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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)*
BERKSHIRE REALTY COMPANY, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
Shares of Common Stock, par value $0.01 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
084710 10 2
--------------------------------------------------------
(CUSIP Number)
David J. Greenwald, Esq.
Goldman, Sachs & Co.
85 Broad Street, New York, New York 10004
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 13, 1999
--------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [_].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedules, including all exhibits. See ss.240.13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- ------------------------- ----------------------
CUSIP No. 084710 10 2 PAGE 2 OF 11 PAGES
- ------------------------- ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
WXI/BRH Gen-Par, L.L.C.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH -0-
REPORTING -----------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
-0-
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
-0-
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS)
[_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO
- --------------------------------------------------------------------------------
<PAGE>
CUSIP No. 084710 10 2 PAGE 3 OF 11 PAGES
Whitehall Street Real Estate Limited Partnership XI ("Whitehall"), WXI/BRH
Gen-Par, L.L.C. ("WHGP"), WH Advisors, L.L.C. XI ("WH Advisors, L.L.C."),
Goldman, Sachs & Co. ("GS&Co.") and The Goldman Sachs Group, L.P. hereby amend
the report on Schedule 13D, dated March 4, 1999, as amended by Amendment No. 1
thereto dated March 8, 1999 (the "Schedule 13D"), filed in respect of shares of
Common Stock, par value $.01 per share (the "Common Stock"), of Berkshire Realty
Company, Inc., a Delaware corporation ("Berkshire"). Capitalized terms used but
not defined herein shall have the meaning attributed to such terms in the
Schedule 13D.
Item 2. Identity and Background.
Item 2 of the Schedule 13D is hereby amended by replacing the
first paragraph therein with the following paragraph:
This statement is being filed by Whitehall Street Real Estate
Limited Partnership XI ("Whitehall"), WXI/BRH Gen-Par, L.L.C.("WHGP"),
WH Advisors, L.L.C. XI ("WH Advisors, L.L.C."), Goldman, Sachs & Co.
("GS&Co.") and The Goldman Sachs Group, L.P. ("GS Group", and, together
with Whitehall, WHGP, WH Advisors, L.L.C. and GS&Co., the "Reporting
Persons").*
Item 2 of the Schedule 13D is further amended by adding the
following paragraphs at the end thereof:
As described in Items 3 and 4 below, on April 12, 1999,
Berkshire Realty Holdings, L.P., a Delaware limited partnership
("Berkshire Holdings"), was formed in connection with the transactions
that are the subject of this Schedule 13D. The general partners of
Berkshire Holdings are WHGP, BRE/Berkshire GP L.L.C., an affiliate of
Blackstone ("Blackstone GP"), and Aptco Gen-Par, L.L.C., an affiliate
of the Krupp Affiliates ("Krupp GP"). The limited partners of Berkshire
Holdings are Whitehall, certain other investment limited partnerships
and corporations affiliated with GS&Co. and GS Group (the "GS
Affiliated Investors"), BRE/Berkshire LP L.L.C., an affiliate of
Blackstone ("Blackstone LP"), and Aptco Holdings, L.L.C., an affiliate
of the Krupp Affiliates ("Krupp LP"). As previously disclosed,
Whitehall, Blackstone and certain of the Krupp Affiliates had formed
Aptco for the purpose of making a merger proposal for the acquisition
of Berkshire and related transactions. As a result of the formation of
Berkshire Holdings, however, Berkshire Holdings and its affiliates,
rather than Aptco, will consummate the transactions described herein.
As a result of the formation of Berkshire Holdings, the
partners of Berkshire Holdings, including WHGP, the GS Affiliated
Investors, Blackstone GP, Blackstone LP, Krupp GP and
- ----------
* Neither the present filing nor anything contained herein shall be construed
as an admission that Whitehall, WHGP, WH Advisors, L.L.C., GS&Co. or GS
Group constitute a "person" for any purpose other than Section 13(d) of the
Securities Exchange Act of 1934.
<PAGE>
CUSIP No. 084710 10 2 PAGE 4 OF 11 PAGES
Krupp LP may be deemed to have joined the "group" (within the meaning
of Section 13(d) of the Securities Exchange Act of 1934, as amended)
that may have been deemed to have been formed by the Reporting Persons,
Blackstone and the Krupp Affiliates.* Pursuant to Rule 13(d)-1(k)(2),
the Reporting Persons are filing individually.
WHGP is a Delaware limited liability company formed in
connection with the transactions that are the subject of this Schedule
13D and is a wholly owned subsidiary of Whitehall.
The name, residence or business address, present principal
occupation or employment, and the name, principal business and address
of any corporation or other organization in which such employment is
conducted and the citizenship of each manager and executive officer of
WHGP are set forth on Schedule IV hereto and are incorporated herein by
reference.
None of WHGP, or to the best knowledge and belief of the
Reporting Persons, any of the individuals listed in Schedule IV has,
during the past five years, been convicted in any criminal proceeding
(excluding traffic violations or similar misdemeanors) or has been a
party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect
to such laws.
To the knowledge of the Reporting Persons, each of Blackstone
GP and Blackstone LP is a Delaware limited liability company that is an
affiliate of Blackstone formed in connection with the transactions that
are the subject of this Schedule 13D and whose business address is 345
Park Avenue, New York, New York 10154.
To the knowledge of the Reporting Persons, each of Krupp GP
and Krupp LP is a Delaware limited liability company that is an
affiliate of the Krupp Affiliates formed for the purpose of becoming a
partner in Berkshire Holdings and whose business address is The
Berkshire Group, One Beacon Street, Suite 1500, Boston, Massachusetts
02108.
This Item 2 is qualified in its entirety by reference to
Schedule IV which is attached hereto and incorporated into this Item by
reference.
Item 3. Source and Amount of Funds or Other Consideration.
Item 3 of the schedule 13D is hereby amended by adding the
following paragraphs after the second paragraph therein:
- ----------
* Neither the present filing nor anything contained herein shall be construed
as an admission that the Reporting Persons together with the GS Affiliated
Investors, Blackstone, Blackstone GP, Blackstone LP, the Krupp Affiliates,
Krupp GP and Krupp LP constitute a "person" or "group" for any purpose.
Neither the present filing nor anything contained herein shall be construed
as an admission that Whitehall together with the GS Affiliated Investors,
Blackstone, Blackstone GP, Blackstone LP, the Krupp Affiliates, Krupp GP
and Krupp LP constitute a "person" or "group" for any purpose other than
what they may be deemed to constitute under Section 13(d) of the Securities
Exchange Act of 1934.
<PAGE>
CUSIP No. 084710 10 2 PAGE 5 OF 11 PAGES
Berkshire Holdings was formed on April 12, 1999 in connection
with the transactions that are the subject of this Schedule 13D.
Pursuant to the terms of the Agreement of Limited Partnership of
Berkshire Holdings, dated as of April 13, 1999 (the "Partnership
Agreement") (attached hereto as Exhibit 7) the partners of Berkshire
Holdings have agreed to contribute up to an aggregate of $316,349,295
in equity capital (as such amount may be reduced to take into account
the number of OP Units that are converted into interests in Berkshire
Holdings rather than cash and the amount of debt financing obtained
with respect to the transactions described herein) to Berkshire
Holdings. The Partnership Agreement provides that (i) Krupp GP and
Krupp LP (acting together) will contribute to Berkshire Holdings at
least 5,416,000 shares of Common Stock and/or OP Units currently owned
by the Krupp Affiliates (having a value of $66,349,295, or $12.25 per
share of Common Stock or OP Unit) and (ii) each of Whitehall and WHGP
(acting together) and Blackstone GP and Blackstone LP (acting together)
will contribute up to $125,000,000 in cash (as such amount may be
reduced to take into account the number of OP Units that are converted
into interests in Berkshire Holdings rather than cash and the amount of
debt financing obtained with respect to the transactions described
herein).
The partners of Berkshire Holdings expect to finance the
transactions proposed herein with their equity contributions and with
debt financing. The Commitment Letter has expired in accordance with
its terms. However, the partners of Berkshire Holdings have had
preliminary discussions with a mortgage broker regarding a financing of
a substantial portion of the properties of Berkshire by the Federal
Home Loan Mortgage Corporation ("Freddie Mac") and plan to continue to
pursue such Freddie Mac financing with a view toward implementing such
financing concurrently with the closing of the transactions described
herein. Krupp GP, acting alone, has the authority to implement Freddie
Mac financing which meets the parameters set forth in the Partnership
Agreement. In the event that Krupp GP is not able to obtain the Freddie
Mac financing within such parameters, WHGP and Blackstone GP, acting
together, have the authority to obtain alternative financing, subject
to the terms of the Partnership Agreement. Each of Whitehall and
Blackstone has severally agreed, pursuant to a letter, dated April 13,
1999, between Berkshire Holdings, Whitehall and Blackstone (the "Second
Commitment Letter") (attached hereto as Exhibit 8), and subject to the
terms of such Second Commitment Letter, to provide to Berkshire
Holdings 50% of an aggregate amount of financing of up to $755 million,
but in no event more than 75.5% of the Transaction Value (as defined in
the Second Commitment Letter).
Item 3 of the Schedule 13D is further amended by adding the
following paragraph at the end thereof:
The information set forth in response to this Item 3
is qualified in its entirety by reference to the Partnership Agreement,
the Second Commitment Letter and the Letter Agreement (as defined
below), which are expressly incorporated herein by reference.
<PAGE>
CUSIP No. 084710 10 2 PAGE 6 OF 11 PAGES
Item 4. Purpose of Transaction.
Item 4 of the Schedule 13D is hereby amended by adding the
following paragraphs at the end thereof:
On April 13, 1999, Berkshire Holdings and BRI Acquisition,
LLC, a wholly owned subsidiary of Berkshire Holdings, entered into an
Agreement and Plan of Merger, dated as of April 13, 1999, with
Berkshire (the "Merger Agreement") (attached hereto as Exhibit 9)
pursuant to which, on the terms and subject to the conditions set forth
therein, among other things, BRI Acquisition, LLC would be merged with
and into Berkshire (provided that, at the option of Berkshire Holdings,
upon the satisfaction of certain conditions, Berkshire would be merged
with and into Berkshire Holdings) and the stockholders of Berkshire
(other than Berkshire, Berkshire Holdings, the subsidiaries of
Berkshire Holdings, and stockholders who properly exercise dissenters'
rights under Delaware law) would receive in cash $12.25 per share of
Common Stock.
On April 13, 1999, Berkshire Holdings and BRI Acquisition Sub,
LP, a wholly owned subsidiary of Berkshire Holdings, entered into an
Agreement and Plan of Merger, dated as of April 13, 1999, with BRI OP
(the "OP Merger Agreement") (attached hereto as Exhibit 10) pursuant to
which, on the terms and subject to the conditions set forth therein,
among other things, BRI Acquisition Sub, LP would be merged with and
into BRI OP and the holders of outstanding OP Units (other than
Berkshire Holdings, Berkshire and Berkshire Apartments, Inc.) would, at
their election, be entitled to receive one of the following forms of
consideration in respect of each outstanding OP Unit: (i) one Class A
Preferred Unit (as defined in the Partnership Agreement) of Berkshire
Holdings, (ii) one Class B Unit (as defined in the Partnership
Agreement) of Berkshire Holdings, or (iii) $12.25 in cash.
To secure certain of its obligations under the Merger
Agreement, Berkshire Holdings has entered into an Escrow Agreement,
dated as of April 13, 1999 (the "Escrow Agreement") (attached hereto as
Exhibit 11) with Berkshire, BRI OP and American Stock Transfer and
Trust Company (the "Escrow Agent") pursuant to which Berkshire Holdings
has deposited a letter of credit (the "Letter of Credit") (attached
hereto as Exhibit 12) in favor of the Escrow Agent which may, subject
to the terms of the Merger Agreement and the Escrow Agreement, be drawn
upon at the direction of Berkshire to satisfy the obligation of
Berkshire Holdings and BRI Acquisition, LLC to pay certain amounts to
Berkshire if the Merger Agreement is terminated in certain
circumstances.
In addition, the partners of Berkshire Holdings have entered
into an agreement (the "Letter Agreement") (attached hereto as Exhibit
14), dated as of April 13, 1999, governing certain matters relating to
the Partnership Agreement and the transactions described herein.
The information set forth in response to this Item 4 is
qualified in its entirety by reference to the Merger Agreement, the OP
Merger Agreement, the Escrow Agreement, the Letter of Credit and the
Letter Agreement, which are expressly incorporated herein by reference.
<PAGE>
CUSIP No. 084710 10 2 PAGE 7 OF 11 PAGES
Item 5. Interests in Securities of the Issuer.
Item 5(a) of the Schedule 13D is hereby amended by adding the
following paragraphs after the third paragraph therein:
As of April 14, 1999, no shares of Common Stock were
beneficially owned by WHGP.
Based on information provided by Blackstone to the Reporting
Persons, as of April 14, 1999, no shares of Common Stock were
beneficially owned by either Blackstone GP or Blackstone LP.
Based on information provided by the Krupp Affiliates to the
Reporting Persons, as of April 14, 1999, no shares of Common Stock were
beneficially owned by either Krupp GP or Krupp LP.
Item 5(a) of the Schedule 13D is hereby further amended by
replacing the last paragraph therein with the following paragraph:
None of the Reporting Persons, and to the knowledge of the
Reporting Persons, none of the persons listed on Schedules I, II and IV
hereto, beneficially own any shares of Common Stock other than as set
forth herein.
Item 5(c) of the Schedule 13D is hereby amended by adding the
following paragraph at the end thereof:
None of WHGP, and based on information provided by Blackstone,
the Krupp Affiliates and the persons listed on Schedule IV hereto to
the Reporting Persons, any of the persons listed on Schedule IV hereto,
Blackstone GP, Blackstone LP, Krupp GP or Krupp LP, has been a party to
any transaction in the Common Stock during the sixty-day period ending
on April 14, 1999.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Item 6 of the Schedule 13D is hereby amended by replacing the
existing paragraph with the following paragraphs:
On April 13, 1999 Douglas S. Krupp entered into a voting
agreement (the "Voting Agreement") with Berkshire and BRI OP, pursuant
to which Douglas S. Krupp has agreed to vote, and to cause persons or
entities affiliated with him to vote, (i) the Common Stock which they
own in favor of adoption of the Merger Agreement and approval of the
transactions contemplated thereby and (ii) the OP Units which they own
in favor of adoption of the OP Merger Agreement and the approval of the
transactions contemplated thereby. A copy of the Voting Agreement is
attached hereto as Exhibit 14 and is incorporated herein by reference.
<PAGE>
CUSIP No. 084710 10 2 PAGE 8 OF 11 PAGES
Except as disclosed in Items 3, 4, 5 and 6, the Joint Filing
Agreement, dated March 4, 1999, among Whitehall, WH Advisors, L.L.C.,
GS Group and GS&Co. (attached hereto as Exhibit 4) and the Joint Filing
Agreement, dated April 14, 1999, among the Reporting Persons (attached
hereto as Exhibit 15), none of the Reporting Persons is a party to any
contracts, arrangements, understandings or relationships with respect
to any securities of Berkshire, including but not limited to the
transfer or voting of any securities, finder's fees, joint ventures,
loan or option agreements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Item 7 of the Schedule 13D is hereby amended by adding the
following immediately at the end thereof:
Exhibit No. Exhibit
----------- -------
7. Agreement of Limited Partnership of Berkshire Realty
Holdings, L.P., dated as of April 13, 1999, among
Whitehall, WHGP, Blackstone GP, Blackstone LP, Krupp
GP, Krupp LP, the GS Affiliated Investors, and, for
the purposes of Section 4.4(c) only, BCLP.
8. Commitment Letter, dated April 13, 1999, among
Berkshire Holdings, Whitehall and Blackstone.
9. Agreement and Plan of Merger, dated as of April 13,
1999, among Berkshire Holdings, BRI Acquisition, LLC
and Berkshire.
10. Agreement and Plan of Merger, dated as of April 13,
1999, among Berkshire Holdings, BRI Acquisition Sub,
LP Berkshire Apartments, Inc. and BRI OP.
11. Escrow Agreement, dated as of April 13, 1999, among
Berkshire, BRI OP, Berkshire Holdings and the Escrow
Agent.
12. Letter of Credit, dated April 13, 1999, deposited by
Berkshire Holdings in favor of the Escrow Agent.
13. Letter Agreement, dated as of April 13, 1999, among
the partners of Berkshire Holdings.
14. Voting Agreement, dated as of April 13, 1999, among
Douglas S. Krupp, Berkshire and BRI OP.
15. Joint Filing Agreement, dated April 14, 1999, among
the Reporting Persons.
<PAGE>
CUSIP No. 084710 10 2 PAGE 9 OF 11 PAGES
SIGNATURE
After reasonable inquiry and to our best knowledge and belief,
we certify that the information set forth in this statement is true complete and
correct.
Dated: April 15, 1999
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP XI
By: WH Advisors, L.L.C. XI,
its general partner
By: /s/ Ralph F. Rosenberg
---------------------------------
Name: Ralph F. Rosenberg
Title: Manager and Vice President
WXI/BRH GEN-PAR, LLC
By: /s/ Ralph F. Rosenberg
---------------------------------
Name: Ralph F. Rosenberg
Title: Manager and Vice President
WH ADVISORS, L.L.C. XI
By: /s/ Ralph F. Rosenberg
---------------------------------
Name: Ralph F. Rosenberg
Title: Manager and Vice President
THE GOLDMAN SACHS GROUP, L.P.
By: /s/ Hans L. Reich
---------------------------------
Name: Hans L. Reich
Title: Attorney-in-Fact
GOLDMAN, SACHS & CO.
By: /s/ Hans L. Reich
---------------------------------
Name: Hans L. Reich
Title: Attorney-in-Fact
<PAGE>
CUSIP No. 084710 10 2 PAGE 10 OF 11 PAGES
SCHEDULE IV
The name, position and present principal occupation of each
manager and executive officer of WXI/BRH Gen-Par, L.L.C. are set forth below.
The business address of all the executive officers and
managers listed below except Todd A. Williams is 85 Broad Street, New York, New
York 10004. The business address of Todd A. Williams is 100 Crescent Court,
Suite 1000, Dallas, TX 75201.
All executive officers and managers listed below are United
States citizens.
<TABLE>
<CAPTION>
Name Position Present Principal Occupation
- ---- -------- ----------------------------
<S> <C> <C>
Rothenberg, Stuart M. Manager/Vice President Managing Director of
Goldman, Sachs & Co.
Neidich, Daniel M. Manager/President Managing Director of
Goldman, Sachs & Co.
Weil, David M. Vice President Managing Director of
Goldman, Sachs & Co.
Rosenberg, Ralph F. Manager/Vice President/ Managing Director of
Assistant Secretary Goldman, Sachs & Co.
Williams, Todd A. Vice President/Assistant Managing Director of
Secretary/Assistant Goldman, Sachs & Co.
Treasurer
Naughton, Kevin D. Vice President/Secretary/ Vice President of
Treasurer Goldman, Sachs & Co.
Siskind, Edward M. Vice President/Assistant Managing Director of
Treasurer Goldman, Sachs & Co.
Klingher, Michael K. Vice President Managing Director of
Goldman, Sachs & Co.
Kava, Alan S. Vice President Vice President of
Goldman, Sachs & Co.
</TABLE>
<PAGE>
CUSIP No. 084710 10 2 PAGE 11 OF 11 PAGES
<TABLE>
<CAPTION>
Name Position Present Principal Occupation
- ---- -------- ----------------------------
<S> <C> <C>
Feldman, Steven M. Vice President Managing Director of
Goldman, Sachs & Co.
Lauer, Kate Vice President/Assistant Vice President of
Secretary Goldman, Sachs & Co.
Sack, Susan L. Vice President/Assistant Vice President of
Secretary Goldman, Sachs & Co.
Burban, Elizabeth M. Vice President/Assistant Vice President of
Secretary Goldman, Sachs & Co.
