- to Master Credit Facility Agreement
<PAGE>
THE LENDER:
WMF WASHINGTON MORTGAGE CORP.,
a Delaware corporation, formerly known as
Washington Mortgage Financial Group, Ltd.
By: /s/ G. Scott Carter
--------------------------------------
G. Scott Carter
Vice President
Second Amendment
-8- to Master Credit Facility Agreement
<PAGE>
FANNIE MAE:
FANNIE MAE, a federally-chartered and
stockholder-owned corporation organized
and existing under the Federal National
Mortgage Association Charter Act,
12 U.S.C. ss.1716 et seq.
By: [ILLEGIBLE]
--------------------------------------
Name:
Title:
Second Amendment
-9- to Master Credit Facility Agreement
<PAGE>
EXHIBIT A TO SECOND AMENDMENT TO MASTER AGREEMENT
CONFIRMATION OF LIABILITY
THIS BORROWER AND GUARANTOR CONFIRMATION OF LIABILITY (the "Confirmation of
Liability") is made as of the 1st day of March, 1997, by (i) BRI OP LIMITED
PARTNERSHIP, a Delaware limited partnership (the "Borrower"), (ii) BERKSHIRE
REALTY COMPANY, INC., a Delaware corporation (the "REIT"), (iii) BPS RIVER OAKS
LIMITED PARTNERSHIP, a Delaware limited partnership (the "Existing Subsidiary
Guarantor"), BRI Hidden Oaks Partnership, a Texas general partnership and BRI
Texas Apartments Limited Partnership, a Delaware limited partnership
(collectively, with the Existing Subsidiary Guarantor, the "Subsidiary
Guarantors") for the benefit of (i) WASHINGTON MORTGAGE FINANCIAL GROUP, LTD., a
Delaware corporation (the "Lender") and (ii) FANNIE MAE, a federally-chartered
and stockholder-owned corporation organized and existing under the Federal
National Mortgage Association Charter Act, 12 U.S.C. ss. 1716 et seq.
RECITALS
A. The Borrower, the REIT, the Existing Subsidiary Guarantor and the Lender
are parties to that certain Master Credit Facility Agreement, dated as of
November 17, 1995 (as amended from time to time, the "Master Agreement").
B. All of the Lender's right, title and interest in the Master Agreement
and the Loan Documents executed in connection with.the Master Agreement or the
transactions contemplated by the Master Agreement have been assigned to Fannie
Mae pursuant to that certain Assignment of Master Credit Facility Agreement and
Other Loan Documents, dated as of November 17, 1995 (the "Assignment"). Fannie
Mae has not assumed any of the obligations of the Lender under the Master
Agreement or the Loan Documents as a result of the Assignment. Fannie Mae has
designated the Lender as the servicer of the Advances contemplated by the Master
Agreement, and the Lender acts as Fannie Mae's agent with respect to the making
of certain decisions under the Master Agreement.
C. The Borrower, the REIT, the Subsidiary Guarantors, the Lender and Fannie
Mae are executing that certain Second Amendment to Master Agreement dated as of
March 1, 1997 (the "Second Amendment").
D. The Lender has required the execution of this Confirmation of Liability
as a condition to its execution of the Second Amendment.
E. The parties are executing this Confirmation of Liability to confirm that
each remains liable for all of its obligations under the Master Agreement and
the other Loan Documents.
Second Amendment
to Master Credit Facility Agreemont
<PAGE>
NOW, THEREFORE, the Borrower, the REIT and the Subsidiary Guarantors, in
consideration of the Lender's and Fannie Mae's execution of the Second Amendment
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, hereby agree as follows:
1. Confirmation of Liability. The Borrower, the REIT and the Subsidiary
Guarantors each confirms that none of its respective obligations under Master
Agreement and the Loan Documents is affected by the GP Substitution Transaction
(as defined in the Second Amendment) or the execution of the Second Amendment,
and each of its respective obligations under the Master Agreement and the Loan
Documents shall remain in full force and effect, and each shall be fully liable
for the observance of all of such obligations, notwithstanding the GP
Substitution Transaction and the execution of the Second Amendment.
2. Beneficiaries. This Confirmation of Liability is made for the express
benefit of both the Lender and Fannie Mae.
3. Capitalized Terms. All capitalized terms used in this Confirmation of
Liability which are not specifically defined herein shall have the respective
meanings set forth in the Master Agreement.
4. Counterparts. This Confirmation of Liability may be executed in
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE BORROWER:
BRI OP LIMITED PARTNERSHIP, a Delaware limited
partnership
By: Berkshire Realty Company, Inc., a Delaware
corporation, its General Partner
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
Second Amendment
to Master Credit Facility Agreement
-2-
<PAGE>
BRI OP LIMITED PARTNERSHIP, a Delaware limited
partnership
By: Berkshire Apartments, Inc., a Delaware
corporation, its new General Partner
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
THE REIT:
BERKSHIRE REALTY COMPANY, INC., a Delaware
corporation
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
THE EXISTING SUBSIDIARY GUARANTOR:
BRI RIVER OAKS LIMITED PARTNERSHIP, a Delaware
limited partnership
By: BRI River Oaks-II, Inc., General Partner
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
Second Amendment
to Master Credit Facility Agreement
-3-
<PAGE>
THE SUBSIDIARY GUARANTORS:
BRI HIDDEN OAKS PARTNERSHIP (formerly known as L
& V Hidden Oaks Partnership), a Texas general partnership
By: BRI Texas Apartments Limited Partnership, a
Delaware limited partnership, a General Partner
By: BRI Texas Apartments-II, Inc., an Alabama
corporation, General Partner
By: /s/ Marianne Pritchard (SEAL)
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
BRI TEXAS APARTMENTS LIMITED PARTNERSHIP, a
Delaware limited partnership
By: BRI Texas Apartments-II, Inc., an Alabama
corporation, General Partner
By: /s/ Marianne Pritchard (SEAL)
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
Second Amendment
-4- to Master Credit Facility Agreement
<PAGE>
EXHIBIT B TO SECOND AMENDMENT TO MASTER AGREEMENT
COMPLIANCE CERTIFICATE
The undersigned, BRI OP Limited Partnership (the "Borrower"), Berkshire
Realty Company, Inc. (the "REIT"). and BRI River Oaks Limited Partnership, BRI
Hidden Oaks Partnership and BRI Texas Apartments Limited Partnership (the
"Subsidiary Guarantors") hereby certify to Washington Mortgage Financial Group,
Ltd. (the "Lender") and Fannie Mae as follows:
1. Master Agreement. The Borrower and the REIT are parties to that certain
Master Credit Facility Agreement, dated as of November 17, 1995, by and among
the Borrower, the REIT, BRI River Oaks Limited Partnership and the Lender (as
amended from time to time, the "Master Agreement"). The Subsidiary Guarantors
are owners of certain Collateral granted to the Lender pursuant to the Master
Agreement. The rights of the Lender under the Master Agreement have been
assigned to Fannie Mae. This Certificate is issued pursuant to the terms of the
Master Agreement.
2. No Default. The Borrower, the REIT and the Subsidiary Guarantors each
hereby represents, warrants and covenants to the Lender that no Event of Default
or Potential Event of Default has occurred and is continuing and that all other
General Conditions described in Article XI of the Master Agreement are satisfied
on the date hereof.
3. Capitalized Terms. All capitalized terms used but not defined in this
Certificate shall have the meanings ascribed to such terms in the Master
Agreement.
Dated: August ___, 1997
THE BORROWER:
BRI OP LIMITED PARTNERSHIP, a DeJaware limited
partnership
By: Berkshire Realty Company, Inc., a Delaware
corporation, its General Partner
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
Second Amendment
to Master Credit Facility Agreement
<PAGE>
BRI OP LIMITED PARTNERSHIP, a Delaware limited
partnership
By: Berkshire Apartments, Inc., a Delaware
corporation, its new General Partner
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
THE REIT:
BERKSHIRE REALTY COMPANY, INC., a Delaware
corporation
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
THE SUBSIDIARY GUARANTORS:
BRI RIVER OAKS LIMITED PARTNERSHIP, a Delaware
limited partnership
By: BRI River Oaks-II, Inc., a Delaware
corporation, General Partner
By: /s/ Marianne Pritchard
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
Second Amendment
to Master Credit Facility Agreement
2
<PAGE>
BRI HIDDEN OAKS PARTNERSHIP (formerly known as L
& V Hidden Oaks Partnership), a Texas general partnership
By: BRI Texas Apartments Limited Partnership, a
Delaware limited partnership, a General Partner
By: BRI Texas Apartments-II, Inc., an Alabama
corporation, General Partner
By: /s/ Marianne Pritchard (SEAL)
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
BRI TEXAS APARTMENTS LIMITED PARTNERSHIP, a
Delaware limited partnership
By: BRI Texas Apartments-II, Inc., an Alabama
corporation, General Partner
By: /s/ Marianne Pritchard (SEAL)
-------------------------------------
Name: Marianne Pritchard
Title: Executive Vice President
Second Amendment
3 to Master Credit Facility Agreement
<PAGE>
EXHIBIT C TO THE SECOND AMENDMENT TO MASTER AGREEMENT
ORGANIZATIONAL CERTIFICATE
I, the undersigned, __________________, hereby certify as follows:
1. Secretary or Assistant Secretary. I am the Secretary or Assistant
Secretary of Berkshire Realty Company, inc. (the "REIT") and I am authorized to
deliver this Certificate on the Corporation's behalf, in its individual capacity
and as General Partner of BRI OP Limited Partnership (the "Borrower").