</TABLE>
<PAGE>
EXHIBIT INDEX
EDGAR
Exhibit Exhibit
No. Exhibit No.
- ------- ----------------------------------------------------- ---------
7. Agreement of Limited Partnership of Berkshire Realty 99.7
Holdings, L.P., dated as of April 13, 1999, among
Whitehall, WHGP, Blackstone GP, Blackstone LP, Krupp
GP, Krupp LP, the GS Affiliated Investors, and, for
the purposes of Section 4.4(c) only, BCLP.
8. Commitment Letter, dated April 13, 1999, among 99.8
Berkshire Holdings, Whitehall and Blackstone.
9. Agreement and Plan of Merger, dated as of April 13, 2.1
1999, among Berkshire Holdings, BRI Acquisition, LLC
and Berkshire.
10. Agreement and Plan of Merger, dated as of April 13, 2.2
1999, among Berkshire Holdings, BRI Acquisition Sub,
LP Berkshire Apartments, Inc. and BRI OP.
11. Escrow Agreement, dated as of April 13, 1999, among 99.9
Berkshire, BRI OP, Berkshire Holdings and the Escrow
Agent.
12. Letter of Credit, dated April 13, 1999, deposited by 99.10
Berkshire Holdings in favor of the Escrow Agent.
13. Letter Agreement, dated as of April 13, 1999, among 99.11
the partners of Berkshire Holdings.
14. Voting Agreement, dated as of April 13, 1999, among 9
Douglas S. Krupp, Berkshire and BRI OP.
15. Joint Filing Agreement, dated April 14, 1999, among 99.12
the Reporting Persons.
Exhibit 7
---------
AGREEMENT OF LIMITED PARTNERSHIP
OF
BERKSHIRE REALTY HOLDINGS, L.P.
THE INTERESTS OF THE GENERAL PARTNERS AND THE LIMITED PARTNERS ISSUED UNDER THIS
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES ACT OF ANY STATE OR THE DISTRICT OF COLUMBIA. NO RESALE OF AN
INTEREST BY A LIMITED PARTNER IS PERMITTED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THIS AGREEMENT AND ANY APPLICABLE FEDERAL OR STATE SECURITIES
LAWS, AND ANY VIOLATION OF SUCH PROVISIONS COULD EXPOSE THE SELLING LIMITED
PARTNER AND THE PARTNERSHIP TO LIABILITY.
DATED AS OF APRIL 13, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1.
DEFINITIONS
1.1 Definitions.....................................................................................2
1.2 Terms Generally................................................................................14
ARTICLE 2.
THE PARTNERSHIP AND ITS BUSINESS
2.1 Partnership Name...............................................................................14
2.2 Term...........................................................................................15
2.3 Filing of Certificate and Amendments...........................................................15
2.4 Business; Scope of Partners' Authority.........................................................15
2.5 Principal Office; Registered Agent.............................................................15
2.6 Names and Addresses of the Partners............................................................16
2.7 Representations by the Partners................................................................17
2.8 Control of the Berkshire Group.................................................................18
2.9 Pre-Closing Costs and Expenses.................................................................18
2.10 Compliance with Certain Agreements.............................................................19
2.11 Miscellaneous..................................................................................19
ARTICLE 3.
MANAGEMENT OF PARTNERSHIP BUSINESS;
POWERS AND DUTIES OF THE ADMINISTERING GENERAL PARTNER
3.1 Management and Control.........................................................................19
3.2 Role of the Administering General Partner and Limitations on its Authority.....................20
3.3 Majority Decisions.............................................................................24
3.4 Unanimous Decisions............................................................................27
3.5 Consents of General Partners...................................................................29
3.6 Meetings of General Partners; etc. ...........................................................30
3.7 No Participation by or Authority of Limited Partners; Limited Rights...........................30
3.8 Acts of the Partnership and the Partners; Representatives......................................31
3.9 Waiver of Rights by the Limited Partners.......................................................31
3.10 Sales of Certain Properties by WHGP and Blackstone GP..........................................32
ARTICLE 4.
RIGHTS AND DUTIES OF PARTNERS
4.1 Duties and Obligations of the Administering General Partner....................................32
4.2 Other Activities of the Partners...............................................................33
4.3 Indemnification................................................................................34
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
4.4 Compensation of Partners and their Affiliates; Goldman, Sachs & Co. as
Financial Advisor............................................................................34
4.5 Dealing with Partners..........................................................................36
4.6 Use of Partnership Property....................................................................36
4.7 Designation of Tax Matters Partner.............................................................36
4.8 Guarantees.....................................................................................37
ARTICLE 5.
BOOKS AND RECORDS; ANNUAL REPORTS
5.1 Books of Account...............................................................................39
5.2 Availability of Books of Account...............................................................39
5.3 Annual Reports and Statements; Annual Budgets and Business Plans...............................39
5.4 Accounting and Other Expenses..................................................................40
5.5 Bank Account...................................................................................41
ARTICLE 6.
CAPITAL CONTRIBUTIONS, LOANS
AND LIABILITIES
6.1 Initial Capital Contributions of the Partners..................................................41
6.2 Additional Contributions.......................................................................43
6.3 Dilution for Failure to Fund Capital Calls.....................................................44
6.4 Capital of the Partnership.....................................................................46
6.5 Liability of General Partners..................................................................46
6.6 Limited Liability of Limited Partners..........................................................46
ARTICLE 7.
CAPITAL ACCOUNTS, PROFITS
AND LOSSES AND ALLOCATIONS
7.1 Capital Accounts...............................................................................46
7.2 Profits and Losses.............................................................................47
ARTICLE 8.
APPLICATIONS AND DISTRIBUTIONS
OF AVAILABLE CASH
8.1 Applications and Distributions.................................................................52
8.2 Liquidation....................................................................................54
ARTICLE 9.
TRANSFER OF COMPANY INTERESTS
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
9.1 Limitations on Assignments of Interests by Partners............................................54
9.2 Sale of All of the Properties Before the Fifth Anniversary of the Closing Date
at the Option of Berkshire...................................................................57
9.3 Sale of All of the Properties Before the Fifth Anniversary of the Closing Date
at the Option of Two General Partners........................................................62
9.4 Sale of the Properties After the Fifth Anniversary.............................................63
9.5 Assignment Binding on Partnership..............................................................64
9.6 Bankruptcy of a Limited Partner................................................................64
9.7 Substituted Partners...........................................................................64
9.8 Acceptance of Prior Acts.......................................................................65
9.9 Additional Limitations.........................................................................65
9.10 Purchase of the Berkshire Group's Interest upon the Termination of Douglas
Krupp's Employment Under the DK Employment Agreement.........................................65
9.11 Transfers by the Blackstone Group and the Whitehall Group......................................66
9.12 Purchase of the Class A Preferred Units and Class B Units......................................67
9.13 Subsequent Transactions........................................................................69
ARTICLE 10.
DISSOLUTION OF THE PARTNERSHIP;
WINDING UP AND DISTRIBUTION OF ASSETS
10.1 Dissolution....................................................................................71
10.2 Winding Up.....................................................................................72
10.3 Distribution of Assets.........................................................................73
10.4 Special Allocation.............................................................................73
ARTICLE 11.
AMENDMENTS
11.1 Amendments.....................................................................................74
11.2 Additional Partners............................................................................74
ARTICLE 12.
MISCELLANEOUS
12.1 Further Assurances.............................................................................74
12.2 Notices........................................................................................74
12.3 Headings and Captions..........................................................................75
12.4 Variance of Pronouns...........................................................................75
12.5 Counterparts...................................................................................75
12.6 Governing Law..................................................................................75
12.7 Consent to Jurisdiction........................................................................75
12.8 Arbitration....................................................................................76
12.9 Partition......................................................................................76
</TABLE>
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<TABLE>
<S> <C>
12.10 Invalidity.....................................................................................76
12.11 Successors and Assigns.........................................................................76
12.12 Entire Agreement...............................................................................77
12.13 Waivers........................................................................................77
12.14 No Brokers.....................................................................................77
12.15 Maintenance as a Separate Entity...............................................................77
12.16 Confidentiality................................................................................77
12.17 No Third Party Beneficiaries...................................................................78
12.18 Power of Attorney..............................................................................78
12.19 Construction of Documents......................................................................79
12.20 Time of Essence................................................................................79
12.21 Default by Partnership.........................................................................79
</TABLE>
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<PAGE>
SCHEDULES
Schedule 1.1(a) Properties; Preliminary Loan Amounts
Schedule 2.6(b) Names and Addresses of Partners
Schedule 2.7(c) Shares of Common Stock of BRI Owned by the Berkshire
Principals that will not be Contributed to the
Partnership
Schedule 2.10 Contribution Agreements
Schedule 3.2(a)(19) List of Ten Assets to be Sold
Schedule 3.2(a)(20) Allocated Acquisition Cost of Each Asset
Schedule 3.8 Representatives of the General Partners
Schedule 4.2(b) Krupp Affiliated Entities
Schedule 4.4(c) Managed Properties
Schedule 5.3(b) Initial Annual Budget
Schedule 6.1 Initial Capital Contributions of the Partners,
Partners; Partnership
Percentage Interests; Partnership Units held by the
Partners
Schedule 9.10 Performance Termination
Schedule 9.13(a)(1) 17 Properties
Schedule 9.13(a)(2) 22 Properties
Schedule 9.13(a)(3) 33 Properties
EXHIBITS
Exhibit 1 Form of DK Employment Agreement
Exhibit 2 Form of Guarantee of Partnership Indebtedness
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<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
BERKSHIRE REALTY HOLDINGS, L.P.
This AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement"), is made and
entered into as of April __, 1999, by and among Whitehall Street Real Estate
Limited Partnership XI, a Delaware limited partnership ("Whitehall"), WXI/BRH
Gen-Par LLC , a Delaware limited liability company ("WHGP"), Stone Street Real
Estate Fund 1998 L.P., a Delaware limited partnership ("Stone Street"), Bridge
Street Real Estate Fund 1998 L.P., a Delaware limited partnership ("Bridge
Street") and Stone Street WXI/BRH Corp., a Delaware corporation ("Stone Corp"),
BRE/Berkshire LP L.L.C., a Delaware limited liability company ("Blackstone LP"),
BRE/Berkshire GP L.L.C., a Delaware limited liability company (in its capacity
as a general partner hereunder, "Blackstone GP"), Aptco Holdings, L.L.C., a
Delaware limited liability company ("Berkshire") and Aptco Gen-Par, L.L.C., a
Delaware limited liability company ("BGP").
RECITALS
WHEREAS, the Partners desire to form a limited partnership pursuant to
the terms and provisions of this Agreement, and in accordance with the statutes
and laws of the State of Delaware relating to limited partnerships, including
without limitation, the Act;
WHEREAS, Berkshire Realty Holdings, L.P., (the "Partnership") intends
to acquire by merger Berkshire Realty Company, Inc., a Delaware corporation
(Berkshire Realty Company, Inc., together with its subsidiaries, "BRI");
WHEREAS, BRI Acquisition Sub, LP, a Subsidiary of the Partnership,
intends to merge with and into BRI OP Limited Partnership, a Delaware limited
partnership ("BRI OP"); and
WHEREAS, the Partnership intends to supervise the operation of the
business conducted by BRI, including the ownership, acquisition, management,
renovation and development of multifamily properties (the multifamily properties
owned by BRI and any additional multifamily properties (or properties proposed
for development) acquired by the Partnership, BRI OP, or any of their respective
subsidiaries, being hereinafter referred to as the "Properties" and any of the
foregoing individually being hereinafter referred to as a "Property").
NOW, THEREFORE, in order to carry out their intent as expressed above
and in consideration of the mutual agreements hereinafter contained, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
<PAGE>
ARTICLE 1.
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below, which meanings shall be applicable equally to
the singular and plural of the terms defined:
"Act" shall mean the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time.
"Additional Capital Call" shall mean a capital call made on the
Partners pursuant to Section 6.2.
"Additional Contribution" shall mean any amounts contributed by a
Partner pursuant to Section 6.2.
"Administering General Partner" shall mean (i) BGP, upon the execution
and delivery hereof or (ii) if for any reason BGP ceases to be Administering
General Partner pursuant to the terms hereof (including Section 3.2(c)), another
Person appointed by the General Partners of the Partnership (except that BGP
shall not have an approval right with respect to such appointment).
"Administrative Services Agreement" shall have the meaning set forth in
Section 4.4(c).
"Affiliate" shall mean with respect to any Person (i) any other Person
that directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with such Person, (ii) any other Person
owning or controlling 10% or more of the outstanding voting securities of, or
other ownership interests in, such Person, (iii) any officer, director, member
or partner of such Person and (iv) if such Person is an officer, director,
member or partner, the company for which such Person acts in any such capacity.
For purposes of this definition, the term "control," when used with respect to
any Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" shall mean this Agreement of Limited Partnership, as it may
hereafter be amended or modified from time to time.
"Annual Budget" shall mean the applicable budget for the Partnership
prepared by the Administering General Partner for approval pursuant to Section
5.3(b).
"Appraiser" shall have the meaning set forth in Section 9.10(d).
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"Approved Budget" shall mean (i) for calendar year 1999, the budget
previously approved by the General Partners and attached hereto as Schedule
5.3(b) and (ii) for any calendar year thereafter, the Annual Budget for the
Budget Year in question, as approved by at least two of the General Partners in
accordance with the provisions hereof and as any of the same may be amended from
time to time in accordance with the provisions hereof.
"Approved Business Plan" shall mean for any Budget Year, the Business
Plan for the Budget Year in question, as approved by at least two of the General
Partners in accordance with the provisions hereof and as any of the same may be
amended from time to time in accordance with the provisions hereof.
"Available Cash" shall mean, for any quarterly period or such other
period for which computation may be appropriate, the excess, if any, of (A) the
sum of (i) the amount of all cash receipts of the Partnership during such period
from whatever source and (ii) any cash reserves of the Partnership existing at
the start of such period, less (B) the sum of (i) all cash amounts paid or
payable (without duplication) in such period on account of expenses and capital
expenditures incurred in connection with the Partnership's business and approved
in accordance with the provisions hereof (including, without limitation, general
operating expenses, taxes, amortization or interest on any debt of the
Partnership and expenses incurred in connection with the satisfaction of any
refinancing of any of the Properties), and (ii) such cash reserves which may be
required for capital expenditures (not to exceed the greater of (x) $400 per
apartment unit then owned by the Partnership (directly or indirectly) and (y)
amounts included in an Approved Budget for capital expenditures less any amounts
actually expended), working capital and future needs of the Partnership in an
amount reasonably determined by at least two of the General Partners or, if not
yet determined for such period, in an amount equal to 105% of the amounts
required for the working capital and future needs of the Partnership as set
forth in the Partnership's Approved Budget.
"Bankruptcy" shall mean, with respect to the affected party, (i) the
entry of an order for relief under the Bankruptcy Code, (ii) the admission by
such party of its inability to pay its debts as they mature, (iii) the making by
it of an assignment for the benefit of creditors, (iv) the filing by it of a
petition in bankruptcy or a petition for relief under the Bankruptcy Code or any
other applicable federal or state bankruptcy or insolvency statute or any
similar law, (v) an application by such party for the appointment of a receiver
for the assets of such party, (vi) an involuntary petition against it seeking
liquidation, reorganization, arrangement or readjustment of its debts under any
other federal or state insolvency law, provided that the same shall not have
been vacated, set aside or stayed within the sixty-day period following the
filing of such petition or (vii) the imposition of a judicial or statutory lien
on all or a substantial part of its assets unless such lien is discharged or
vacated or the enforcement thereof stayed within sixty (60) days after its
effective date.
"Bankruptcy Code" shall mean Title 11 of the United States Code, as
amended.
"Berkshire" shall have the meaning set forth in the first paragraph of
this Agreement.
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"Berkshire Group" shall mean, collectively, Berkshire and BGP together
with any assignees or transferees to the extent permitted hereunder, but only so
long as any such Person continues in its capacity as a partner in the
Partnership.
"Berkshire Principals" shall mean Douglas Krupp and George Krupp.
"BGP" shall have the meaning set forth in the first paragraph of this
Agreement.
"Blackstone GP" shall have the meaning set forth in the first paragraph
of this Agreement.
"Blackstone Group" shall mean, collectively, Blackstone GP and
Blackstone LP, together with any assignees or transferees to the extent
permitted hereunder, but only so long as any such Person continues in its
capacity as a partner in the Partnership.
"Blackstone LP" shall have the meaning set forth in the first paragraph
of this Agreement.
"Book Value" shall mean, with respect to any Partnership Asset, its
adjusted basis for federal income tax purposes, except that the initial Book
Value of any asset contributed by a Partner to the Partnership shall be an
amount equal to the agreed gross fair market value of such asset, and such Book
Value shall thereafter be adjusted in a manner consistent with Treasury
Regulations Section 1.704-1(b)(2)(iv)(g) for revaluations pursuant to Section
7.1(b) and for the Depreciation taken into account with respect to such asset.
"BRI Merger Agreement" shall mean the Agreement and Plan of Merger,
dated as of April __, 1999 (as such agreement may be amended from time to time),
by and among the Partnership, BRI Acquisition LLC and Berkshire Realty Company,
Inc.
"BRI OP Merger Agreement" shall mean the Agreement and Plan of Merger,
dated as of April __, 1999 (as such agreement may be amended from time to time),
by and among the Partnership, BRI Acquisition Sub, L.P., Berkshire Apartments,
Inc. and BRI OP.
"Bridge Loan" shall have the meaning set forth in Section 2.9(c).
"Bridge Street" shall have the meaning set forth in the first paragraph
of this Agreement.
"Budget Year" shall mean the period beginning on the date hereof and
ending on December 31, 1999; and beginning January 1, 2000, "Budget Year" shall
mean a period beginning on January 1, 2000 and ending on December 31, 2000 and
each calendar year thereafter.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which banks in New York are required or permitted to be closed.
"Business Plan" shall mean the applicable business plan for the
Partnership prepared by the Administering General Partner for approval pursuant
to Section 5.3(b).
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<PAGE>
"Capital Account" shall mean, when used in respect of any Partner, the
Capital Account maintained for such Partner in accordance with Section 7.1, as
said Capital Account may be increased or decreased from time to time pursuant to
the terms of this Agreement.
"Capital Contribution" shall mean, (i) with respect to any Investor
Group Partner, the aggregate amount of capital actually contributed (and, in the
case of Berkshire and BGP only, deemed to be contributed) to the Partnership by
such Partner in accordance with Article 6 (regardless of the class of
Partnership Units received in respect of such contribution) and (ii) with
respect to Class A Preferred Limited Partners and the Class B Limited Partners,
the amounts deemed contributed by such Partners pursuant to Section 6.1 hereof
and reflected on Schedule 6.1 hereto.
"Cause"shall mean, with respect to any Person, the conviction, guilty
plea, plea bargain or plea of nolo contendere of such Person with respect to a
felony, or the commission of fraud, in each case, other than with respect to the
Partnership or its Subsidiaries, Properties, business or personnel.
"Certificate" shall mean the Certificate of Limited Partnership of the
Partnership filed with the Secretary of State of Delaware on April ___, 1999, as
the same may hereafter be amended and/or restated from time to time.
"Class A Preferred Limited Partner" shall mean each Limited Partner who
is deemed to have made a Capital Contribution pursuant to Section 6.1(c) hereof
and who holds Class A Preferred Units, and any transferee of the foregoing to
the extent permitted hereunder, but only so long as any such Person continues in
its capacity as a partner in the Partnership.
"Class A Preferred Percentage Interest" shall mean, with respect to
each Class A Preferred Limited Partner, its percentage interest in such class,
determined by dividing the Class A Preferred Units owned by such Partner by the
total number of Class A Preferred Units then outstanding as specified in
Schedule 6.1 attached hereto, as such schedule may be amended and restated from
time to time.
"Class A Preferred Unit" means a Partnership Unit that is specifically
designated, when issued, as being a Class A Preferred Unit under the terms of
this Agreement.