2. Master Agreement. The Borrower and the REIT are parties to that certain
Master Credit Facility Agreement, dated as of November 17, 1995, by and among
the Borrower, the REIT, BRI River Oaks Limited Partnership and the Lender (as
amended from time to time, the "Master Agreement"). The rights of the Lender
under the Agreement have been assigned to Fannie Mae. This Certificate is issued
pursuant to the terms of the Master Agreement.
3. Due Authorization. I hereby certify that no action of the board of
directors is necessary to duly authorize the execution and delivery of, and the
consummation of the GP Substitution Transaction contemplated by that certain
Second Amendment to Master Agreement, by and among the Borrower, the REIT, the
Subsidiary Guarantors, the Lender and Fannie Mae, or, if necessary, that
attached as Exhibit A to this Certificate is a true copy of resolutions duly
adopted at a meeting of the board of directors of the REIT which authorizes the
action. Any such resolutions are in full force and effect and are unmodified as
of the date of this Certificate.
4. No Changes. Since the date of the most recent Organizational
Certificate delivered to the Lender, or, if there are none, since the date of
the Master Agreement, there have been no changes in any of the Organizational
Documents of the Borrower, the REIT or any of the Guarantors, except for that
certain Amendment No. 11 to the Borrower's Limited Partnership Agreement and as
set forth in the Exhibit B to this Certificate, and the Borrower, the REIT and
the other Guarantors remain in good standing or duly qualified in each of the
jurisdictions in which they are required to be in good standing under the terms
of the Master Agreement.
Second Amendment
to Master Credit Facility Agreement
<PAGE>
5. Incumbency Certificate. The persons authorized to execute and deliver
any documents required to be delivered in connection with the Request are set
forth below, and a specimen signature of each has been previously delivered to
the Lender.
----------------------------------
----------------------------------
----------------------------------
----------------------------------
6. Capitalized Terms. All capitalized terms used but not defined in this
Certificate shall have the meanings ascribed to such terms in the Master
Agreement.
Dated; August ______, 1997
_____________________________
Name:________________________
Title:_______________________
Second Amendment
to Master Credit Facility Agreement
2
THIRD AMENDMENT
TO MASTER CREDIT FACILITY AGREEMENT
THIS THIRD AMENDMENT TO MASTER CREDIT FACILITY AGREEMENT (the "Third
Amendment") is made as of the 8th day of August, 1998, by and among (i) BRI OP
LIMITED PARTNERSHIP, a Delaware limited partnership, (the "Borrower"), (ii)
BERKSHIRE REALTY COMPANY, INC., a Delaware corporation (the "REIT"),(iii) BRI
RIVER OAKS LIMITED PARTNERSHIP, a Delaware limited partnership (the "Existing
Subsidiary Guarantor") and BRI HIDDEN OAKS PARTNERSHIP, a Texas general
partnership, and BRI TEXAS APARTMENTS LIMITED PARTNERSHIP, a Delaware limited
partnership (collectively, with the Existing Subsidiary Guarantor, the
"Subsidiary Guarantors")(the Borrower, the REIT and the Subsidiary Guarantors
are sometimes referred to herein individually as a "Borrower Party" and
collectively as the "Borrower Parties"), (iv) WaSHINGTON MORTGAGE FINANCIAL
GROUP, LTD., a Delaware corporation (the "Lender") and (v) FANNIE MAE, a
federally-chartered and stockholder-owned corporation organized and existing
under the Federal National Mortgage Association Charter Act, 12 U.S.C. ss.1716
et seq.
RECITALS
A. The Borrower, the REIT, the Existing Subsidiary Guarantor and the Lender
are parties to that certain Master Credit Facility Agreement, dated as of
November 17, 1995, as amended by a First Amendment to Master Credit Facility
Agreement, dated September 1, 1996 (the "First Amendment", and by a Second
Amendment to Master Credit Facility Agreement, dated March 1, 1997 (as further
amended from time to time, the "Master Agreement").
B. All of the Lender's right, title and interest in the Master Agreement
and the Loan Documents executed in connection with the Master Agreement or the
transactions contemplated by the Master Agreement have been assigned to Fannie
Mae pursuant to that certain Assignment of Master Credit Facility Agreement and
Other Loan Documents, dated as of November 17, 1995 (the "Assignment"). Fannie
Mae has not assumed any of the obligations of the Lender under the Master
Agreement or the Loan Documents as a result of the Assignment. Fannie Mae has
designated the Lender as the servicer of the Advances contemplated by the Master
Agreement.
C. Pursuant to the First Amendment, the Base Facility Credit Commitment was
expanded to $63,345,000.00 and the Revolving Facility Credit Commitment was
reduced to $36,655,000.00.
D. The parties are executing this Third Amendment pursuant to the Master
Agreement to reflect a complete termination of the Revolving Facility Credit
Commitment.
<PAGE>
NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
and agreements contained in this Third Amendment and the Master Agreement, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, hereby agree as follows:
1. Complete Termination of Revolving Facility Credit Commitment. The
Revolving Facility Credit Commitment is hereby permanently reduced to $0.00, and
the definition of "Revolving Facility Credit Commitment", and all corresponding
references to "Revolving Facility Credit Commitment, are hereby deleted.
2. Definition of Base Facility Credit Commitment. The definition of "Base
Facility Credit Commitment" is hereby replaced in its entirety by the following
new definition:
"Base Facility Credit Commitment" means an amount equal to
$63,345,000.00.
3. Obligations. The Master Agreement is hereby amended to include the
following definition of Obligations:
"Obligations" means the aggregate of the obligations of each of the
Borrower Parties under this Agreement and the other Loan Documents,
including the repayment of the Advances in accordance with the terms of the
Loan Documents.
4. Limitation on Recourse and Other Changes. Articles V, VIII, IX, XIII and
XV of the Master Agreement (other than the covenants contained in Sections
13.01(a), (b), (c), (e), (f), (g), (h), (k), (1) and (m), Sections 13.02(a),
(c), (d}, (e), (f), (j) and Section 13.03(d) of the Master Agreement) are hereby
deleted.
5. Non-Recourse Liability. The Master Agreement is hereby amended to
include the following Article XX:
"ARTICLE XX
"LIMITS ON PERSONAL LIABILITY
"SECTION 20.01 Limits on Personal Liability.
"SECTION 20.01(a) Limits on Personal Liability. Except as otherwise
provided in this Article, no Borrower Party shall have any personal liability
under this Agreement, the Notes, the Security Instrument or any other Loan
Document for the performance of any Obligations of any Borrower Party under the
Loan Documents, and the Lender's only recourse for the payment and performance
of the Obligations shall be the Lenders exercise of its rights and remedies with
respect to the Mortgaged Property and any other Collateral held by the Lender as
security for the
Third Amendment
to Master Credit Facility Agreement
-2-
<PAGE>
Obligations. This limitation on the Borrower Parties' liability shall not limit
or impair the Lender's enforcement of its rights against any guarantor of all or
part of the Obligations, but, if such guarantor is a Borrower Party, such
guarantor's liability shall also be limited to the extent set forth in this
Article.