"Class B Limited Partner" shall mean each Limited Partner who is deemed
to have made a Capital Contribution pursuant to Section 6.1(d) hereof and who
holds Class B Units, and any transferee of the foregoing to the extent permitted
hereunder, but only so long as any such Person continues in its capacity as a
partner in the Partnership.
"Class B Percentage Interest" shall mean, with respect to each Class B
Limited Partner, its percentage interest in such class, determined by dividing
the Class B Units owned by such Partner by the total number of Class B Units
then outstanding, as specified in Schedule 6.1 attached hereto, as such schedule
may be amended and restated from time to time.
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<PAGE>
"Class B Unit" means a Partnership Unit that is specifically designated
by the General Partners, when issued, as being a Class B Unit under the terms of
this Agreement.
"Class C Partner" shall mean each Partner (including each GP) who has
made a Capital Contribution pursuant to Section 6.1(a) hereof and who holds
Class C Preferred Units, and any transferee of the foregoing to the extent
permitted hereunder, but only so long as any such Person continues in its
capacity as a partner in the Partnership. The initial Class C Partners shall be
WHGP, Whitehall, Blackstone GP, Blackstone LP, Stone Street, Bridge Street and
Stone Corp.
"Class C Preferred Percentage Interest" shall mean, with respect to
each Class C Partner, its percentage interest in such class, determined by
dividing the Class C Preferred Units owned by such Partner by the total number
of Class C Preferred Units then outstanding, as specified in Schedule 6.1
attached hereto, as such schedule may be amended and restated from time to time.
"Class C Preferred Unit" means a Partnership Unit that is specifically
designated by the General Partners, when issued, as being a Class C Preferred
Unit under the terms of this Agreement.
"Class D Partner" shall mean each Partner (including each GP) who has
made a Capital Contribution pursuant to Section 6.1(b) hereof and who holds
Class D Units, and any transferee of the foregoing to the extent permitted
hereunder, but only so long as any such Person continues in its capacity as a
partner in the Partnership. The initial Class D Partners shall be BGP and
Berkshire.
"Class D Percentage Interest" shall mean, with respect to each Class D
Limited Partner, its percentage interest in such class, determined by dividing
the Class D Units owned by such Partner by the total number of Class D Units
then outstanding, as specified in Schedule 6.1 attached hereto, as such schedule
may be amended and restated from time to time.
"Class D Unit" means a Partnership Unit that is specifically designated
by the General Partners, when issued, as being a Class D Unit under the terms of
this Agreement.
"Class E Limited Partner" shall mean those Partners holding Class E
Units who shall be admitted to the Partnership from time to time pursuant to the
IMP upon the recommendation of the Administering General Partner and the
concurrence of the other General Partners.
"Class E Percentage Interest" shall mean, with respect to each Class E
Limited Partner, its percentage interest in such class, determined by dividing
the Class E Units then owned by such Partner by the total number of Class E
Units then outstanding, as specified in Schedule 6.1 attached hereto, as such
schedule may be amended and restated from time to time.
"Class E Unit" means a Partnership Unit that is specifically designated
by the General Partners, when issued, as being a Class E Unit under the terms of
this Agreement.
"Closing Date" shall mean the date upon which the closing under the BRI
Merger Agreement occurs.
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<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
corresponding provision(s) of succeeding law.
"Company Cause"shall mean, with respect to any Person, the conviction,
guilty plea, plea bargain or plea of nolo contendere of such Person with respect
to a felony, or the commission of fraud, wilful misconduct, gross negligence or
gross dereliction of duties, in each case, with respect to the Partnership or
its Subsidiaries, Properties, business or personnel, provided that, in the case
of gross negligence or gross dereliction of duties capable of cure, written
notice of such gross negligence or gross dereliction has been provided to such
Person and such conduct is not cured within a thirty (30) day period.
"Confidential Information" shall have the meaning set forth in Section
12.16.
"Contributing Partner" shall have the meaning set forth in Section
6.3(a).
"Covered Person" shall have the meaning set forth in Section 4.2.
"Depreciation" shall mean, with respect to any Fiscal Year, all
deductions attributable to depreciation or cost recovery with respect to
Partnership Assets, including any improvements made thereto and any tangible
personal property located therein, or amortization of the cost of any intangible
property or other assets acquired by the Partnership, which have a useful life
exceeding one year; provided, however, that with respect to any Partnership
Asset whose tax basis differs from its Book Value at the beginning of such
Fiscal Year or other period, Depreciation shall be an amount which bears the
same ratio to such beginning Book Value as the depreciation, amortization or
other cost recovery deduction for such period with respect to such asset for
federal income tax purposes bears to its adjusted tax basis as of the beginning
of such Fiscal Year; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deduction for such Fiscal Year
is zero, Depreciation shall be determined using any method selected by the
General Partners.
"DK Employment Agreement" shall have the meaning set forth in Section
4.4(d).
"DK IMP" shall mean the right of holders of the Class D Units to
receive distributions under Sections 8.1(b)(5)(ii), (6)(i) and (7)(i), and
related rights.
"Failed Contribution" shall have the meaning set forth in Section
6.3(a).
"Fair Market Value" shall have the meaning set forth in Section
9.10(d).
"Financing Capital Call" shall have the meaning set forth in Section
6.2(b).
"Fiscal Year" shall mean the fiscal year of the Partnership, which
shall be the calendar year; but upon termination of the Partnership, "Fiscal
Year" shall mean the period from the end of the last preceding Fiscal Year to
the date of such termination.
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"Freddie Mac" shall mean The Federal Home Loan Mortgage Corporation.
"Freddie Mac Parameters" shall mean a loan with the following terms:
(i) an original principal amount equal to the greater of (A) 75% of the
appraised value of the properties listed on Schedule 1.1(a) hereto and (B) $650
million (such principal amount to be reduced by the preliminary loan amounts in
respect of any assets sold at or prior to the Closing Date (as set forth on
Schedule 1.1(a) hereto) and by the preliminary loan amounts in respect of any
assets that are not included in the collateral pool for such financing) (as set
forth on Schedule 1.1(a) hereto), (ii) such loan and all amounts payable with
respect thereto shall be non recourse in all respects to all Partners (with
express exculpation), unless they agree in writing otherwise, (iii) a term equal
to seven years, (iv) fixed interest rate of 8% per annum or less, (v) yield
maintenance penalty due upon prepayments only during the first five years of the
term, (vi) the properties subject to such loan will not be cross- collateralized
and individual loans securing such Properties will not be cross-defaulted and
(vii) the other terms are no less favorable to the Partnership than the terms of
the "Conditional Commitment", dated November 16, 1998, provided by Freddie Mac
to the Investor Group Partners.
"Funded Portion" shall have the meaning set forth in Section 6.3(a).
"General Partner" or "GP" shall mean each of WHGP, Blackstone GP, BGP,
and any Person who subsequently becomes a general partner of the Partnership
pursuant to the terms of the Agreement, for so long as such Persons shall be
general partners of the Partnership; "General Partners"or "GPs", shall mean such
Persons, collectively.
"Goldman, Sachs & Co." shall mean Goldman, Sachs & Co., a New York
limited partnership, and any Person succeeding to its business substantially as
an entirety.
"GS Group" shall mean The Goldman Sachs Group, L.P. and any Person
succeeding to its business substantially as an entirety, together with any
assignees or transferees to the extent permitted hereunder.
"GSMC" shall have the meaning set forth in Section 2.9(c).
"Holder Purchase Date" shall have the meaning set forth in Section
9.12(a).
"IMP" shall mean the incentive management participation plan approved
by the General Partners as a Unanimous Decision, which IMP shall provide the
Class E Limited Partners with the distributions under Sections 8.1(b)(5)(iii),
8.1(b)(6)(ii) and 8.1(b)(7)(ii) (it being understood and agreed that none of
BGP, Berkshire, Douglas Krupp or any of their respective Affiliates shall be
allocated any IMP allocated to the Class E Limited Partners).
"Initial Appraisals" shall have the meaning set forth in Section
9.10(d).
"Initial Business Plan" shall mean the Business Plan for 1999 to be
approved in accordance with Section 5.3 within 30 days after the date hereof.
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"Initial Capital Contribution" shall mean any Capital Contributions
made or deemed made pursuant to Sections 6.1(a)-(d) and 6.1(h).
"Institutional Lender" shall mean an Affiliate of any Investor Group
Partner (other than Berkshire or BGP) and/or any one or more of the following
other entities, provided that for any such other entity to qualify as an
Institutional Lender hereunder, such other entity, together with its Affiliates,
must have total assets of at least $5,000,000,000 and stockholders' equity or
net worth of at least $250,000,000 (or, in either case, the equivalent thereof
in a foreign currency) as of the date the loan is made: a savings bank, a
savings and loan association, a commercial bank or trust company, an insurance
company subject to regulation by any governmental authority or body, a publicly
traded real estate investment trust, a union, governmental or secular employees'
welfare, benefit, pension or retirement fund, a pension fund property unit trust
(whether authorized or unauthorized), an investment company or trust, a merchant
or investment bank or any other entity generally viewed as an institutional
lender. In each of the foregoing cases, such Affiliate or other entity shall
constitute an Institutional Lender whether (i) acting for itself or (ii) as
trustee, in a fiduciary, management or advisory capacity or, in the case of a
bank, as agent bank, for any number of lenders, so long as in the case of clause
(ii) the day-to-day management decisions relating to the loan are either
exercised by or recommended by such Institutional Lender and, during the life of
the loan, such Institutional Lender shall only be removed from its clause (ii)
capacity if it is replaced by another Institutional Lender also so acting under
clause (ii).
"Interest" shall mean the entire interest of a Partner in the
Partnership at any particular time, including the right of such Partner to any
and all benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all the
terms and provisions of this Agreement. An Interest may be expressed as a number
of Partnership Units.
"Investment" shall mean, relative to any Person (i) any loan or advance
made by such Person to any other Person (excluding advances made to officers and
employees in the ordinary course of business); (ii) the purchase by such Person
of any debt obligation of any other Person; and (iii) any ownership or similar
interest held by such Person in any other Person.
"Investor Group Partners" shall mean Berkshire, BGP, Whitehall, WHGP,
Stone Street, Bridge Street, Stone Corp., Blackstone LP and Blackstone GP,
together with any assignees or transferees thereof to the extent permitted
hereunder.
"IRS" shall mean the Internal Revenue Service and any successor agency
or entity thereto.
"Krupp Affiliated Entities" shall have the meaning set forth in Section
4.2(a).
"Limited Partners" shall mean all Class A Preferred Limited Partners,
all Class B Limited Partners, all Class C Partners that hold limited partnership
interests, in their capacities as such holders, all Class D Partners that hold
limited partnership interests, in their capacities as such holders, all Class E
Limited Partners, all other Limited Partners admitted to the Partnership
pursuant to the terms hereof,
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and any transferees of the foregoing permitted hereunder, but only so long as
any such Person continues in its capacity as a Partner in the Partnership.
"Losses" shall have the meaning set forth in Section 7.2(a).
"Majority Decision" shall have the meaning set forth in Section 3.3.
"Majority Sales Notice" shall have the meaning set forth in Section
9.3(a).
"Majority Third Party Offer" shall have the meaning set forth in
Section 9.3(b).
"Majority Triggering Parties" shall have the meaning set forth in
Section 9.3(b).
"Managed Properties" shall have the meaning set forth in Section
4.4(c).
"Mandatory Capital Call" shall have the meaning set forth in Section
6.2(a).
"Mandatory Capital Call Limit" shall have the meaning set forth in
Section 6.2(a).
"Maximum Share" shall have the meaning set forth in Section 9.1(a).
"Minimum Gain" shall mean an amount equal to the excess of the
principal amount of debt, for which no Partner is liable ("non-recourse debt"),
over the adjusted basis of the Partnership Assets which represents the minimum
taxable gain which would be recognized by the Partnership if the nonrecourse
debt were foreclosed upon and the Partnership Assets were transferred to the
creditor in satisfaction thereof, and which is referred to as "minimum gain" in
Treasury Regulations Section 1.704-2(b)(2). A Partner's share of Minimum Gain
shall be determined pursuant to Treasury Regulations Section 1.704-2.
"Necessary Expenditure" shall have the meaning set forth in Section
6.2(a).
"Non-Contributing Partner" shall have the meaning set forth in Section
6.3(a).
"Non-recourse Deductions" for a taxable year means deductions
attributable to non-recourse debt (as determined under Treasury Regulation
Sections 1.704-2(c) and 1.704-2(i)(2)) for such year.
"Non-Triggering Parties" shall have the meaning set forth in Section
9.2(a).
"Notice of Sale" shall have the meaning set forth in Section 9.1(a).
"Objection Notice" shall have the meaning set forth in Section 5.3(b).
"Offer Terms" shall have the meaning set forth in Section 9.1(a).
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"Offered Interest" shall have the meaning set forth in Section 9.1(a).
"Organizational Document" shall mean, with respect to any Person, (i)
in the case of a corporation, such Person's certificate of incorporation and
by-laws, and any shareholder agreement, voting trust or similar arrangement
applicable to any of such Person's authorized shares of capital stock, (ii) in
the case of a partnership, such Person's certificate of limited partnership,
partnership agreement, voting trusts or similar arrangements applicable to any
of its partnership interests, (iii) in the case of a limited liability company,
such Person's certificate of formation, limited liability company agreement or
other document affecting the rights of holders of limited liability company
interests, or (iv) in the case of any other legal entity, such Person's
organizational documents and all other documents affecting the rights of holders
of equity interests in such Person.
"Partner-Funded Debt" shall mean any non-recourse debt of the
Partnership that is loaned or guaranteed by any Partner and/or is treated as
Partner non-recourse debt with respect to a Partner under Treasury Regulations
Section 1.704-2(b)(4).
"Partners" shall mean all Class A Preferred Limited Partners, all Class
B Limited Partners, all Class C Partners, all Class D Partners, all Class E
Limited Partners and all other Partners admitted to the Partnership pursuant to
the terms hereof, and any transferees of the foregoing permitted hereunder, but
only so long as any of the foregoing Persons continues in its capacity as a
partner in the Partnership; "Partner" shall mean any of the foregoing
individually.
"Partnership" shall mean Berkshire Realty Holdings, L.P., a Delaware
limited partnership, as said Partnership may from time to time be hereafter
constituted.
"Partnership Assets" shall mean all right, title and interest of the
Partnership in and to all or any portion of the assets of the Partnership and
any property (real, personal, tangible or intangible) or estate acquired in
exchange therefor or in connection therewith.
"Partnership Percentage Interest" shall mean, as to a Partner, the
percentage obtained by dividing the Partnership Units (other than Class A
Preferred Units, Class B Units or Class E Units) owned by such Partner by the
total number of Partnership Units (other than Class A Preferred Units, Class B
Units or Class E Units) then outstanding as specified in Schedule 6.1 attached
hereto, as such exhibit may be amended and restated from time to time. For the
avoidance of doubt, the Partnership Percentage Interest of any Class A Preferred
Limited Partner, Class B Limited Partner or any Class E Limited Partner shall be
deemed zero percent (0%).
"Partnership Redemption Date" shall have the meaning set forth in
Section 9.12(b).
"Partnership Unit" means a fractional, undivided share of the Interests
of all Partners issued pursuant to Section 6 hereof, and includes Class A
Preferred Units, Class B Units, Class C Preferred Units, Class D Units, Class E
Units and any other classes or series of Partnership Units established after the
date hereof. The number of Partnership Units outstanding and the Class A
Percentage Interests, Class B Percentage Interests, Class C Percentage
Interests, Class D Percentage Interests,
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Class E Percentage Interests and the Partnership Percentage Interests in the
Partnership represented by such Partnership Units are set forth in Schedule 6.1
hereto, as such Exhibit may be amended and restated from time to time.
"Performance Termination" shall mean a termination of the DK Employment
Agreement after the third anniversary of the Closing Date as a result of a
determination by WHGP and Blackstone GP that the net operating income of the
Properties is not at least $124 million for the full year ending on the third
anniversary of the Closing Date (the "Test Year") (it being understood that such
net operating income shall be calculated based upon the unaudited financial
statements of the Partnership, provided that any of the General Partners may
require that the Performance Termination be based on the net operating income
shown on audited financial statements). For purposes of calculating the
foregoing test, (x) net operating income so derived shall be reduced by (i) the
amount of any net operating income attributable to properties acquired by the
Partnership after the Closing Date and (ii) the amount of net operating income
attributable to properties sold by the Partnership prior to or after the Closing
Date to the extent included in the net operating income of the Test Year, and
(y) the $124 million threshold shall be reduced by the amount of net operating
income attributable to the Properties sold by the Partnership prior to or after
the Closing Date, as such attributable amounts are shown on Schedule 9.10
attached hereto.
"Permitted Pledge" shall mean, with respect to any member of the
Berkshire Group, a pledge of, or security interest in, an equity interest in a
legal entity to secure a loan made to the pledgor, provided that, (i) such
pledged equity interest may not be transferred to the pledgee by foreclosure,
assignment in lieu thereof or other enforcement of such pledge and (ii) the
pledgor may pledge only its economic interest in such legal entity and no other
rights under such legal entity's Organizational Documents.
"Person" shall mean any individual, partnership, corporation, limited
liability company, trust or other legal entity.
"Pledgee" shall have the meaning set forth in Section 9.1(b).
"Pledgor" shall have the meaning set forth in Section 9.1(b).
"Profits" shall have the meaning set forth in Section 7.2(a).
"Properties" shall have the meaning set forth in the Recitals.
"Property" shall have the meaning set forth in the Recitals.
"Property Loan" shall mean any bridge, permanent or construction
financing assumed or obtained by the Partnership in accordance with the
provisions hereof, which may be secured by a mortgage, or similar security in
the nature of a mortgage on all or any of the Properties.
"Purchaser" shall have the meaning set forth in 9.1(a).
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"Rate of Return" shall mean, with respect to any Partnership Units held
by any Partner, a return of all Capital Contributions made by such Partner with
respect to such Partnership Units plus a cumulative, annually compounded, return
on such Capital Contributions (and accrued but unpaid return at the specified
rate outstanding from time to time) at a rate per annum equal to the applicable
percentage specified herein. A Partner shall be deemed to have received a
specified Rate of Return with respect to such Partner's Partnership Units when
the total Capital Contributions made from time to time by such Partner in
respect of such Partnership Units are returned to such Partner together with an
annual return thereon equal to such specified percentage calculated commencing
on the date such Capital Contributions are made and compounded annually to the
extent not paid on a current basis, taking into account the timing and amounts
of all previous Capital Contributions by such Partner in respect of such
Partnership Units and all previous distributions by the Partnership to such
Partner. For purposes of computing such Rate of Return, the periods used to
measure capital inflows and outflows shall be monthly and any Capital
Contribution made, or deemed made, by such Partner, any forfeiture of any
Capital Contribution and any distribution of funds received by such Partner at
any time during a month shall be deemed to be made, forfeited or received on the
first day of such month. Any calculations shall be based on a 12-month year
based on thirty (30) day months.
"Restricted Period" shall have the meaning set forth in Section 4.2(a).
"Sales Notice" shall have the meaning set forth in Section 9.2(a).
"Sales Response Notice" shall have the meaning set forth in Section
9.2(c).
"Second Tier Differential" shall mean an amount equal to the excess of
(i) the amount distributed by the Partnership necessary to give the holders of
Class C Preferred Units a 20% Rate of Return on the aggregate Capital
Contributions made in respect of such Class C Preferred Units over (ii) the
amount distributed by the Partnership necessary to give the holders of Class C
Preferred Units a 17.5% Rate of Return on the aggregate Capital Contributions
made in respect of such Class C Preferred Units.
"Stone Corp" shall have the meaning set forth in the first paragraph of
this Agreement.
"Stone Street" shall have the meaning set forth in the first paragraph
of this Agreement.
"Subsidiaries" shall mean all of the entities in which the Partnership
owns (whether as of the date hereof or at any time hereafter), directly or
indirectly 51% or more of the ownership interests and "Subsidiary" shall mean
any one of them.