"SECTION 20.01(b) Exceptions to Limits on Personal Liability. The Borrower
Parties shall be personally liable to the Lender on a joint and several basis
for the repayment of a portion of the Advances and other amounts due under the
Loan Documents equal to any loss or damage suffered by the Lender as a result of
(1) failure of any Borrower Party to pay to the Lender upon demand after an
Event of Default, all Rents to which the Lender is entitled under Section 26 of
the Security Instrument encumbering the Mortgaged Property and the amount of all
security deposits collected by the Borrower Party from tenants then in
residence; (2) failure of any Borrower Party to apply all insurance proceeds and
condemnation proceeds as required by the Security Instrument encumbering the
Mortgaged Property; (3) failure of the Borrower Party to comply with the last
paragraph of Section 13.01(b) relating to the delivery of books and records,
statements, schedules and reports; (4) fraud or written material
misrepresentation by any Borrower Party or any officer, director, partner,
member or employee of any Borrower Party in connection with the application for
or creation of the Obligations or any request for any action or consent by the
Lender; or (5) failure to apply Rents, first, to the payment of reasonable
operating expenses and then to amounts ("Debt Service Amounts") payable under
the Loan Documents (except that the Borrower Party will not be personally liable
(i) to the extent that the Borrower Party lacks the legal right to direct the
disbursement of such sums because of a bankruptcy, receivership or similar
judicial proceeding, or (ii) with respect to Rents of a Mortgaged Property that
are distributed in any calendar year if the Borrower Party has paid all
operating expenses and Debt Service Amounts for that calendar year).
"SECTION 20.01(c) Full Recourse. The Borrower Parties shall become
personally liable to the Lender for the performance of all Obligations upon the
occurrence of any of the following Events of Default under Section 16.01(b) of
the Master Agreement: (1) failure to perform or observe the terms, covenants and
conditions under Sections 13.02(c), which failure continues after 30 days
written notice thereof, or 13.02(d) of the Master Agreement; or (2) failure to
perform or observe the terms, covenants and conditions under Paragraph F of the
Rider to the Security instrument.
"SECTION 20.01(d) Permitted Transfer Not Release. No Transfer by any
Borrower Party of its Ownership Interests in any other Borrower Party shall
release the Borrower Party from liability under this Article, this Agreement or
any other Loan Document, unless the Lender shall have approved the Transfer and
shall have expressly released the Borrower Party in connection with the
Transfer.
"SECTION 20.01(e) Miscellaneous. To the extent that a Borrower Party has
personal liability under this Section, the Lender may exercise its rights
against the Borrower Party
Third Amendment
to Master Credit Facility Agreement
-3-
<PAGE>
personally without regard to whether the Lender has exercised any rights against
the Mortgaged Property or any other security, or pursued any rights against any
guarantor, or pursued any other rights available to the Lender under the Loan
Documents or applicable law. For purposes of this Article, the term "Mortgaged
Property" shall not include any funds that (1) have been applied by any Borrower
Party as required or permitted by the Loan Documents prior to the occurrence of
an Event of Default, or (2) are owned by a Borrower Party and which the Borrower
Party was unable to apply as required or permitted by the Loan Documents because
of a bankruptcy, receivership, or similar judicial proceeding."
6. Termination Fee. Concurrently with the execution of this Third
Amendment, the Borrower is paying to the Lender a termination fee equal to the
excess of (i) $144,013.42, over (ii) the product obtained by multiplying (A) the
number of days in the period commencing July 1, 1998 to and including the date
of this Third Amendment, by (B) $162.91, which the parties hereby agree is the
amount due as a termination fee under Section 9.03(b) of the Master Agreement.
7. Expenses. In accordance with Section 13.01(k) and the other provisions
of the Master Agreement, the Borrower will pay the Lender's and Fannie Mae's
costs and expenses, including legal fees and expenses, incurred in connection
with this Third Amendment and the transactions contemplated hereunder.
8. Capitalized Terms. All capitalized terms used in this Third Amendment
which are not specifically defined herein shall have the respective meanings set
forth in the Master Agreement.
9. Full Force and Effect. Except as expressly modified by this Third
Amendment, all terms and conditions of the Master Agreement shall continue in
full force and effect.
10. Counterparts. This Third Amendment may be executed in counterparts by
the parties hereto, and each such counterpart shall be considered an original
and all such counterparts shall constitute one and the same instrument.
[The rest of this page has been left blank intentionally.]