"Substituted Partner" shall mean any Person admitted to the Partnership
as a Partner pursuant to the provisions of Section 9.7.
"Targeted Capital Account Balance" shall mean, with respect to any
Partner, the balance necessary to produce a Capital Account for each Partner
such that if an amount of cash equal to such
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positive Capital Account were distributed in accordance with such positive
Capital Account balances, such distribution would be in the amounts, sequence
and priority set forth in Section 10.3.
"Tax Matters Partner" shall mean the General Partner designated
pursuant to Section 4.7.
"Third Appraisal" shall have the meaning set forth in Section 9.10(d).
"Third Party Offer" shall have the meaning set forth in Section 9.2(f).
"Third Party Offer Price" shall have the meaning set forth in Section
9.2(f).
"Third Party Response Notice" shall have the meaning set forth in
Section 9.2(g).
"Transfer" shall have the meaning set forth in Section 9.1(a).
"Transferring Partner" shall have the meaning set forth in Section
9.1(a).
"Treasury Regulations" shall mean the regulations promulgated under the
Code, as such regulations are in effect on the date hereof.
"Triggering Party" shall have the meaning set forth in Section 9.2(a).
"Unanimous Decision" shall have the meaning set forth in Section 3.4.
"WHGP" shall have the meaning set forth in the first paragraph of this
Agreement.
"Whitehall" shall have the meaning set forth in the first paragraph of
this Agreement.
"Whitehall Group" shall mean, collectively, Whitehall, WHGP, Stone
Street, Bridge Street and Stone Corp., together with any assignees or
transferees to the extent permitted hereunder, but only so long as any such
Person continues in its capacity as a partner in the Partnership.
1.2 Terms Generally. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision; and
(b) the words "including" and "include" and other words of similar
import shall be deemed to be followed by the phrase "without limitation."
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ARTICLE 2.
THE PARTNERSHIP AND ITS BUSINESS
2.1 Partnership Name. The business of the Partnership shall be
conducted under the name of Berkshire Realty Holdings, L.P. in the State of
Delaware and under such name or such assumed names as the Administering General
Partner deems necessary or appropriate to comply with the requirements of any
other jurisdiction in which the Partnership may be required to qualify.
2.2 Term. The term of the Partnership shall continue in full force and
effect until terminated following dissolution on December 31, 2049 or such
earlier date of dissolution as hereinafter provided.
2.3 Filing of Certificate and Amendments. The Certificate of Limited
Partnership of the Partnership was filed with the Secretary of State of the
State of Delaware on April ___, 1999. The Partners hereby agree to execute and
file any required amendments to the Certificate and shall do all other acts
requisite for the constitution of the Partnership as a limited partnership
pursuant to the laws of the State of Delaware or any other applicable law and
for enabling the Partnership to conduct business in the jurisdictions in which
the Partnership's properties are located.
2.4 Business; Scope of Partners' Authority.
(a) The Partnership is organized primarily for the purpose of BRI
merging with the Partnership (or a Subsidiary thereof) and, subsequent to such
merger, acquiring, owning, financing, refinancing, managing, maintaining,
operating, improving, developing, marketing and selling multifamily properties.
The Partnership is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership, including, without limitation, full
power and authority to enter into, perform and carry out contracts of any kind,
borrow money, guarantee and issue evidences of indebtedness whether or not
secured by any mortgage, deed of trust, pledge or other lien, acquire, own,
manage, improve and develop any real property (or any interest therein), and
sell, transfer and dispose of any such real property.
(b) Except as otherwise expressly and specifically provided in this
Agreement, no Partner shall have any authority to bind or act for, or assume any
obligations or responsibility on behalf of, any other Partner. Neither the
Partnership nor any Partner shall, by virtue of executing this Agreement, be
responsible or liable for any indebtedness or obligation of any other Partner
incurred or arising on, before or after the execution of this Agreement, except,
as to the Partnership, as to those joint responsibilities, liabilities,
indebtedness, or obligations expressly assumed by the Partnership as of the date
of this Agreement or incurred thereafter pursuant to and as limited by the terms
of this Agreement.
2.5 Principal Office; Registered Agent. The principal office of the
Partnership shall be c/o The Berkshire Group, One Beacon Street, Suite 1500,
Boston, Massachusetts 02108. The
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Partnership may change its place of business to such location or locations as
may at any time or from time to time be determined by the Administering General
Partner and consented to by WHGP and Blackstone GP. The mailing address of the
Partnership shall be c/o The Berkshire Group, One Beacon Street, Suite 1500,
Boston, Massachusetts 02108, or such other address as may be selected from time
to time by the Administering General Partner. The address of the registered
office of the Partnership in the State of Delaware is c/o Bridge Service Corp.,
30 Old Rudnick Lane, Dover, Delaware 19901. The name and address of the
registered agent of the Partnership for service of process in the State of
Delaware is Bridge Service Corp, 30 Old Rudnick Lane, Dover, Delaware 19901.
2.6 Names and Addresses of the Partners. The names and addresses of the
Partners on the date of this Agreement are as follows:
Whitehall Street Real Estate Limited Partnership XI
85 Broad Street
New York, New York 10004
Attn: Steven M. Feldman
WXI/BRH Gen-Par LLC
85 Broad Street
New York, New York 10004
Attn: Steven M. Feldman
Bridge Street Real Estate Fund 1998 L.P.
Stone Street Real Estate Fund 1998 L.P.
Stone Street WXI/BRH Corp.
85 Broad Street
New York, N.Y. 10004
Attn: Kevin D. Naughton
BRE/Berkshire GP L.L.C.
345 Park Avenue, 32nd Floor
New York, N.Y. 10154
Attn: Mr. Thomas Saylak
BRE/Berkshire LP L.L.C.
345 Park Avenue, 32nd Floor
New York, N.Y. 10154
Attn: Mr. Thomas Saylak
Aptco Holdings, L.L.C.
One Beacon Street, Suite 1500
Boston, Massachusetts 02108
Attn: Mr. Douglas Krupp
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Aptco Gen-Par, L.L.C.
One Beacon Street, Suite 1500
Boston, Massachusetts 02108
Attn: Mr. Douglas Krupp
The names and addresses of the other Limited Partners and of such
Partners as may be admitted as Partners to the Partnership after the date hereof
shall be as set forth on Schedule 2.6(b) hereof, as such Schedule may be amended
from time to time.
2.7 Representations by the Partners.
(a) Each Partner who is not an individual represents,
warrants, agrees and acknowledges that, as of the date hereof:
(1) it is a corporation, a limited liability company
or partnership, as applicable, duly organized or formed and
validly existing and in good standing under the laws of the
state of its organization or formation; it has all requisite
corporate, limited liability company or partnership power and
authority to enter into this Agreement, to acquire and hold
its Interest and to perform its obligations hereunder; and the
execution, delivery and performance of this Agreement has been
duly authorized by all necessary corporate, limited liability
company or partnership action; and
(2) its execution and delivery of this Agreement and
the performance of its obligations hereunder will not conflict
with or violate any of the provisions of its Organizational
Documents.
(b) Each Partner, whether or not an individual, represents,
warrants, agrees and acknowledges that as of the date hereof:
(1) its execution and delivery of this Agreement and
the performance of its obligations hereunder will not conflict
with, result in a breach of or constitute a default (or any
event that, with notice or lapse of time, or both, would
constitute a default) or result in the acceleration of any
obligation under any of the terms, conditions or provisions of
any other agreement or instrument to which it is party or by
which it is bound or to which any of its property or assets
are subject, violate any statute or any order, rule or
regulation of any court or governmental or regulatory agency,
body or official, that would materially and adversely affect
the performance of its duties hereunder; such Partner has
obtained any consent, approval, authorization or order of any
court or governmental agency or body required for the
execution, delivery and performance by such Partner of its
obligations hereunder;
(2) there is no action, suit or proceeding pending
against such Partner or, to its knowledge, threatened in any
court or by or before any other governmental agency
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or instrumentality which would prohibit its entering into or
performing its obligations under this Agreement; and
(3) this Agreement is a binding agreement on the part
of such Partner enforceable in accordance with its terms
against such Partner.
Further, each Limited Partner represents that it is acquiring its Interest for
its own account for investment purposes only and not with a view to the
distribution or resale thereof, in whole or in part, in violation of applicable
securities laws and agrees that it will not Transfer all or any part of its
Interest, or solicit offers to buy from or otherwise approach or negotiate in
respect thereof with any Person or Persons whomsoever, all or any portion of its
Interest in any manner that would violate or cause the Partnership or any
General Partner to violate applicable federal or state securities laws.
(c) Berkshire and BGP represent, warrant and covenant that (i) they
will, on the Closing Date, contribute to the Partnership all shares of common
stock of BRI and all partnership interests in BRI OP owned by Berkshire, BGP,
the Berkshire Principals (other than the shares listed on Schedule 2.7(c)) or
any Affiliate of any of the foregoing as of the date hereof and as of the
Closing Date (it being understood that they shall only be required to contribute
72.5% of the BRI OP interests held by Turtle Creek Associates (such percentage
representing their entire ownership percentage of Turtle Creek Associates)),
(ii) as of the date of this Agreement, Berkshire, BGP, the Berkshire Principals
and each Affiliate of any of the foregoing, collectively own 512,203 shares of
common stock of BRI (excluding the shares listed on Schedule 2.7(c)) and
4,904,066 Units of partnership interests in BRI OP and (iii) none of Berkshire,
BGP, the Berkshire Principals, or any Affiliates of any of the foregoing, shall
Transfer any such shares or Units except to the Partnership as the initial
Capital Contributions of Berkshire and BGP. Each of BGP and Berkshire further
represents and warrants that, except as set forth above and on Schedule 2.7(c),
BGP, Berkshire, the Berkshire Principals and their respective Affiliates have no
equity interest in BRI or BRI OP (other than the shares listed on Schedule
2.7(c)).
2.8 Control of the Berkshire Group. Berkshire and BGP represent and
warrant that the Berkshire Principals control (which control is exercisable
without the consent or approval of any other Person) the business and affairs of
Berkshire and BGP.
2.9 Pre-Closing Costs and Expenses.
(a) Any reasonable out of pocket due diligence, legal and underwriting
costs or expenses incurred by an Investor Group Partner or its Affiliate (other
than GSMC) relating to the acquisition of BRI or the execution of this Agreement
will be reimbursed by the Partnership to such Partner on or promptly after the
Closing Date.
(b) The Partnership shall not be required to reimburse any Partner for
fees payable to any broker or investment banker in connection with the proposed
acquisition of BRI, except for the fee payable to Greenhill & Co. in accordance
with its existing agreement with The Berkshire Group, which fee shall not be in
excess of $4,955,000. Notwithstanding the foregoing, the Partnership may pay
fees
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to brokers or investment bankers in connection with additional equity and/or
debt financing as provided in Section 3.4 or Section 4.4(a).
(c) The Partnership shall pay (i) all fees and expenses in an amount
not to exceed $750,000 related to the bridge financing committed by Goldman
Sachs Mortgage Company ("GSMC") in connection with the contemplated merger of
the Partnership (or a Subsidiary thereof) and BRI and (ii) all fees and expenses
related to the bridge financing committed or provided by Whitehall and
Blackstone in connection with the contemplated merger of the Partnership (or a
Subsidiary thereof) and BRI (the "Bridge Loan") payable under the commitment
letter or definitive agreements relating to such Bridge Loan.
(d) In the event that, under the terms of the BRI Merger Agreement, a
termination or break-up fee and/or reimbursement of expenses becomes payable to
the Partnership, such fee shall be allocated among the Investor Group Partners
as follows: (i) first, to reimburse the Investor Group Partners for their actual
out of pocket transaction costs and expenses incurred to the date of the payment
of such fee and (ii) second, to the Investor Group Partners pro rata based upon
their respective anticipated initial Partnership Percentage Interests.
2.10 Compliance with Certain Agreements. The Partnership acknowledges
that from and after the Closing Date, it will be bound by and will comply (and
will cause BRI OP to comply) with the terms of the agreements listed on Schedule
2.10 hereto, as if the Partnership were a party to such agreements and that the
Class A Preferred Limited Partners and Class B Limited Partners shall be able to
enforce such agreements as third party beneficiaries of such agreements. Nothing
in this Agreement shall constitute an amendment to, or diminish or alter any
rights or obligations contained in, any of the agreements listed on Schedule
2.10.
2.11 Miscellaneous. The Partnership anticipates that the equity and
debt financing expected to be raised in contemplation of the transactions
contemplated by the BRI Merger Agreement will be sufficient to pay the purchase
price required in connection with such merger and the transaction costs
associated therewith (assuming that the transaction costs of BRI and BRI OP
incurred in connection with the BRI Merger and the BRI OP Merger (other than
severance costs) do not exceed $11,000,000), but no assurance can be made with
respect to the foregoing.
ARTICLE 3.
MANAGEMENT OF PARTNERSHIP BUSINESS;
POWERS AND DUTIES OF THE ADMINISTERING GENERAL PARTNER
3.1 Management and Control.
(a) Except as limited specifically herein, the powers of the General
Partners shall include all powers, statutory and otherwise, possessed by general
partners under the laws of the State of Delaware. No General Partner may be
removed by the Limited Partners with or without cause.
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(b) Except as otherwise expressly and specifically provided in this
Agreement, no Limited Partner shall have any authority to bind, to act for, to
execute any document or instrument on behalf of or to assume any obligation or
responsibility on behalf of the Partnership or any other Partner.
(c) The provisions of this Agreement relating to the management and
control of the business and affairs of the Partnership shall also be construed
to be fully applicable to the management and control of each Subsidiary, and any
and all matters listed in Section 3.3 shall constitute Majority Decisions for
purposes hereof whether such matter relates to the Partnership or any Subsidiary
of the Partnership, any and all matters listed in Section 3.4 shall constitute
Unanimous Decisions for purposes hereof whether such matter relates to the
Partnership or any Subsidiary of the Partnership and the provisions of Section
3.2 shall apply with respect to the Partnership as well as to any Subsidiary of
the Partnership. Without limitation of the foregoing, given that the Partnership
will, after consummation of the transactions contemplated by the BRI Merger
Agreement and the BRI OP Merger Agreement, indirectly control the management of
and will own 100% of the sole general partner of BRI OP, each of the General
Partners shall have management rights over BRI OP, and the Partnership, in its
capacity as the general partner, will not take any actions in respect of
"Majority Decisions" or "Unanimous Decisions" without the approval of the
required General Partners (as if such decisions were made by the Partnership).
3.2 Role of the Administering General Partner and Limitations on its
Authority.
(a) In addition to such powers and rights of the Administering General
Partner as are expressly set forth herein, and subject to the express
restrictions set forth in Sections 3.3 and 3.4, the Administering General
Partner shall have the right and the duty to manage the business of the
Partnership, to execute documents and to implement the decisions made on behalf
of the Partnership by the General Partners in accordance with the terms hereof
and applicable laws and regulations, and such other rights and powers as are
granted to the Administering General Partner hereunder and as the other General
Partners may from time to time expressly delegate to the Administering General
Partner (provided, that any such obligations or responsibilities that are
delegated to the Administering General Partner shall be subject to the
Administering General Partner's acceptance to the extent not set forth herein).
The Administering General Partner shall devote such time to the Partnership and
its business as shall be reasonably necessary to conduct the business of the
Partnership in an efficient manner and to carry out the Administering General
Partner's responsibilities as set forth herein. Without limiting the generality
of the foregoing but subject to WHGP's and Blackstone GP's rights with respect
to Majority Decisions and Unanimous Decisions, the Administering General Partner
shall have the right and duty to do, accomplish and complete, using Partnership
funds at all times except where expressly provided to the contrary in this
Agreement, for and on behalf of the Partnership with reasonable diligence and in
a prompt and businesslike manner, exercising such care and skill as a prudent
owner with sophistication and experience in owning, operating and managing
property like the Properties would exercise in dealing with its own property,
all of the following:
(1) applying for and using diligent efforts to obtain any and
all necessary consents, approvals and permits required for the construction,
occupancy and operation of the Properties;
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(2) paying, before delinquency and prior to the addition of
interest or penalties, all taxes, assessments and other impositions applicable
to the Properties, and retaining counsel to initiate any action or proceeding
seeking to reduce such taxes, assessments or other impositions;
(3) verifying that appropriate insurance (including any
required by the terms of any Property Loan) is maintained by each contractor
performing work on the Properties;
(4) assisting in obtaining any and all necessary financing
required to carry out the purposes of the Partnership;
(5) procuring and arranging all necessary insurance to the
extent available at commercially reasonable rates for the Partnership in
accordance with the insurance program adopted by the Partnership from time to
time pursuant to Section 3.3(12) below; causing the Investor Group Partners to
be named as additional insureds on all liability policies maintained by the
Partnership; delivering to the General Partners copies of all insurance policies
maintained by the Partnership from time to time, including renewals or
replacements of any expiring policies prior to the expiration thereof;
(6) demanding, receiving, acknowledging and instituting legal
action for recovery of any and all revenues, receipts and considerations due and
payable to the Partnership, in accordance with prudent business practices;
(7) executing and delivering leases and other legal documents
necessary to carry out the business of the Partnership (which leases and legal
documents shall have first been approved by either one or both of the other two
General Partners if their approval is required pursuant to this Agreement,
including without limitation, Sections 3.3 and 3.4 below, or shall otherwise be
in accordance with the relevant Approved Budget and Approved Business Plan);
(8) keeping all books of account and other records of the
Partnership and delivering all reports in the manner provided in Article 5
below;
(9) maintaining all funds of the Partnership in a Partnership
bank account in the manner provided in Article 5 below, which funds shall not be
commingled with the funds of any other Person;
(10) protecting and preserving the title and interests of the
Partnership in the Properties, and including keeping the Properties free from
mechanics' and materialmen's liens;
(11) preparing for approval by the General Partners and
implementing once the same shall have been approved in accordance herewith, all
Approved Budgets and Approved Business Plans, including negotiating all
contracts and expending funds in accordance therewith;
(12) opening and maintaining bank accounts to the extent
required or permitted by Section 5.5;
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(13) coordinating the defense of any claims, demands, suits or
legal proceedings made or instituted against the Partnership by other parties,
through legal counsel for the Partnership engaged in accordance with the terms
of this Agreement; giving WHGP and Blackstone GP prompt notice of the receipt of
any material claim or demand or the commencement of any suit or legal proceeding
and promptly providing WHGP and Blackstone GP all information relevant or
necessary thereto;
(14) monitoring and complying with (i) the terms and
provisions of any restrictive covenants or easement agreements affecting the
Properties or any portion thereof, and any and all contracts entered into or
assumed by the Partnership, including, without limitation, the exceptions noted
in any title policy, and (ii) the terms and provisions of any note, mortgage and
other loan documents assumed or executed by the Partnership, including any
Property Loan documents;
(15) delivering to the General Partners copies of any notices
received from lenders, or other persons with whom the Partnership has material
contractual obligations, alleging any material deficiencies or defaults by the
Partnership under the said contractual arrangements;
(16) paying (or causing to be paid), prior to delinquency, all
insurance premiums, debts and other obligations of the Partnership, including
amounts due under any loans of the Partnership and costs of construction,
operation and maintenance of the Properties;
(17) subject to the provisions of this Agreement, developing,
operating, maintaining and otherwise managing the Properties in an efficient
manner and in accordance with the relevant Approved Budget and Approved Business
Plan;
(18) promptly complying with all present and future laws,
ordinances, orders, rules, regulations and requirements of all federal, state
and municipal governments, courts, departments, commissions, boards and
officers, the requirements of any insurance policy (or any insurer thereunder)
covering the Properties (and any improvements thereon), any national or local
Board of Fire Underwriters, or any other body exercising functions similar to
those of any of the foregoing, which may be applicable to any of the Properties
(and any improvements thereon) and the operation and management thereof, and
when and to the extent approved by the General Partners, the Administering
General Partner shall contest or assist the Partners in contesting the validity
or application of any such law, ordinance, order, rule, regulation or
requirement;
(19) provided that Douglas Krupp (or, if the last paragraph of
this Section 3.2 applies, George Krupp) is still acting as chairman and chief
executive officer of the Partnership, selling the ten (10) assets listed on
Schedule 3.2(a)(19) hereto within the time period contemplated by the Approved
Business Plan to parties which are not Affiliated with the Berkshire Group and
in which the Berkshire Group and its Affiliates have no continuing interest, for
prices that yield the Partnership net proceeds (after all transaction costs,
transfer or similar taxes and debt prepayment fees and expenses) equal to, in
respect of each such Property, at least 95% of the amounts set forth on Schedule
3.2(a)(19) hereto opposite such Property, provided that the aggregate amount of
all such net sale proceeds shall not be less than 97.5% of the aggregate of all
such amounts set forth on Schedule 3.2(a)(19) hereto;
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(20) provided that Douglas Krupp (or, if the last paragraph of
this Section 3.2 applies, George Krupp) is still acting as chairman and chief
executive officer of the Partnership, selling certain individual assets in any
calendar year not in excess of $100 million in gross proceeds, provided that (i)
the price for each sold asset yields the Partnership net proceeds (after all
transaction costs, transfer or similar taxes and debt prepayment fees and
expenses) equal to at least 103% of the allocated acquisition cost of such asset
as set forth on Schedule 3.2(a)(20) hereto and (ii) if any such assets are held
by an entity that is a REIT (other than any REIT that holds a single Property),
independent tax counsel approved by a majority of the General Partners renders
an opinion that such sale will not be a "prohibited transaction" within the
meaning of Section 857 of the Code;
(21) (i) in the event the Partnership draws down the Bridge
Loan, incurring indebtedness on or prior to May 1, 2000 to refinance all or part
of the Bridge Loan, provided that such indebtedness satisfies the Freddie Mac
Parameters or (ii) in the event the Partnership determines not to draw down the
Bridge Loan, incurring indebtedness satisfying the Freddie Mac Parameters
contemporaneously with the Closing Date (provided that a commitment letter
relating to indebtedness satisfying the Freddie Mac Parameters is obtained by
July 15, 1999, definitive agreements relating to such indebtedness are executed
by September 1, 1999, and at no time after July 15, 1999 do WHGP and Blackstone
GP reasonably conclude that there is a material risk the indebtedness satisfying
the Freddie Mac Parameters will not be agreed to, closed and funded on or prior
to the anticipated Closing Date);
(22) implementing, in the form approved pursuant to the terms
of this Agreement, Unanimous Decisions and Majority Decisions approved by the
General Partners pursuant to the terms of this Agreement (including, without
limitation, Approved Business Plans);
(23) performing all other services reasonably necessary or
required for the ownership, development, maintenance, marketing and operation by
the Partnership of the Properties or otherwise required to be performed by the
Administering General Partner pursuant to this Agreement and not otherwise
prohibited hereunder; and
(24) retaining legal firms to represent the Partnership and
its Subsidiaries provided that such firms are selected with due care and are
recognized as having expertise in the area for which they have been retained.