Third Amendment
to Master Credit Facility Agreement
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE BORROWER:
BRI OP LIMITED PARTNERSHIP, a Delaware limited partnership
By: Berkshire Apartments, Inc., a Delaware corporation,
its General Partner
By: /s/ Marianne Pritchard
----------------------------------
Name: Marianne Pritchard
----------------------------
Title: Executive Vice President
----------------------------
THE REIT:
BERKSHIRE REALTY COMPANY, INC., a Delaware corporation
By: /s/ Marianne Pritchard
----------------------------------
Name: Marianne Pritchard
----------------------------
Title: Executive Vice President
----------------------------
THE EXISTING SUBSIDIARY GUARANTOR:
BRI RIVER OAKS LIMITED PARTNERSHIP, a Delaware limited
partnership
By: BRI River Oaks-II, Inc., a Delaware corporation,
its general partner
By: /s/ Marianne Pritchard
----------------------------------
Name: Marianne Pritchard
----------------------------
Title: Executive Vice President
----------------------------
Third Amendment
to Master Credit Facility Agreement
-5-
<PAGE>
THE SUBSIDIARY GUARANTORS:
BRI HIDDEN OAKS PARTNERSHIP (formerly known as L & V
Hidden Oaks Partnership), a Texas general partnership
By: BRI Texas Apartments Limited Partnership, a Delaware
limited partnership, a general partner
By: BRI Texas Apartments-II, Inc., an Alabama
corporation, its general partner
By: /s/ Marianne Pritchard
----------------------------------
Name: Marianne Pritchard
----------------------------
Title: Executive Vice President
----------------------------
BRI TEXAS APARTMENTS LIMITED PARTNERSHIP, a
Delaware limited partnership
By: BRI Texas Apartments-II, Inc., an Alabama
corporation, its general partner
By: /s/ Marianne Pritchard
----------------------------------
Name: Marianne Pritchard
----------------------------
Title: Executive Vice President
----------------------------
THE LENDER
WMF WASHINGTON MORTGAGE CORP., a Delaware corporation
f/k/a
WASHINGTON MORTGAGE FINANCIAL GROUP, LTD., a
Delaware corporation
By: /s/ G. Scott Carter
----------------------------------
Name: G. Scott Carter
----------------------------
Title: Vice President
----------------------------
Third Amendment
to Master Credit Facility Agreement
-6-
<PAGE>
FANNIE MAE:
FANNIE MAE, a federally-chartered and stockholder-owned
corporation organized and existing under the Federal
National Mortgage Association Charter Act, 12 U.S.C. ss.
1716 et seq.
By:
----------------------------------
Name:
----------------------------
Title:
----------------------------
Third Amendment
to Master Credit Facility Agreement
-7-
Exhibit 21.1
<TABLE>
<CAPTION>
ENTITY NAME STATE OF ORGANIZATION
- ----------- ---------------------
<S> <C>
CORPORATIONS
Berkshire Apartments, Inc. DE
BRI Altamonte-II, Inc. DE
BRI Baltimore - 22, L.L.C. MA
BRI Baltimore - 23, L.L.C. MA
BRI Baltimore - 24, L.L.C. MA
BRI Baltimore - 25, L.L.C. MA
BRI Baltimore - 26, L.L.C. MA
BRI Baltimore - 27, L.L.C. MA
BRI Baltimore - 28, L.L.C. MA
BRI Baltimore - 29, L.L.C. MA
BRI Baltimore - 31, L.L.C. MA
BRI Emerald, Inc. DE
BRI Essex House, L.L.C. GA
BRI Foxglove Associates, L.L.C. MD
BRI Gessner, Inc. DE
BRI Granite Run Associates, L.L.C. MD
BRI Highlands, L.L.C. GA
BRI Hunters Glen-II, Inc. DE
BRI Huntington Chase-II, Inc. DE
BRI Lodge, Inc. DE
BRI Newport-II, Inc. DE
BRI Park Colony-Woodland-II, Inc. DE
BRI Pines, L.L.C. GA
BRI Plantation Colony-II, Inc. DE
BRI River Oaks-II, Inc. DE
BRI River Parkway, L.L.C. GA
BRI Texas Apartments-II, Inc. AL
BRI Timbers-II, Inc. DE
BRI Westchester, Inc. DE
LIMITED PARTNERSHIP
BRI Altamonte Limited Partnership DE
BRI Arborview Associates Limited Partnership MD
BRI Benchmark Limited Partnership TX
BRI Calvert's Walk Associates Limited Partnership MD
BRI Commons Limited Partnership TX
BRI Coventry Park Limited Partnership TX
BRI Diamond Ridge Associates Limited Partnership MD
BRI The Estates Limited Partnership MD
BRI Fairbrook Associates Limited Partnership MD
BRI Florida Apartments Limited Partnership DE
BRI Fourth Rolling Road Associates Limited Partnership MD
<PAGE>
BRI Gessner Limited Partnership MD
BRI Harper's Mill Limited Partnership MD