(b) The Administering General Partner shall not (and shall not have any
right, power or authority to), without the prior approval of either WHGP or
Blackstone GP, or of both WHGP and Blackstone GP, as applicable, bind or take
any action on behalf of or in the name of the Partnership or any Subsidiary, or
enter into any commitment or obligation binding upon the Partnership or any
Subsidiary, except for actions authorized under this Agreement (including all
actions authorized by Section 3.2(a)) or actions authorized by WHGP, Blackstone
GP or the General Partners in the manner set forth herein. Neither WHGP nor
Blackstone GP shall have the authority to take any action on behalf of or in the
name of the Partnership or any Subsidiary except for actions authorized under
this Agreement.
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(c) (1) Notwithstanding anything contained herein to the contrary, BGP
shall be removed as Administering General Partner and as a General Partner, and
be relieved of its obligations as same, and shall have no further rights with
respect to approvals of or consent to any Majority Decision or Unanimous
Decision in the event that (i) Berkshire, BGP or any of their respective
Affiliates Transfers any of its interests in the Partnership in violation of the
terms of this Agreement, (ii) the Partnership or any member of the Blackstone
Group or the Whitehall Group acquires the Interest of the Berkshire Group
pursuant to the terms of Section 9.10 of this Agreement or (iii) a default by
Berkshire, BGP or one of their respective Affiliates of a loan secured by
interests of Berkshire, BGP or an Affiliate in the Partnership and such loan
becomes due as a result of such default.
(2) Notwithstanding anything contained herein to the contrary,
BGP shall be removed as Administering General Partner and as a General Partner
in the event that Douglas Krupp is removed as chief executive officer of the
Partnership for Cause or Company Cause at any time or Douglas Krupp resigns as
chief executive officer of the Partnership prior to the fifth anniversary of the
Closing Date, and in connection with such removal or resignation, (i) the
general partnership Interest of BGP shall automatically (and without any notice
or other action) be converted into a new class of limited partnership interest
(and there shall be no other limited partnership interests of such class), (ii)
such limited partnership Interest shall be entitled (by means of a class vote or
similar mechanism) to exercise the rights that BGP had under this Agreement as a
General Partner (provided, that BGP shall not have the right to vote with
respect to the Unanimous Decisions described in clauses (5)(it being understood
and agreed that upon such removal or resignation and such conversion of
Interests, the Berkshire Group shall not be obligated to fund any Additional
Capital Call made pursuant to such clause (5) but shall be subject to dilution
as set forth in Section 6.3), (10), (14) and (16) of Section 3.4 and shall not
be entitled to vote in respect of any Majority Decision (other than the Majority
Decisions described in clauses (4), (7) and (16) of Section 3.3, as to which BGP
shall have the right to vote) and (iii) from and after the date of such removal,
the remaining General Partners shall then have the right to sell the Partnership
or all or substantially all of the assets of the Partnership (including by means
of a merger, consolidation or other business combination) provided that, as a
result of such sale, the members of the Berkshire Group receive, in the
aggregate, an amount equal to the greater of (x) the Fair Market Value of the
Berkshire Group's Interest (excluding the DK IMP which shall be forfeited upon
the occurrence of any of such events) on the date of such termination or
resignation or (y) the amount equal to the aggregate amount of Capital
Contributions made by the Berkshire Group prior to the date of such termination
or resignation less any prior distributions made to the Berkshire Group.
In the event that Douglas Krupp ceases to be chief executive
officer of the Partnership as a result of the death or disability of Douglas
Krupp (but not as the result of the termination by the Partnership of Douglas
Krupp's employment by the Partnership or as a result of the resignation by
Douglas Krupp of his employment by the Partnership), the Partnership will offer
George Krupp, Douglas Krupp's brother, the opportunity to serve as chief
executive officer of the Partnership on the same terms and conditions as Douglas
Krupp is employed as the chief executive officer of the Partnership pursuant to
this Agreement and the DK Employment Agreement.
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3.3 Majority Decisions. Notwithstanding anything to the contrary in
this Agreement, no act shall be taken, sum expended, decision made or obligation
incurred by the Partnership or any Subsidiary, the Administering General Partner
or any of the General Partners with respect to a matter within the scope of any
of the Majority Decisions except as expressly reserved as Unanimous Decisions or
Administering Partner Decisions pursuant to Section 3.2 or Section 3.4, unless
and until the prior written consent of at least two General Partners shall have
been obtained pursuant to and in accordance with this Section 3.3 and Section
3.5. Any two of the General Partners shall have the full and complete right,
power, authority and discretion to decide, and take all actions necessary to
implement, any Majority Decision:
The "Majority Decisions" are:
(1) making a Mandatory Capital Call pursuant to the terms of
Section 6.2(a) or a Financing Capital Call pursuant to the terms of Section
6.2(b);
(2) approving any Annual Budget or Business Plan or modifying
or deviating from or making expenditures (whether operating or capital in
nature) or incurring any obligations in excess of any of the foregoing except to
the extent the Administering General Partner is so permitted by Section 3.2 or
by this Section 3.3; provided, however, that, so long as Douglas Krupp (or if
the last paragraph of Section 3.2 applies, George Krupp) is still acting as
chairman and chief executive officer of the Partnership, the Administering
General Partner may, without the approval of any other General Partner, (i)
incur payroll expenses which do not exceed 105% of the annual amount for such
item on the Approved Budget and (ii) make additional expenditures or incur
additional obligations which, in the aggregate, do not exceed 105% of annual
expenses (other than payroll expenses) as set forth in the Approved Budget; and
provided further that without the consent of the Administering General Partner
no line item in an Approved Budget may provide for expenditures (other than
capital items or reserves relating thereto) of more than 105% of the
corresponding line item in the previous Approved Budget;
(3) without limiting the Administering General Partner's
ability to take action under 3.2(a)(19), (20) or (21), taking any action in
respect of the Properties relating to environmental matters; provided, however,
that any General Partner is hereby authorized upon prior notice to the other
General Partners to take such action as may be reasonably required to mitigate
or eliminate any material environmental condition that poses imminent danger to
human health or safety; provided further, that such emergency expenses referred
to in the preceding clause shall not, without the approval of all of the General
Partners, exceed $100,000 in the aggregate in any Budget Year;
(4) subject to the provisions of Article 9 hereof, dissolving
and winding-up the Partnership or electing to continue the Partnership or
electing to continue the business of the Partnership;
(5) incurring, renewing, refinancing or paying or otherwise
discharging (or agreeing to do any of the foregoing) indebtedness of the
Partnership (other than paying or discharging indebtedness secured by an asset
with proceeds from sales of such asset, which the Administering General Partner
shall have authority to do without the need to obtain approval of another
General
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Partner) provided that the Administering General Partner (in addition to WHGP
and Blackstone GP acting jointly) may incur (i) indebtedness expressly
authorized by an Approved Business Plan or an Approved Budget or (ii)
indebtedness to Freddie Mac, or another institutional lender, satisfying the
Freddie Mac Parameters on or prior to the applicable time periods specified in
Section 3.2(a)(21). Notwithstanding the foregoing, in the event (i) the
Administering General Partner does not obtain financing satisfying the Freddie
Mac Parameters on or prior to May 1, 2000 (if the Bridge Loan is drawn upon) or
(ii) the Administering General Partner does not obtain a commitment letter
relating to indebtedness satisfying the Freddie Mac Parameters by July 15, 1999
or definitive agreements relating to such indebtedness have not been executed by
September 1, 1999 (or if at any time after July 15, 1999 WHGP and Blackstone GP
reasonably conclude that there is a material risk the indebtedness satisfying
the Freddie Mac Parameters will not be agreed to, closed and funded on or prior
to the anticipated Closing Date), two General Partners may take action necessary
to incur, refinance, pay and otherwise discharge up to $650,000,000 of
indebtedness on terms other than the Freddie Mac Parameters as if such
incurrence were a Majority Decision provided that, (A) the General Partners use
commercially reasonable efforts to obtain financing on terms as close as
possible to the Freddie Mac Parameters, (B) any such financing shall be fixed
rate or be subject to appropriate hedging arrangements and (C) the recourse of
any lender of such financing permitted to be incurred pursuant to this sentence
shall be limited to the Partnership Assets (and shall not be recourse to any
Partner without such Partner's approval);
(6) modifying (i) any loan documentation executed by the
Partnership or (ii) any other material agreement, except if such modification is
contained in an Approved Business Plan;
(7) instituting proceedings to adjudicate the Partnership a
bankrupt, or consenting to the filing of a bankruptcy proceeding against the
Partnership, or filing a petition or answer or consent seeking reorganization of
the Partnership under the Bankruptcy Code or any other similar applicable
federal, state or foreign law, or consenting to the filing of any such petition
against the Partnership, or consenting to the appointment of a receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of the Partnership
or of its property, or making an assignment for the benefit of creditors of the
Partnership, or admitting in writing the Partnership's inability to pay its
debts generally as they become due;
(8) taking any action that would constitute an event of
default under any loan agreement to which the Partnership is a party;
(9) organizing or forming any Subsidiary of the Partnership,
except as otherwise expressly provided herein;
(10) approving or filing any tax return or tax report on
behalf of the Partnership (it being understood and agreed that the Administering
General Partner shall prepare the first draft of such tax returns and deliver
such drafts to the other General Partners by no later than February 1 of each
year and that such tax returns shall be completed before February 15 of each
year);
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(11) approving an insurance program for the Partnership or any
of the Properties or making a material change to such approved insurance
program;
(12) settling a property insurance claim or condemnation
action involving a claim in excess of one hundred thousand dollars ($100,000) or
that, when added to all other insurance or condemnation claims during a single
calendar year, exceeds two hundred fifty thousand dollars ($250,000);
(13) making or agreeing to any material changes to the zoning
of any of the Properties or approving the terms and provisions of any material
restrictive covenant or material easement agreement affecting any of the
Properties or any portion thereof (other than utility easements and the like
granted or released in the ordinary course);
(14) establishing any reserves for the Partnership (in
addition to capital expenditure reserves) in excess of $250,000 in the aggregate
but less than $2,000,000 in the aggregate unless set forth in the Approved
Budget;
(15) except as expressly set forth in an Approved Business
Plan, approving or disapproving of a creditors' plan, the filing of an
involuntary petition of bankruptcy or the dismissal or discharge of a claim of
bankruptcy in connection with bankruptcy proceedings involving any Person
contracting with the Partnership other than contractors against whom the
Partnership's claim is less than $100,000;
(16) taking any action that involves or relates to, or
entering into any agreement with, any General Partner or any Affiliate thereof
(it being understood and agreed that such General Partner shall recuse itself
from the consideration of any such matter);
(17) executing, modifying, accepting the surrender of or
terminating any non-residential lease or other arrangement involving the rental,
use or occupancy of more than 5,000 square feet of the Properties (provided that
the subleasing a portion of BRI's current principal office at One Beacon Place
Boston, Massachusetts may be effected by the Administering General Partner as if
such decision were permitted under Section 3.2), except in accordance with the
applicable Approved Business Plan; provided, however, that the Administering
General Partner may modify a lease of all or any portion of the Properties if
such lease would still satisfy the applicable Approved Business Plan as
modified; and provided further, however, that the Administering General Partner
may terminate any lease (and bring eviction and legal proceedings against the
tenant thereunder) where the tenant has defaulted in its rent payments or is
otherwise in material default;
(18) unless required pursuant to the terms of any ground lease
or mortgage encumbering any of the Properties, deciding whether to repair or
rebuild in case of material damage to any of the improvements on any Property,
or any part thereof, arising out of a casualty or condemnation (except such
emergency repairs as may be necessary to protect such Property);
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(19) except as otherwise expressly set forth in Sections
3.2(a), 3.10 and Article 9 of this Agreement, selling any of the Partnership
Assets or Properties;
(20) entering into hedging, interest rate protection or
similar arrangements with respect to up to 50% of the anticipated amount of debt
financing to be incurred by the Partnership or its Subsidiaries in connection
with the BRI Merger and the BRI OP Merger;
(21) exercising any rights by the Partnership under the DK
Employment Agreement or Section 9.10 hereof; and
(22) any action that is not a Unanimous Decision or that the
Administering General Partner has the authority to effect pursuant to Section
3.2(a) (it being understood that in the case of any inconsistency between
Sections 3.2(a)(19), 3.2(a)(20) and 3.2(a)(21) and this Section 3.3, the
foregoing Sections will prevail); provided that two General Partners may modify
Section 3.2(a) (other than clauses (19), (20) and (21) thereof) to provide that
any such actions set forth in Section 3.2(a) shall constitute Majority
Decisions.
3.4 Unanimous Decisions. Notwithstanding anything to the contrary in
this Agreement, no act shall be taken, sum expended, decision made or obligation
incurred by the Partnership, the Administering General Partner or any of the
General Partners with respect to a matter within the scope of any of the
Unanimous Decisions, unless and until the prior written consent of all of the
General Partners shall have been obtained pursuant to and in accordance with
this Section 3.4 and Section 3.5. The General Partners, acting unanimously,
shall have the full and complete right, power, authority and discretion to
decide, and take all actions necessary to implement, any Unanimous Decision.
The "Unanimous Decisions" are:
(1) taking any action in contravention of, amending, modifying
or waiving any of the provisions of this Agreement or the Certificate;
(2) except as permitted by Article 9, approving the admission
to the Partnership of a successor or a new Partner, removing any Partner,
designating or approving the classification of any new class of Partners (and
establishing the designations, preferences and relative rights and duties of
each class of Partners), or making any public or private offering for the sale
of equity interests or securities issued by the Partnership;
(3) except as provided in Article 9, merging or consolidating
the Partnership with or into another Person (or engaging in any other
transaction having substantially the same effect); it being agreed that the
terms of Section 17-211(g) of the Act shall be applicable such that the General
Partners acting pursuant to this Section 3.4 shall have the right to effect any
amendment to this Agreement or effect the adoption of a new partnership
agreement for a limited partnership if it is the surviving or resulting limited
partnership on the merger or consolidation (except as may be expressly
prohibited under Section 3.7(b) or Section 3.7(c));
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(4) altering the nature of the business of the Partnership
from the businesses permitted by Section 2.4(a);
(5) making an Additional Capital Call other than pursuant to
Sections 6.2(a) and 6.2(b);
(6) disposing of all or any portion of the property known as
Berkshire Towers or the subsidiary that owns such property prior to the fifth
anniversary of the Closing Date, provided, however, that such disposition shall
be a Majority Decision if it is made in a tax deferred transaction;
(7) acquiring any real property or interest therein or other
material assets;
(8) except as set forth in Article 9, selling the Partnership
or all or substantially all of the Partnership Assets prior to the date which is
forty-two months after the Closing Date;
(9) changing, amending or terminating the BRI Merger Agreement
or the BRI OP Merger Agreement; executing the foregoing documentation or any
documents related thereto or executed in connection therewith; or accepting any
closing deliveries, or making any election or granting any consents, approvals
or waivers of conditions to the Partnership's obligation to close the merger
with BRI pursuant to the foregoing documentation or any documents related
thereto or executed in connection therewith;
(10) approving the IMP (and the persons to whom such IMP is
allocated) and admitting or removing any Class E Limited Partner;
(11) incurring, refinancing, paying and otherwise discharging
indebtedness in connection with the financing of the transactions contemplated
by the BRI Merger Agreement and the BRI OP Merger Agreement if the all-in,
blended interest rate for such financing exceeds a per annum rate equal to 10%;
(12) selecting or varying depreciation and accounting methods
and making or revoking any other decisions or elections with respect to federal,
state, local or foreign tax matters or other financial purposes;
(13) establishing reserves for the Partnership (in addition to
capital expenditure reserves) in an amount equal to or in excess of $2,000,000
in the aggregate unless set forth in the Approved Budget;
(14) changing the Partnership's accountants and independent
auditors from PriceWaterhouse Coopers (it being agreed and understood that the
General Partners intend that PriceWaterhouse Coopers shall act as the
Partnership's initial accountants); making any accounting decisions for the
Partnership (other than those specifically provided for in, or necessary to
carry out, other sections of this Agreement); or approving any financial
statements prepared by the Partnership's auditors;
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(15) using Partnership funds to extend credit, make an
Investment, make a loan or become a guarantor or surety for debt of another
party;
(16) except as provided in Section 4.2(b), entering into any
property management, leasing, development or similar agreement;
(17) entering into hedging, interest rate protection or
similar arrangements with respect to an amount of the debt financing to be
incurred by the Partnership or its Subsidiaries in connection with the BRI
Merger and the BRI OP Merger in excess of 50% of such indebtedness; and
(18) except as expressly set forth in the Approved Business
Plan, taking any action that reasonably would be expected to have a material
adverse effect on the assets, liabilities, income or expenses of the Properties.
Notwithstanding anything else to the contrary herein, but subject to
Section 3.7(b), Article 9 and Section 11.1, any action or decision that is not a
Unanimous Decision or a decision permitted pursuant to Section 3.2 to be taken
by the Administering General Partner without the consent of any other General
Partner shall be deemed to be a Majority Decision and may be taken or made by
the General Partners acting together without the consent or approval of any
other Partner.
3.5 Consents of General Partners. If BGP consents to any Majority
Decision or Unanimous Decision in its capacity as the Administering General
Partner, BGP need not also give its consent to such Majority Decision or
Unanimous Decision in its capacity as a General Partner. In the event of any
need for consent of the General Partners to any Majority Decision or Unanimous
Decision, the Administrating General Partner, or the requesting General Partner
as the case may be, shall make such request of the General Partners and shall
provide the General Partners with any information reasonably necessary for the
General Partners to make an informed decision. If a General Partner does not
respond within ten (10) Business Days after receipt of such request for consent
to a Majority Decision or Unanimous Decision, such General Partner shall be
deemed to have rejected such request; provided that a request pursuant to
Section 3.3(a)(12), shall be deemed to be approved by a General Partner that
does not respond within such ten Business Day period. Each General Partner
(including the Administering General Partner) shall use its good faith
reasonable efforts to respond promptly to requests for consent and to keep the
other General Partners informed of the status of any matter regarding which such
General Partner intends to request the General Partners' consent under Section
3.3 or Section 3.4. No General Partner shall be permitted to enter into a
separate agreement with another General Partner regarding the voting of its
General Partner interests or the granting of its consent to any Majority
Decision or Unanimous Decision.
3.6 Meetings of General Partners; etc. The Administering General
Partner shall from time to time, but no less frequently than every fiscal
quarter, meet with WHGP and Blackstone GP at WHGP's or Blackstone GP's request
to discuss the business and affairs of the Partnership or to discuss any
particular matter reasonably requested by WHGP or Blackstone GP. WHGP and
Blackstone GP shall promptly inform BGP of actions taken by WHGP and Blackstone
GP with respect to any Majority Decision. No General Partner shall be
responsible to the Partners for any adverse
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consequences, of actions taken in accordance with the terms of this Agreement or
without its consent. Notice of meetings of the General Partners shall be given
in the manner provided in Section 12.2 hereof at least seventy-two (72) hours
before the time of such meeting (unless each General Partner waives such
notice). No action may be taken at any meeting of the General Partners unless a
quorum of at least two (2) General Partners shall be present thereat; and no
action may be taken at any such meeting at which less than all of the General
Partners are present unless such action was included in the notice for such
meeting. The General Partners may act by written consent in lieu of a meeting.
3.7 No Participation by or Authority of Limited Partners; Limited
Rights.
(a) No Limited Partner shall have the right to participate in the
management or conduct of the Partnership. No Limited Partner shall transact
business for the Partnership, nor shall any Limited Partner have power to sign,
act for or bind the Partnership, all of such powers being vested solely and
exclusively in the General Partners. Except as required by law or as expressly
provided in this Section 3.7, no holder of Limited Partnership Interests shall
be entitled to vote at any meeting of the Partners or for any other purpose or
otherwise to participate in any action taken by the Partnership or the Partners,
or to receive notice of any meeting of the Partners. When entitled to vote on a
matter being submitted to holders of Partnership Interests of more than one
class or series, all classes of Interests in the Partnership shall vote together
as one class with each interest in the Partnership having a vote equal to the
Partnership Percentage Interest related to such Interest.
(b) Notwithstanding anything in this Agreement to the contrary, so long
as any Class A Preferred Units are outstanding, the Partnership shall not,
without the prior approval of the holders of at least a majority of the
outstanding Class A Preferred Units held by Persons other than the General
Partners and their respective Affiliates, (i) amend any provisions of this
Agreement in any manner that (x) adversely affects the holders of the Class A
Preferred Units disproportionately with respect to the rights of holders of
other classes of Partnership Units or (y) alters the preferences, rights,
privileges or powers of, or restrictions provided for the benefit of, the Class
A Preferred Units (it being understood and agreed that this Section 3.7(b) shall
not prevent the Partnership from authorizing or creating any class of
Partnership Units on a parity with the Class A Preferred Units or junior to the
Class A Preferred Units as to distributions or liquidations), (ii) authorize or
create any class of Partnership Units with a priority as to distributions or
liquidations over the Class A Preferred Units (it being understood and agreed
that this Section 3.7(b) shall not prevent the Partnership from issuing any debt
securities), (iii) issue any additional Class A Preferred Units or (iv) except
as expressly provided herein, redeem or repurchase any Interests (other than the
Interests of Class E Limited Partners which may be redeemed at any time).
(c) Notwithstanding anything in this Agreement to the contrary, so long
as any Class B Units are outstanding, the Partnership shall not, without the
prior approval of the holders of at least a majority of such outstanding Class B
Units held by Persons other than the General Partners and their respective
Affiliates, amend any provisions of this Agreement in any manner that (i)
adversely affects such holders of such Class B Units disproportionately with
respect to the rights of holders of other classes of Partnership Units or (ii)
alters the preferences, rights, privileges or powers of, or restrictions
provided for the benefit of, the Class B Units (it being understood and agreed
that this Section 3.7(c)
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shall not prevent the Partnership from authorizing or creating any class of
Partnership Units, whether on a parity, junior or senior to the Class B Units as
to distributions or liquidations).
3.8 Acts of the Partnership and the Partners; Representatives.
(a) Whenever in this Agreement or elsewhere it is provided that consent
is required of, a demand shall be made by, or acts shall be performed by or at
the direction of the Administering General Partner, all such consents, demands
and acts are to be made, given or performed upon the consent of any of the
Persons listed on Schedule 3.8 attached hereto (as the same may be amended from
time to time by the Administering General Partner) under the heading
"Representatives of the Administering General Partner" who shall be vested with
the authority of the Administering General Partner, until such time, as any, as
the General Partners shall receive a notice from the Administering General
Partner designating one or more new representatives.
(b) Whenever in this Agreement or elsewhere it is provided that consent
is required of, a demand shall be made by, or acts shall be performed at the
direction of WHGP, all such consents, demands and acts are to be made, given or
performed upon the consent of any of the Persons listed on Schedule 3.8 attached
hereto (as the same may be amended from time to time by WHGP) under the heading
"Representatives of WHGP" who shall be vested with the authority of WHGP, until
such time, as any, as the Administering General Partner and Blackstone GP shall
receive a notice from WHGP designating one or more new representatives.
(c) Whenever in this Agreement or elsewhere it is provided that consent
is required of, a demand shall be made by, or acts shall be performed at the
direction of Blackstone GP, all such consents, demands and acts are to be made,
given or performed upon the consent of any of the Persons listed on Schedule 3.8
attached hereto (as the same may be amended from time to time by Blackstone GP)
under the heading "Representatives of Blackstone GP" who shall be vested with
the authority of Blackstone GP, until such time, as any, as the Administering
General Partner and WHGP shall receive a notice from Blackstone GP designating
one or more new representatives.
3.9 Waiver of Rights by the Limited Partners. To the fullest extent
permitted by law, subject to Sections 3.7(b) and (c) and subject to compliance
with the agreements referenced in Section 2.10, each of the Limited Partners
hereby (a) waives any rights it may have to (i) consent to, (ii) request
statutory appraisal rights with respect to or (iii) otherwise approve, any
merger, combination, sale of Partnership Assets, cross-collateralized financing
or refinancing or other similar transaction with respect to the Partnership and
(b) releases each Partner of the Whitehall Group, the Berkshire Group and the
Blackstone Group from any claims that the Limited Partners might have had with
respect to such rights had they not been waived (it being understood and agreed
that such waivers shall not constitute a waiver of fiduciary duties owed to the
Limited Partners).
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3.10 Sales of Certain Properties by WHGP and Blackstone GP.
(a) In the event that the Administering General Partner does not sell
the ten (10) assets as set forth in Section 3.2(a)(19) within the time period
contemplated by the initial Business Plan the WHGP and Blackstone GP, acting
together as if such decision were a Majority Decision, may cause the Partnership
to sell (or to enter into an agreement to sell) such assets during the
immediately succeeding six (6) month period to parties that are not Affiliated
with either the Whitehall Group or the Blackstone Group and in which neither the
Whitehall Group nor the Blackstone Group have a continuing interest, provided
that such sales would satisfy the requirements of Section 3.2 (a)(19) had the
Administering General Partner effected such sales.
(b) In the event that the Administering General Partner does not sell
Properties in any calendar year for gross proceeds of at least $50,000,000
pursuant to Section 3.2(a)(20), during the six months following such calendar
year, WHGP and Blackstone GP, acting together as if such decision were a
Majority Decision, may cause the Partnership to sell Properties for an amount of
gross proceeds equal to the lesser of (i) $50,000,000 or (ii) the excess of
$100,000,000 over the gross proceeds received by the Partnership in respect of
Property sales during the preceding calendar year pursuant to Section
3.2(a)(20); provided that such Property sales pursuant to this clause (b) would
satisfy the requirements of Section 3.2(a)(20) had they been effected by the
Administering General Partner.
ARTICLE 4.
RIGHTS AND DUTIES OF PARTNERS
4.1 Duties and Obligations of the Administering General Partner. In
addition to such duties as are described elsewhere in this Agreement, the
Administering General Partner shall (i) prepare and deliver to WHGP and
Blackstone GP (or cause to be prepared and delivered to WHGP and Blackstone GP)
the Business Plan for each Budget Year, (ii) deliver to WHGP and Blackstone GP
promptly upon its receipt, copies of all (x) summonses and complaints served on
the Partnership, or the Administering General Partner (as a general partner of
the Partnership) and (y) notices of default on any loan or other indebtedness of
the Partnership or on any liens against any Partnership Asset, (iii) monitor
compliance by the Partnership with any loan agreements, mortgages, purchase
agreements and other material agreements to which the Partnership is bound (and
take appropriate steps to cure any non-compliance to the extent permitted under
this Agreement or otherwise promptly notify WHGP and Blackstone GP of any
noncompliance of which it has obtained knowledge) and (iv) manage the
Partnership and the Partnership Assets with the same care as it would use if it
owned the Partnership Assets individually.
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4.2 Other Activities of the Partners.
(a) So long as Douglas Krupp or George Krupp shall be the chief
executive officer of the Partnership, or BGP or another Affiliate of Douglas
Krupp or George Krupp is the Administering General Partner (the "Restricted
Period"), Berkshire and BGP shall comply, and shall cause the Berkshire
Principals and their respective Affiliates (including, without limitation, (i)
any immediate family members of the Berkshire Principals or trusts established
for the benefit of such family members of the Berkshire Principals and (ii) any
public or private partnership or other entities (other than BRI) in which any
Berkshire Principals or any of their Affiliates owns, directly or indirectly, a
general partner interest or an economic interest (as limited partner, member or
stockholder) of 50% or more (the "Krupp Affiliated Entities")) (any of the
foregoing, a "Covered Person") to comply with the provisions of this Section
4.2. Berkshire and BGP acknowledge that this covenant is a material inducement
to Whitehall, WHGP, Blackstone LP and Blackstone GP entering into this Agreement
and that a material breach of this covenant that is not cured after written
notice and a reasonable period to cure shall constitute a material breach of
this Agreement entitling such Partners to exercise all remedies available to
them at law or in equity. Berkshire and BGP represent that all of the Krupp
Affiliated Entities are identified on Schedule 4.2(b).
(b) During the Restricted Period, no Covered Person may, directly or
indirectly, develop a new multifamily property (other than development that
completes previously commenced construction or a multifamily property that is a
part of a portfolio of multifamily property acquired by such Covered Person)
located within a one mile radius of any Property held by the Partnership.
(c) During the Restricted Period each Covered Person shall offer the
Partnership the opportunity to act as property manager for each multifamily
property owned by such Covered Person that is not managed by a third party
property manager unaffiliated with the Partnership or any Covered Person for a
management fee equal to the amount (or percentage) that is market at such time.
(d) Subject to this Section 4.2, each Partner may engage or invest in
any other activity or venture or possess any interest therein independently or
with others. Subject to this Section 4.2, none of the Partners, the Partnership
or any other Person employed by, related to or in any way affiliated with any
Partner or the Partnership shall have any duty or obligation to disclose or
offer to the Partnership or the Partners, or obtain for the benefit of the
Partnership or the Partners, any other activity or venture or interest therein
including, without limitation, any multifamily property. Except in the event of
a breach of the limitations set forth in subparagraph (a) or (b) above, none of
the Partnership, the Partners, the creditors of the Partnership or any other
Person having any interest in the Partnership shall have (A) any claim, right or
cause of action against any Partner or any other Person employed by, related to
or in any way affiliated with, any Partner by reason of any direct or indirect
investment or other participation, whether active or passive, in any such
activity or venture or interest therein, or (B) any right to any such activity
or venture or interest therein or the income or profits derived therefrom.
(e) During the Restricted Period Berkshire and BGP agree to give
written notice to the Partnership and each of the General Partners of the
acquisition by any Covered Person of a
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multifamily property promptly following the acquisition by such Covered Person
of any such property or any direct or indirect interest therein (but in no event
more than sixty (60) days following such acquisition).
4.3 Indemnification.
(a) Notwithstanding anything in this Agreement to the contrary, no
Partner, or General Partner or tax matters partner shall be liable, responsible
or accountable in damages or otherwise to the Partnership, any third party or to
any other Partner for (i) any act performed within the scope of the authority
conferred on such Partner or General Partner by this Agreement except for the
gross negligence or willful misconduct of such Partner or General Partner in
carrying out its obligations hereunder or any act that is in breach of its
fiduciary duties, (ii) such Partner's or General Partner's failure or refusal to
perform any act, except those required by the terms of this Agreement, (iii)
such Partner's or General Partner's performance of, or failure to perform, any
act on the reasonable reliance on advice of legal counsel to the Partnership or
(iv) the negligence, dishonesty or bad faith of any agent, consultant or broker
of the Partnership selected, engaged or retained in good faith. In any
threatened, pending or completed action, suit or proceeding, each Partner,
General Partner and tax matters partner shall be fully protected and indemnified
and held harmless by the Partnership against all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, proceedings, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, reasonable attorneys' fees, costs of investigation, fines, judgments
and amounts paid in settlement, actually incurred by such Partner or General
Partner in connection with such action, suit or proceeding) by virtue of its
status as Partner, General Partner or tax matters partner or with respect to any
action or omission taken or suffered in good faith, other than liabilities and
losses resulting from the gross negligence or willful misconduct of such
Partner, General Partner or tax matters partner. The indemnification provided by
this Section 4.3 shall be recoverable only out of the assets of the Partnership,
and no Partner or General Partner shall have any personal liability (or
obligation to contribute capital to the Partnership) on account thereof.
(b) Each General Partner shall defend and indemnify the Partnership and
the other Partners against, and shall hold it and them harmless from, any
damage, loss, liability, or expense, including reasonable attorneys' fees, as
and when incurred by the Partnership or the other Partners in connection with or
resulting from such indemnifying General Partner's gross negligence,
malfeasance, fraud, breach of fiduciary duty or willful misconduct.
4.4 Compensation of Partners and their Affiliates; Goldman, Sachs & Co.
as Financial Advisor.
(a) No General Partner nor any other Partner, nor any of their
respective Affiliates, shall be entitled to compensation from the Partnership in
connection with any matter that may be undertaken in connection with the
fulfillment of its duties and responsibilities hereunder, except as provided in
this Section 4.4, or as set forth in an approved Business Plan.
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(b) For so long as Whitehall is a Partner of the Partnership, to the
extent the Partnership seeks to retain an investment bank for (i) an initial
public offering of the Partnership or (ii) any other sale, merger or financing
transaction relating to the Partnership involving an amount in excess of $100
million, the Partnership shall offer to Goldman, Sachs & Co. or one or more of
its Affiliates the opportunity to act as (A) lead investment banker with respect
to an initial public offering or (B) co-lead investment banker with respect to a
transaction described in clause (ii) above; provided, however, that in the event
of a sale, merger or financing other than an initial public offering, the
Partnership may, at the election of BGP or Blackstone GP engage a second
investment banker of its choice to act as co-lead financial advisor. In the
event that the Partnership engages Goldman, Sachs & Co. and/or one of its
Affiliates in connection with such an initial public offering or to arrange a
purchase, sale, financing, refinancing, securitization or similar transaction in
respect of the Partnership, or all or any portion of the Properties, Goldman,
Sachs & Co. and/or such Affiliate shall be entitled to receive from the
Partnership its customary fees, commissions and indemnification for such
services charged to independent third parties. In addition, in the event of any
sale, merger or other disposition relating to the Partnership and involving an
amount in excess of $100 million, the Partnership shall pay to an Affiliate of
Blackstone LP an advisory fee, equal to 33% of the total fees paid to Goldman,
Sachs & Co. in connection with such engagement. Notwithstanding the foregoing,
the aggregate amount of fees so paid to Goldman, Sachs & Co. or its Affiliates
and to such Affiliate of Blackstone LP shall not exceed in the aggregate
customary amounts that would be payable to one investment banker in a
transaction of that type.
(c) Each of BGP and Berkshire, on behalf of itself and each member of
the Berkshire Group and their respective Affiliates, hereby agrees that for so
long as any member of the Berkshire Group or any Affiliate thereof shall control
the owner of the properties listed on Schedule 4.4(c) hereto (the "Managed
Properties") and until the latter to occur of (i) the end of the Restricted
Period or (ii) the third anniversary of the Closing Date, subject to its
fiduciary duties as general partner of such owners, Berkshire shall cause the
owner of such Managed Properties not to terminate or reduce the management fees
payable under, or seek to terminate or reduce the management fees payable under,
any of the management or similar contracts relating to such Managed Properties
to which BRI, the Partnership or any of their respective Affiliates is a party
without the prior written consent of Blackstone GP and WHGP; provided that the
owner of such Managed Properties may, after the third anniversary of the Closing
Date, reduce the management fee paid under such agreements to four percent (4%)
of the gross revenues of the properties subject to such management agreements.
In addition, each of BGP and Berkshire, on behalf of itself and each member of
the Berkshire Group and their respective Affiliates, hereby agrees that it will
use its best efforts, prior to the Closing Date (and following the Closing Date
if the amendments or waivers referred to in this Section 4.4(c) are not made or
obtained prior to the Closing Date) to cause The Berkshire Companies Limited
Partnership to amend the Administrative Services Agreement, dated as of February
28, 1997, as amended (as so amended, the "Administrative Services Agreement"),
between a subsidiary of BRI and The Berkshire Companies Limited Partnership to
provide that (i) the transactions contemplated by this Agreement and the merger
agreement between BRI and the Partnership shall not constitute a "Change in
Control" for purposes of the Administrative Services Agreement, (ii) no
termination or similar fee shall be payable by BRI, the Partnership or their
respective successors, assigns or Affiliates in connection with any termination
of such Administrative Services Agreement, (iii) The Berkshire Companies Limited
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Partnership will not terminate or reduce the fees payable under, or seek to
terminate or reduce the fees payable under, the Administrative Services
Agreement without the prior written consent of Blackstone GP and WHGP.
By its execution below solely for the purpose of this paragraph, The
Berkshire Companies Limited Partnership hereby agrees, and Berkshire hereby
agrees, on behalf of its Affiliates, including The Berkshire Companies Limited
Partnership, that, upon and after consummation of the transactions contemplated
by the BRI Merger Agreement and the BRI OP Merger Agreement, no further BRI OP
Units or other consideration shall be issuable to The Berkshire Companies
Limited Partnership or any other person under the terms of the Advisory
Contribution Agreement, dated as of February 26, 1996, by and among BRI, BRI OP
and The Berkshire Companies Limited Partnership.
(d) The Partnership will enter into an employment agreement with
Douglas Krupp in substantially the form set forth on Exhibit 1 hereto (the "DK
Employment Agreement") effective as of the Closing Date.
4.5 Dealing with Partners.
(a) Subject to paragraph (b) below, the fact that a Partner, an
Affiliate of a Partner, or any officer, director, employee, partner, consultant
or agent of a Partner, is directly or indirectly interested in or connected with
any Person employed by the Partnership to render or perform a service, or from
or to whom the Partnership may buy or sell any property or have other business
dealings, shall not prohibit a General Partner from employing such Person or
from dealing with such Person on customary terms and at competitive rates of
compensation, and neither the Partnership nor any of the other Partners shall
have any right in or to any income or profits derived therefrom by reason of
this Agreement. The foregoing is not intended to modify the restrictions on the
authority of the Administering General Partner under Sections 3.3 and 3.4.