BRI Henley Associates Limited Partnership MD
BRI Heritage Hill Limited Partnership MD
BRI Hunters Glen Limited Partnership DE
BRI Huntington Chase Limited Partnership DE
BRI Lamplighter Ridge Limited Partnership MD
BRI Lodge Limited Partnership TX
BRI Newport Limited Partnership DE
BRI Olde Forge Limited Partnership MD
BRI OP Limited Partnership DE
BRI OP Management Limited Partnership MA
BRI Park Colony-Woodland Limited Partnership DE
BRI Plantation Colony Limited Partnership DE
BRI The Point Limited Partnership DE
BRI Ridgeview Chase Associates Limited Partnership MD
BRI River Oaks Limited Partnership DE
BRI Second Kingswood Common Associates Limited Partnership MD
BRI Southwest Apartments Limited Partnership DE
BRI Texas Apartments Limited Partnership DE
BRI Third Rolling Road Associates Limited Partnership MD
BRI Timbers Limited Partnership DE
BRI Washington Square Limited Partnership MD
BRI Westchester Limited Partnership MD
GENERAL PARTNERSHIPS
BRI Countrywood General Partnership TX
BRI Frederick Road Associates MD
BRI Frederick Road II General Partnership MD
BRI Hidden Oaks Partnership TX
BRI Lynn Lakes Arms General Partnership FL
BRI Plainfield Associates MD
BRI Plainfield II General Partnership MD
BRI Purnell Associates MD
BRI Purnell Associates II General Partnership MD
BRI Rolling Road Associates MD
BRI Rolling Road II General Partnership MD
BRI Second Kingswood Common II General Partnership MD
BRI Second Rolling Road Associates MD
BRI Second Rolling Road II General Partnership MD
BRI Seven Winds Operating Partnership FL
BRI Warren Park Associates MD
BRI Warren Park II General Partnership MD
BRI Williston Associates MD
BRI Williston II General Partnership MD
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Berkshire Realty Company, Inc. and Subsidiaries on Forms S-3 (File Numbers
333-29831, 333-32565, 333-34201, 333-41525, 333-44567, 333-48575, 333-50193, and
333-64631) and Forms S-8 (File Numbers 333-03997 and 333-58399) of our report
dated January 25, 1999, except for Note W, for which the date is March 5, 1999,
on our audits of the consolidated financial statements and financial statement
schedule of Berkshire Realty Company, Inc. and Subsidiaries as of December 31,
1998 and 1997, and for the three years in the period ended December 31, 1998,
which is included in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
Boston, Massachusetts
March 19, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Berkshire
Realty Company's Financial Statements for the year ended December 31, 1998 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 12,366,880
<SECURITIES> 14,813,206<F1>
<RECEIVABLES> 16,305,255<F2>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,303,383<F3>
<PP&E> 936,118,118<F4>
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,008,906,842
<CURRENT-LIABILITIES> 33,528,564
<BONDS> 572,699,318<F5>
69,661,451<F6>
0
<COMMON> 337,035,584<F7>
<OTHER-SE> (4,018,075)<F8>
<TOTAL-LIABILITY-AND-EQUITY> 1,008,906,842
<SALES> 0
<TOTAL-REVENUES> 182,784,997<F9>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 156,268,719<F10>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,801,288
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,285,010)
<DISCONTINUED> (3,266,019)<F11>
<EXTRAORDINARY> 132,454<F12>
<CHANGES> 1,264,920<F13>
<NET-INCOME> (14,153,655)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
<FN>
<F1>Includes MBS securities, Mortgage loans and Notes receivable.
<F2>Includes escrows held.
<F3>Includes Intangible Asset and Workforce acquired of 9,449,030 and other assets
of 19,854,353.
<F4>Includes properties held less depreciation.
<F5>Includes Credit Agreements, Mortgages payable and Construction loan.
<F6>Includes Minority Interest.
<F7>Includes Preferred Stock, Common Stock, Additional Paid-In Capital and
Accumulated deficit.
<F8>Includes Loan receivable to Officer and Treasury Stock.
<F9>Includes all revenue of the Company.
<F10>Includes all expenses of the Company.
<F11>Includes Minority Interest income less Income allocated to preferred
shareholders and Extraordinary items.
<F12>Includes income on Joint Venture.
<F13>Includes Gain on Sale of properties.
</FN>
</TABLE>