(b) Except as provided in Section 4.4, the Partnership shall not employ
to render or perform a service, buy or sell any property from or to, or have any
other business dealings with, any Person who is a Partner in the Whitehall
Group, the Blackstone Group or the Berkshire Group or any Affiliate of any
Partner in the Whitehall Group, the Blackstone Group or the Berkshire Group
without the prior approval of both of the disinterested General Partners.
4.6 Use of Partnership Property. No Partner shall make use of the funds
or property of the Partnership, or assign its rights to specific Partnership
property, other than for the business or benefit of the Partnership.
4.7 Designation of Tax Matters Partner. WHGP shall act as the "tax
matters partner" of the Partnership, as provided in the regulations pursuant to
Section 6231 of the Code. Each Partner hereby approves of such designation and
agrees to execute, certify, acknowledge, deliver, swear to, file and record at
the appropriate public offices such documents as may be deemed necessary or
appropriate to evidence such approval. The Partnership and each General Partner
further agrees to indemnify WHGP for any claims made against it in its capacity
as tax matters partner in accordance
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with Section 4.3. To the extent and in the manner provided by applicable Code
sections and regulations thereunder, the Tax Matters Partner (a) shall furnish
the name, address, profits interest and taxpayer identification number of each
Partner to the IRS and (b) shall inform each Partner of administrative or
judicial proceedings for the adjustment of Partnership items required to be
taken into account by a Partner for income tax purposes. The Tax Matters Partner
shall not enter into an agreement with the IRS or any other taxing authority to
extend the limitation period for assessment of any federal, state or local
income, franchise or unincorporated business tax of any Partner or owner thereof
nor settle with the IRS or any other taxing authority to disallow deductions or
increase income from the Partnership with respect to any Partner, unless all of
the General Partners shall have agreed thereto. Each Partner hereby reserves all
rights under applicable law, including the right to retain independent counsel
of its choice at its expense (which counsel shall receive the full cooperation
of the Tax Matters Partner and shall be entitled to prior review of submissions
by the Partnership in respect of any dispute with relevant taxing authorities).
4.8 Guarantees.
(a) The General Partners acknowledge that certain of the Partners
(individually, an "Indemnitor Partner," and collectively, the "Indemnitor
Partners") would, absent a guarantee of Partnership indebtedness, be required to
recognize income or gain under the Code in respect of their interests in the
Partnership. For purposes of this Section 4.8, the amount of Partnership
liabilities that an Indemnitor Partner would need to guarantee, at any time, so
as to enable such Indemnitor Partner to defer the recognition of income or gain
that would otherwise result by virtue of the liability allocation rules under
Code Section 752 and Section 465 and the Treasury Regulations thereunder is
referred to herein as the "Minimum Debt Amount" and the aggregate of the Minimum
Debt Amounts of all the Indemnitor Partners on the date first written above is
referred to herein as the "Aggregate Minimum Debt Amount."
(b) On the Closing Date and otherwise upon written request from an
Indemnitor Partner, the General Partners on behalf of the Partnership shall
permit such Partner to guarantee (a "Guarantee") an amount of the "least risky
portion" of Partnership indebtedness then available (it being understood and
agreed that, subject to the following sentence, this Section 4.8 shall not
impose any obligations on the Partnership with respect to the incurrence or
maintenance of any amount of indebtedness) equal to such Indemnitor Partner's
then Minimum Debt Amount, pursuant to a guarantee substantially in the form
attached hereto as Exhibit 2 to the extent not prohibited by the applicable
lenders. The General Partners agree that until the earliest of (i) the date that
is sixty-six months after the Closing Date, or (ii) the sale of all or
substantially all of the Partnership's assets (other than any transaction
described in Section 9.13(a)) or (iii) the sale of the Partnership's assets
pursuant to a plan of liquidation of the Partnership the Partnership shall
maintain at least $110,000,000 of Partnership indebtedness (including by reason
of any guarantees made by the Partnership of indebtedness of partnerships in
which the Partnership is a partner directly or indirectly, the form of such
guarantees to be provided to BRI OP prior to the closing of the BRI OP Merger
Agreement and subject to the reasonable approval of BRI OP). In the event that
the minimum debt provision of the previous sentence ceases to apply, the
Partnership shall use reasonable efforts to continue to maintain such minimum
debt; provided that such reasonable efforts are consistent with the
Partnership's Approved
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Business Plan and that no Indemnitor Partner shall have any rights to assert
that the Partnership has not used such reasonable efforts to so maintain such
indebtedness. In the event that the sum of the Minimum Debt Amounts of the
Indemnitor Partners other than Berkshire and BGP who request a Guarantee of
indebtedness exceeds the Aggregate Minimum Debt Amount of such Partners or the
amount of available debt, each such Indemnitor Partner shall be entitled to a
Guarantee of indebtedness pro rata based upon the respective Minimum Debt
Amounts of such Indemnitor Partners then requesting Guarantees as of the date
first written above. The General Partners on behalf of the Partnership shall use
commercially reasonable efforts to cause any lender of Partnership indebtedness
that is the subject of the Guarantee to acknowledge and accept such Guarantee,
and such Indemnitor Partner's obligation thereunder and to cause the Partnership
to acknowledge and accept the indemnification obligation of such Indemnitor
Partner contained in any such Guarantee.
(c) Nothing in this Section 4.8 shall prohibit or preclude the General
Partners, at any time and in their sole discretion (but subject to any other
provision of this Agreement), from refinancing, paying down or paying off any
Partnership indebtedness or permitting new Partners to guarantee excess amounts
of debt, or indemnify the General Partners for, any portion of the Partnership
indebtedness; provided, however, with respect to any Partnership indebtedness
that is subject to a Guarantee and which is to be refinanced, paid down or paid
off, the Administering General Partner shall notify, in writing (the "Notice"),
each such Indemnitor Partner of such refinancing, paydown or payoff, and such
Indemnitor Partner shall have fifteen (15) days from the date of receipt of the
Notice to execute a substitute Guarantee (a "Substitute Guarantee") for an
amount of the "least risky portion" of Partnership indebtedness then in
existence determined in the manner described in subsection (b) above pursuant to
a guarantee having substantially similar terms as the Guarantee that is being
substituted. If, within fifteen (15) days of the Indemnitor Partner's receipt of
the Notice, the Indemnitor Partner notifies the Administering General Partner,
in writing, of the Indemnitor Partner's desire to execute a Substitute Guarantee
as described in the Notice, then the Administering General Partner shall,
subject to the limitations set forth herein: (i) permit such Indemnitor Partner
to execute such Substitute Guarantee; (ii) use commercially reasonable efforts
to cause the lender of the Partnership indebtedness that is guaranteed by the
Substitute Guarantee to acknowledge and accept such Substitute Guarantee, and
such Indemnitor Partner's obligations thereunder, and (iii) cause the
Partnership to acknowledge and accept the indemnification obligation of such
Indemnitor Partner contained in such Guarantee.
(d) Notwithstanding anything herein to the contrary, provided that the
General Partners and the Partnership satisfy their obligations under this
Section 4.8, at no time and under no circumstances shall an Indemnitor Partner
have any recourse against the Partnership, the General Partners or any other
Person, and none of the Partnership, the General Partners nor any other Person
shall have any liability under this Section 4.8 or otherwise in the event that a
Guarantee or Substitute Guarantee (i) is not acknowledged or accepted by any
lender and/or (ii) does not result in the deferral of taxes.
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ARTICLE 5.
BOOKS AND RECORDS; ANNUAL REPORTS
5.1 Books of Account. At all times during the continuance of the
Partnership, the Administering General Partner shall keep or cause to be kept
true and complete books of account in which shall be entered fully and
accurately each transaction of the Partnership. Such annual books shall be kept
on the basis of the Fiscal Year in accordance with the accrual method of
accounting, and shall reflect all Partnership transactions in accordance with
generally accepted accounting principles. Any Investor Group Partner shall have
the right to inspect, copy and audit the books and records of the Partnership at
reasonable times and upon reasonable notice.
5.2 Availability of Books of Account. All of the books of account
referred to in Section 5.1, together with an executed copy of this Agreement and
the Certificate, and any amendments thereto, shall at all times be maintained at
the principal office of the Partnership or such other location as the
Administering General Partner may propose and WHGP and Blackstone GP shall
approve (which other location, upon such approval, shall be communicated to all
of the Partners), and upon reasonable notice to the Administering General
Partner, shall be open to the inspection and examination of the General Partners
or their representatives during reasonable business hours.
5.3 Annual Reports and Statements; Annual Budgets and Business Plans.
(a) For each Fiscal Year, the Administering General Partner shall send
to each Person who was a Partner at any time during such Fiscal Year, by no
later than February 15 of the next Fiscal Year, an annual report of the
Partnership including an annual balance sheet, profit and loss statement and a
statement of changes in financial position, and a statement showing
distributions to the Partners all as prepared in accordance with generally
accepted accounting principles consistently applied and audited by the
Partnership's independent public accountants, which initially shall be
PricewaterhouseCoopers, and a statement showing allocations to the Partners of
taxable income, gains, losses, deductions and credits, as prepared by such
accountants (it being acknowledged that the Administering General Partner's
obligations hereunder are not to guaranty timely delivery of audits, tax returns
or similar third-party work product, and the failure of the auditor or another
third party to make such delivery shall not itself constitute a default
hereunder on the part of the Administering General Partner). For each quarter,
the Administering General Partner shall send to each Person who was a Partner at
any time during such quarter, within forty-five (45) days after the end of such
quarter, quarterly financial statements of the Partnership including a quarterly
balance sheet, profit and loss statement and a statement of changes in financial
position, and a statement showing distributions to the Partners all as prepared
in accordance with generally accepted accounting principles consistently
applied. In addition, the Administering General Partner shall send (i) to each
General Partner within twenty-five (25) days after the end of each month of each
Fiscal Year a monthly report setting forth the financial and operating
information on an accrual basis and in form and substance approved by the
General Partners (acting reasonably) after the date hereof, (ii) to each Partner
by no later than February 15 of each year, completed IRS Schedules K-1 prepared
by the Partnership's accountants in accordance with Section 3.3(ii), and (iii)
to each Partner such other information concerning the
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Partnership and reasonably requested by any Partner as is necessary for the
preparation of each Partner's federal, state and local income or other tax
returns. Each General Partner agrees that the Partnership will use and comply
with the requirements and deadlines of the Whitehall REPSYS management reporting
system (to the extent that compliance with such reporting system does not cause
the Partnership to incur additional material costs). The Administering General
Partner shall prepare and deliver to the lender under any loan documents to
which the Partnership is a party all reports and statements required by such
lender.
(b) The Administering General Partner shall prepare or cause to be
prepared a proposed Annual Budget and related Business Plan for the Partnership
as a whole. The initial Annual Budget and Business Plan, which have been
approved by all of the General Partners, are attached hereto as Schedule 5.3(b).
Not later than November 15 of the prior Budget Year with respect to each
subsequent Budget Year, the Administering General Partner shall prepare for the
Partnership for the Budget Year in question, a proposed Annual Budget and a
proposed Business Plan for the Partnership as a whole. Not later than thirty
(30) days after receipt by WHGP and Blackstone GP of a proposed Annual Budget or
Business Plan (or such longer period as WHGP or Blackstone GP may reasonably
request on notice to the Administering General Partner), WHGP or Blackstone GP
may deliver a notice (an "Objection Notice") to the Administering General
Partner stating that WHGP or Blackstone GP objects to any information contained
in or omitted from such proposed Annual Budget or Business Plan and setting
forth the nature of such objections. With respect to all or any portion of such
proposed Annual Budget or Business Plan as to which no Objection Notice is
delivered prior to such thirtieth (30th) day (or such longer period as WHGP or
Blackstone GP may have reasonably requested), the proposed Annual Budget or
Business Plan or such portion thereof will be deemed to have been accepted and
consented to by WHGP and Blackstone GP. If the Objection Notice is timely
delivered, the Administering General Partner shall modify the proposed Annual
Budget or Business Plan, taking into account WHGP's and/or Blackstone GP's, as
applicable, objections, shall resubmit the same to WHGP and Blackstone GP for
WHGP's and Blackstone GP's approval within 15 days thereafter, and WHGP and
Blackstone GP may deliver further Objection Notices (if any) within 15 days
thereafter (in which event, the re-submission and review process described above
in this sentence shall continue until the Annual Budget or Business Plan in
question is accepted and consented to by WHGP and/or Blackstone GP or deemed to
be so accepted and consented to). As to any portion of a proposed Annual Budget
or Business Plan that is the subject of an Objection Notice, the Annual Budget
or Business Plan (as the case may be) for the immediately preceding year shall
be deemed to control pending resolution by WHGP and/or Blackstone GP of the
disputed items (as adjusted in accordance with Section 3.3(2) above).
Notwithstanding the foregoing, approval of the Annual Budget and the Business
Plan shall at all times be a Majority Decision and no General Partner shall have
the right to submit an Objection Notice after the approval of an Annual Budget
or Business Plan by the General Partners in accordance with Section 3.3.
5.4 Accounting and Other Expenses. All out-of-pocket expenses payable
to Persons, including Affiliates of the Administering General Partner that are
retained in accordance with the terms of this Agreement, in connection with the
keeping of the books and records of the Partnership and the preparation of
audited or unaudited financial statements and federal and local tax and
information returns required to implement the provisions of this Agreement or
required by any governmental
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authority with jurisdiction over the Partnership or otherwise required to be
paid in connection with the management or operation of the Partnership shall be
borne by the Partnership as an ordinary expense of its business. The Partnership
shall reimburse the Administering General Partner's consultants for the
preparation of K-1's, and federal and local tax and information returns.
5.5 Bank Account. The Administering General Partner shall, as soon as
reasonably practicable, establish and maintain segregated bank accounts in the
Partnership's name and for the Partnership's business, which accounts shall, to
the extent reasonably practicable, be interest-bearing. Withdrawals or checks,
other than withdrawals or checks made or issued in respect of required mortgage
payments, in excess of $500,000 (or, upon notice to the Administering General
Partner, such lesser or greater amount as WHGP and Blackstone GP may from time
to time determine) shall require the signature of an authorized representative
of WHGP or Blackstone GP. Withdrawals or checks not in excess of $500,000 (or
upon notice to the Administering General Partner, such lesser or greater amount
as WHGP and Blackstone GP may from time to time determine) and withdrawals and
checks made or issued in respect of required mortgage payments may be made by an
authorized representative of the Administering General Partner to the extent
that the Administering General Partner is permitted hereunder to incur the
expense or other liability paid or discharged without the prior consent or
approval of the other General Partners.
ARTICLE 6.
CAPITAL CONTRIBUTIONS, LOANS
AND LIABILITIES
6.1 Initial Capital Contributions of the Partners.
(a) Each Class C Partner shall, on or prior to the Closing Date, make
initial cash Capital Contributions, to the Partnership in the aggregate amounts
set forth opposite such Class C Partner's name on Schedule 6.1(a) hereto and the
Partnership shall, in consideration of such Capital Contribution, issue to each
such Class C Partner the number of Class C Preferred Units set forth opposite
such Class C Partner's name on Schedule 6.1 hereto. Each Class C Partner shall
be deemed to have made a Capital Contribution to the Partnership in an amount
equal to the amount of cash so contributed to the Partnership.
(b) As contemplated by Section 2.7(c), each Class D Partner shall, on
or prior to the Closing Date, make an initial Capital Contribution to the
Partnership of 512,203 shares of common stock of BRI and 4,904,066 BRI OP Units
held by Berkshire, BGP and their respective Affiliates on such date free and
clear of any and all liens and encumbrances, such Capital Contributions having
an agreed value equal to the product of (i) the number of shares plus the number
of such BRI Units so contributed to the Partnership and (ii) $12.25. In
consideration for such Capital Contributions, the Partnership shall issue to
Berkshire and BGP a number of Class D Units equal to the sum of the number of
shares of common stock of BRI plus the number of BRI OP Units so contributed to
the Partnership.
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(c) Each holder of BRI OP Units electing to receive Class A Preferred
Units in the merger of BRI OP and a subsidiary partnership of the Partnership
(the "Partnership Merger") shall be considered to have made, as a result of the
Partnership Merger, an initial Capital Contribution to the Partnership on the
Closing Date of all BRI OP Units held by such holder on such date (it being
understood and agreed that all such BRI OP Units shall, immediately prior to the
consummation of such Partnership Merger, be free and clear of any and all liens
and encumbrances). In consideration for such Capital Contributions, the
Partnership shall issue to such holder of BRI OP Units a number of Class A
Preferred Units equal to the number of BRI OP Units so contributed to the
Partnership. Each such holder shall be deemed to have made a Capital
Contribution to the Partnership in an amount equal to the product of (i) the
number of BRI OP Units so contributed to the Partnership by such holder of BRI
OP Units and (ii) $12.25.
(d) Each holder of BRI OP Units electing to receive Class B Units in
the Partnership Merger shall be considered to have made, as a result of the
Partnership Merger, an initial Capital Contribution to the Partnership on the
Closing Date of all BRI OP Units held by such holder on such date (it being
understood and agreed that all such BRI OP Units shall, immediately prior to the
consummation of such Partnership Merger, be free and clear of any and all liens
and encumbrances). In consideration for such Capital Contributions, the
Partnership shall issue to such holder of BRI OP Units a number of Class B Units
equal to the number of BRI OP Units so contributed to the Partnership. Each such
holder shall be deemed to have made a Capital Contribution to the Partnership in
an amount equal to the product of (i) the number of BRI OP Units so contributed
to the Partnership by such holder of BRI OP Units and (ii) $12.25.
(e) Schedule 6.1 hereto, as such schedule may be amended from time to
time, sets forth the respective number and type of Units held by, and the Class
A Preferred Percentage Interest, Class B Percentage Interest, Class C Percentage
Interest, Class D Percentage Interest and Class E Percentage Interest of, each
of the Partners.
(f) Intentionally omitted.
(g) The General Partners may, acting by unanimous decision pursuant to
Section 3.4, cause the Partnership to admit officers, employees or consultants
of the Partnership as Class E Limited Partners and in connection therewith, in
their sole discretion, apportion Class E Percentage Interests to such Class E
Limited Partners. Each such officer, employee or consultant shall become a Class
E Limited Partner only when (i) such person executes a written acceptance of all
of the terms and conditions of this Agreement and (ii) the Administering General
Partner has entered such person as a Partner on the books and records of the
Partnership. The General Partners may, acting as if such decision were a
Unanimous Decision, remove any Class E Limited Partner for Cause or Company
Cause (as determined by the General Partners), and in the event of such removal
such Class E Limited Partner shall forfeit his Class E Limited Partnership
Interest. In addition, the Partnership may, upon the approval of all of the
General Partners as if such decision were a Unanimous Decision, enter into
agreements with one or more Class E Limited Partners providing for, among other
things, the repurchase or forfeiture of Class E Limited Partnership Interests in
accordance with the terms of such agreements.
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(h) On the date hereof and prior to the Closing Date, the Class C
Partners may make Capital Contributions to fund the Partnership's obligations
(or make payments in respect of obligations) that arise prior to the Closing
Date, including, without limitation, the Partnership's obligations to provide an
escrowed amount under the terms of the BRI Merger Agreement or to purchase
interest rate hedge agreements). All such Capital Contributions or payments made
by such Class C Partners shall be deemed to be made pursuant to Section 6.1(a).
Any amounts paid by Berkshire or BGP to fund such obligations shall be treated
as an advance to the Partnership and shall be repaid by the Partnership
contemporaneously with the closing under the BRI Merger Agreement (together with
a 12% return thereon). This clause (h) shall not apply with respect to the
payment of fees and expenses that are to be reimbursed pursuant to Section
2.9(a).
6.2 Additional Contributions.
(a) If two of the General Partners, acting together as if such decision
were a Majority Decision, determine that funds are necessary with respect to
required debt service payments, the payment of taxes required to be paid in
respect of the Properties or the operations of the Partnership, operating
deficits, insurance premiums and similar matters, or by an emergency that
threatens injury to persons or damage to property, (a "Necessary Expenditure"),
such General Partners shall have the right to make a capital call (a "Mandatory
Capital Call") with respect to the Investor Group Partners in an amount as
reasonably determined by such General Partners making such Mandatory Capital
Call in order to remedy such matter and shall as promptly as reasonably possible
deliver a notice to each of the other Investor Group Partners (by telephone,
telecopier or such other means as is necessary in order to remedy such emergency
potential injury or damage) describing the amount and nature of such Necessary
Expenditure and making a Mandatory Capital Call for such amount. Notwithstanding
anything contained herein to the contrary, in no event may the General Partners
make Mandatory Capital Calls in excess of an aggregate amount equal to the
amount obtained by dividing (a) $10,000,000 by (b) the aggregate Partnership
Percentage Interests of Berkshire and BGP on the date hereof (the "Mandatory
Capital Call Limit") (it being understood and agreed that any Additional Capital
Call or portion thereof in respect of Necessary Expenditures in an amount which
when aggregated with the amounts of all previous Mandatory Capital Calls exceeds
the Mandatory Capital Call Limit shall be subject to Section 6.2(c)). Each
Investor Group Partner shall be required to contribute to the capital of the
Partnership an amount of cash equal to such Investor Group Partner's pro rata
portion (based on such Investor Group Partner's Partnership Percentage Interest
as compared to the Partnership Percentage Interests of all of the other Investor
Group Partners) which contribution shall be made as promptly as reasonably
determined by the General Partners making such Mandatory Capital Call (but in no
event sooner than twenty (20) business days following the delivery of the notice
of a Mandatory Capital Call) in order to remedy such matter requirement,
emergency, potential injury or damage. The Partnership shall use reasonable
efforts to minimize the costs and expenditures to the Partnership in connection
with such requirement, emergency, potential injury or matter.
(b) Two of the General Partners, acting together as if such decision
were a Majority Decision, may, during the period ending on the date that is the
later of (i) the first anniversary following the Closing Date and (ii) three
months after the maturity of the Bridge Loan, require the
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funding of one or more Additional Capital Calls in an aggregate amount not to
exceed $30,000,000 (a "Financing Capital Call"). In the event such General
Partners determine to make such a Financing Capital Call, such General Partners
shall as promptly as reasonably possible deliver a notice to each of the other
Investor Group Partners (in the manner provided in Section 12.2) describing the
amount and nature of such Financing Capital Call. Each of Berkshire, Whitehall
and Blackstone LP shall be required to contribute to the capital of the
Partnership an amount in cash equal to one-third (1/3) of the amount of such
Financing Capital Call, which contribution shall be made as promptly as
possible, but in no event later than twenty (20) business days following the
delivery of notice of such Financing Capital Call.
(c) Any Additional Capital Calls not described in clause (a) or clause
(b) of this Section 6.2 (including, without limitation, an Additional Capital
Call on account of a Necessary Expenditure in excess of the Mandatory Capital
Call Limit) shall be Unanimous Decisions subject to the approval requirements of
Section 3.4. In the event that such an Additional Capital Call is so approved,
each of the Investor Group Partners shall be required to contribute to the
capital of the Partnership an amount in cash equal to such Partner's pro rata
portion (based on such Investor Group Partner's Partnership Percentage Interest
as compared to the Partnership Percentage Interests of all of the other Investor
Group Partners) which contribution shall be made as promptly as possible, but in
no event later than thirty (30) days, after such approval.
(d) Unless otherwise determined by the unanimous vote of the General
Partners, the Partnership shall issue Class C Preferred Units as consideration
for Additional Contributions and such Class C Preferred Units shall be issued by
the Partnership at a price of $12.25 per Class C Preferred Unit.
(e) The amount of any U.S. federal and state tax liability of the
direct or indirect owners of the Berkshire Group (after giving effect to any
losses allocated to the Berkshire Group under Section 7.2 hereof) arising from
gain recognized by the Partnership in connection with the merger of BRI with the
Partnership (or a Subsidiary thereof) (as a result of the shares of common stock
in Berkshire Realty Company, Inc. contributed to the Partnership by the
Berkshire Group) will be deemed to constitute an Additional Contribution made
pro rata by the Berkshire Group on the date such tax liability is paid, up to a
maximum of $1.5 million, and the Berkshire Group shall receive Class D Units in
exchange for such deemed Additional Contributions valued at $12.25 per class D
Unit.
6.3 Dilution for Failure to Fund Capital Calls.
(a) If any Partner shall fail to make a capital contribution required
pursuant to an Additional Capital Call in the amount and within the time periods
specified therein (such Partner is hereinafter referred to as a
"Non-Contributing Partner"), the Administering General Partner (or, if the
Administering General Partner is the Non-Contributing Partner, WHGP or
Blackstone GP) shall give notice of such failure to all other Investor Group
Partners and the amount of the capital contribution not funded by the
Non-Contributing Partner (such amount is hereinafter referred to as the "Failed
Contribution") and, within twenty (20) business days after receiving notice of
such failure, any Investor Group Partner or Investor Group Partners that is or
are not in default with respect to the
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Failed Contribution or any contribution required to be made in connection with
such Additional Capital Call may fund all or part of such Failed Contribution
(each such funding Partner is hereinafter referred to as a "Contributing
Partner"). If more than one Partner desires to be a Contributing Partner, each
such Partner shall have the right to fund a portion of such Failed Contribution
(the "Funded Portion") pro rata in proportion to the relative Partnership
Percentage Interests of such Contributing Partners. At any time after funding
all or part of a Failed Contribution, the Partnership Percentage Interest of
each such Contributing Partner(s) shall be increased to the percentage (rounded
up to the nearest one hundredth of one percent) equal to the sum of (i) such
Contributing Partner's Partnership Percentage Interest immediately prior to
giving effect to the Capital Contributions pursuant to such Additional Capital
Call plus (ii) the percentage equal to the quotient of (x) the sum of (A) the
amount funded by such Contributing Partner pursuant to such Additional Capital
Call (other than the Funded Portion ) plus (B) the product of 2.0 (200%) times
the Funded Portion funded by such Contributing Partner divided by (y) the sum of
all Partners' (other than the Class A Preferred Limited Partners) Capital
Contributions after giving effect to the Capital Contributions funded pursuant
to such Additional Capital Call (including the Funded Portions). The Partnership
Percentage Interest of the Non-Contributing Partner shall be decreased by the
aggregate amount of the increase in the Partnership Percentage Interests of all
Contributing Partners as a result of the failure of the Non-Contributing Partner
to fund the capital calls in question.
Notwithstanding the foregoing, the words "1.0 (100%)" shall replace the
words "2.0 (200%)" for determining the applicable dilution for a
Non-Contributing Partner in respect of any Additional Capital Call made pursuant
to clause (a) of Section 6.2, to the extent, but only to the extent, that
Berkshire's share of such Additional Capital Contribution is in excess of
$10,000,000.
(b) In the event that the Partnership Percentage Interest of a
Non-Contributing Partner or of a Contributing Partner is adjusted pursuant to
the foregoing provisions of this Section 6.3, the Class C Percentage Interest or
other Percentage Interest relating to a class of Partnership Units of such
Contributing Partner or Non-Contributing Partner and the number of Partnership
Units of each class held by such Non-Contributing Partner shall likewise be
adjusted, using the same dilution factors as are used in determining the
adjustment to the Partnership Percentage Interests (it being understood and
agreed that such adjustments will result in an adjustment to the Partnership
Percentage Interest of the Non-Contributing and Contributing Partner and to the
Class C Percentage Interest (or such other applicable Percentage Interest) and
to the number of Partnership Units of each class held by the Contributing
Partner and the Non-Contributing Partner).
(c) In the event one or more of the Investor Group Partners fund an
Additional Capital Call, the Limited Partners other than the Investor Group
Partners shall not be required or entitled to fund any portion of such
Additional Capital Call and the Partnership Percentage Interest of such Limited
Partners (and of the Investor Group Partners) shall be adjusted as provided in
clause (a) of this Section 6.3; provided, however, that the words "1.0 (100%)"
shall replace the words "2.0 (200%)" for purposes of all such calculations.
(d) Notwithstanding anything contained herein to the contrary, the
Class A Preferred Limited Partners, Class B Limited Partners and Class E Limited
Partners shall have no obligation to
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contribute any additional capital to the Partnership and the Partnership
Percentage Interest of the Class A Preferred Limited Partners , Class B Limited
Partners and Class E Limited Partners (which shall at all times be zero (0%)),
shall not be diluted by operation of this Section 6.3.
6.4 Capital of the Partnership. Except as otherwise expressly provided
herein, no Partner shall be entitled to withdraw or receive any interest or
other return on, or return of, all or any part of its Capital Contribution, or
to receive any Partnership property (other than cash) in return for its Capital
Contribution. No Partner shall be entitled to make a Capital Contribution to the
Partnership except as expressly authorized by this Agreement or to make any
loans to the Partnership except with the unanimous consent of the General
Partners.
6.5 Liability of General Partners. All debts and obligations of the
Partnership shall be paid or discharged first with the assets of the Partnership
before the General Partners shall be obligated to pay or discharge such debts or
obligations (and then such obligation shall be only to the extent required by
applicable law). The General Partners shall not be liable for the return of the
Capital Contribution of any Limited Partner.
6.6 Limited Liability of Limited Partners. Except as provided in
Section 4.8, no Limited Partner shall be bound by, or be personally liable for,
the expenses, liabilities, indebtedness or obligations of the Partnership or of
the General Partners. The liability of each Limited Partner shall be limited
solely to the amount of its Capital Contribution; provided, however, that after
a Limited Partner has received a distribution from the Partnership, such Limited
Partner may be liable to the Partnership for the amount of the distribution but
only to the extent required by the Act. Without affecting the rights and
remedies provided under Sections 6.2 through 6.5 hereof, the Limited Partners
shall not be required to contribute any amounts to the Partnership other than
their Initial Capital Contributions. Nothing contained in this Agreement shall
be deemed to confer on any Limited Partner the right to control the business of
the Partnership for purposes of the Act.
ARTICLE 7.
CAPITAL ACCOUNTS, PROFITS
AND LOSSES AND ALLOCATIONS
7.1 Capital Accounts.
(a) The Partnership shall maintain a Capital Account for each Partner
in accordance with federal income tax accounting principles. Each Partner's
Capital Account as of the Effective Date will be equal to its original Capital
Contribution pursuant to Section 6.1. In the event any General Partner or any
controlling person of such General Partner files a bankruptcy or similar
proceeding with respect to the Partnership without first obtaining the prior
written approval of at least one other General Partner, the Capital Account, the
Partnership Percentage Interest, Class C Percentage Interest and/or Class D
Percentage Interest of such General Partner and of whichever of the Berkshire
Group, the Whitehall Group or The Blackstone Group of which it is a member shall
be reduced to zero (0).
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(b) The Capital Account of each Partner shall be increased by (i) the
amount of any cash and the agreed Book Value of any property (net of liabilities
encumbering such property) as of the date of contribution subsequently
contributed as a Capital Contribution to the capital of the Partnership by such
Partner and (ii) the amount of any Profits allocated to such Partner. The
Capital Account of each Partner shall be decreased by (i) the amount of any
Losses allocated to such Partner and (ii) the amount of distributions (including
the fair market value of any property distributions (net of liabilities
encumbering such Properties)) to such Partner. In all respects, the Partner's
Capital Accounts shall be determined in accordance with the detailed capital
accounting rules set forth in Treasury Regulations Section 1.704-1(b)(2)(iv) and
shall be adjusted upon the occurrence of certain events as provided in Treasury
Regulations Section 1.704-1(b)(2)(iv)(f).
(c) A transferee of all (or a portion) of an Interest shall succeed to
the Capital Account (or portion of the Capital Account) attributable to the
transferred Interest.
7.2 Profits and Losses.
(a) The profits and losses of the Partnership ("Profits" and "Losses")
shall be the net income or net loss (including capital gains and losses),
respectively, of the Partnership determined for each Fiscal Year in accordance
with the accounting method followed for federal income tax purposes except that
(i) in computing Profits and Losses, all depreciation and cost recovery
deductions shall be deemed equal to Depreciation, (ii) in computing Profits and
Losses, gains or losses shall be determined by reference to Book Value rather
than tax basis, (iii) any tax-exempt income received by the Partnership shall be
included as an item of gross income; (iv) the amount of any adjustments to the
Book Values of any assets of the Partnership pursuant to Code Section 743 shall
not be taken into account except to the extent provided in the penultimate
sentence of Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(2), (v) any
expenditure of the Partnership described in Code Section 705(a)(2)(B) (including
any expenditures treated as being described in Section 705(a)(2)(B) pursuant to
Treasury Regulations under Code Section 704(b)) shall be treated as a deductible
expense, (vi) the amount of items of income, gain, loss or deduction specially
allocated to any Partners pursuant to Section 7.2(f) shall not be included in
the computation and (vii) the amount of any increases or decreases in the Book
Value of any asset upon an adjustment to the Book Values of the assets pursuant
to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall be included in the
computation as items of gain and loss respectively.
(b) Whenever a proportionate part of the Profits or Losses is allocated
to a Partner, every item of income, gain, loss, deduction or credit entering
into the computation of such Profits or Losses or arising from the transactions
with respect to which such Profits or Losses were realized shall be credited or
charged, as the case may be, to such Partner in the same proportion; provided,
however, that "recapture income", if any, shall be allocated to the Partners who
were allocated the corresponding depreciation deductions.
(c) If any Partner transfers all or any part of its Interest during any
Fiscal Year or its Interest is increased or decreased, Profits and Losses
attributable to such Interest for such Fiscal Year shall be apportioned between
the transferor and transferee or computed as to such Partners, as the case
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may be, ratably on a daily basis, provided in all events that any apportionment
described above shall be permissible under the Code and applicable regulations
thereunder.
(d) For all purposes, including federal, state and local income tax
purposes, Profits shall be allocated each year among all the Partners as
follows:
(i) First, pro rata among all the Partners in proportion to
the amounts allocated and previously allocated pursuant to Section
7.2(e)(viii) hereof until the amount allocated and previously allocated
pursuant to this Section 7.2(d)(i) equals the amount allocated and
previously allocated pursuant to Section 7.2(e)(viii) hereof;
(ii) Second, to the Partners so that the cumulative amounts
allocated to each of them pursuant to this Section 7.2(d)(ii) equals
the cumulative amount distributed to each of them for the current
period and all prior periods pursuant to Section 8.1(b)(1) hereof
(including amounts distributed on a sale or other disposition of all or
substantially all of the Partnership Assets pursuant to the accrued and
unpaid distribution clause of Section 10.3(5));
(iii) Third, to the Partners in proportion to the amounts
distributable and previously distributed pursuant to Section 8.1(b)(2)
hereof (excluding amounts attributable to Capital Contributions but
including amounts (x) that would be distributable pursuant to Section
8.1(b)(2) hereof as a result of the application of Section 10.3(6) upon
a sale or other disposition of all or substantially all of the
Partnership Assets, or (y) that would have been distributable if the
Partnership had received and distributed the full amount of cash
attributable to the income being allocated) until the amount allocated
and previously allocated pursuant to this Section 7.2(d)(iii) (and not
reversed by Section 7.2(e) (vii) hereof) equals such distributed or
distributable amounts;
(iv) Fourth, to the Partners in proportion to the amounts
distributable and previously distributed pursuant to Section 8.1(b)(3)
hereof (excluding amounts attributable to Capital Contributions but
including amounts (x) that would be distributable pursuant to Section
8.1(b)(3) as a result of the application of Section 10.3(6) upon a sale
or other disposition of all or substantially all of the Partnership
Assets, or (y) that would have been distributable if the Partnership
had received and distributed the full amount of cash attributable to
the income being allocated) until the amount allocated and previously
allocated pursuant to this Section 7.2(d)(iv) (and not reversed by
Section 7.2(e)(vi) hereof) equals such distributed or distributable
amounts;
(v) Fifth, to the Partners in proportion to the amounts
distributable and previously distributed pursuant to Section 8.1(b)(4)
hereof (excluding amounts attributable to Capital Contributions but
including amounts (x) that would have been distributable pursuant to
Section 8.1(b)(4) as a result of the application of Section 10.3(6)
upon a sale or other disposition of all or substantially all of the
Partnership Assets, or (y) that would have been distributable if the
Partnership had received and distributed the full amount of cash
attributable to the income being allocated) until the amount allocated
and previously allocated
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pursuant to this Section 7.2(d)(v) (and not reversed by Section
7.2(e)(v) hereof) equals such distributed or distributable amounts;
(vi) Sixth, to the Partners in proportion to the amounts
distributable and previously distributed pursuant to Section 8.1(b)(5)
hereof (excluding amounts attributable to Capital Contributions but
including amounts (x) that would be distributable pursuant to Section
8.1(b)(5) as a result of the application of Section 10.3(6) upon a sale
or other disposition of all or substantially all of the Partnership
Assets, or (y) that would have been distributable if the Partnership
had received and distributed the full amount of cash attributable to
the income being allocated) until the amount allocated and previously
allocated pursuant to this Section 7.2(d)(vi) (and not reversed by
Section 7.2(e)(iv) hereof) equals such distributed or distributable
amounts; and
(vii) Seventh, to the Partners in proportion to the amounts
distributable and previously distributed pursuant to Section 8.1(b)(6)
hereof (including amounts (x) that would be distributable pursuant to
Section 8.1(b)(6) as a result of the application of Section 10.3(6)
upon a sale or other disposition of all or substantially all of the
Partnership Assets, or (y) that would have been distributable if the
Partnership had received and distributed the full amount of cash
attributable to the income being allocated) until the amount allocated
and previously allocated pursuant to this Section 7.2(d)(vii) (and not
reversed by Section 7.2(e)(iii) hereof) equals such distributed or
distributable amounts;
(viii) Thereafter, (A) with respect to periods during which
BGP is the Administering General Partner, (I) seventeen and one-half
percent (17 1/2%) pro rata to the Class D Partners, (II) seven and
one-half percent (7 1/2%) to the Class E Limited Partners (in
proportion to their respective Class E Percentage Interests) and (iii)
seventy-five percent (75%) to the Partners other than the Class A
Preferred Limited Partners and Class E Limited Partners (pro rata in
proportion to their Partnership Percentage Interests, or (B) with
respect to periods during which BGP is not the Administering General
Partner, (I) seventeen and one-half percent (17 1/2%) to the Class E
Limited Partners and (II) the remainder to the Partners other than the
Class A Preferred Limited Partners and Class E Limited Partners (pro
rata in proportion to their Partnership Percentage Interests).
(e) For all purposes, including federal, state and local income tax
purposes, Losses shall be allocated each year among all the Partners as follows:
(i) First, pro rata to the Class D Partners in proportion to
and to the extent of their positive Capital Account balances;
(ii) Second, to the Partners in proportion to and to the
extent of the excess of (A) the respective aggregate amount allocated
to them pursuant to Section 7.2(d)(viii) hereof over (B) the respective
amounts previously allocated to them pursuant to this Section
7.2(e)(ii);
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(iii) Third, to the Partners in proportion to and to the
extent of the excess of (A) the respective aggregate amount allocated
to them pursuant to Section 7.2(d)(vii) hereof over (B) the respective
amounts previously allocated to them pursuant to this Section
7.2(e)(iii);
(iv) Fourth, to the Partners in proportion to and to the
extent of the excess of (A) the respective aggregate amount allocated
to them pursuant to Section 7.2(d)(vi) hereof over (B) the respective
amounts previously allocated to them pursuant to this Section
7.2(e)(iv);
(v) Fifth, to the Partners in proportion and to the extent of
the excess of (A) the respective aggregate amount allocated to them
pursuant to Section 7.2(d)(v) hereof over (B) the respective amounts
previously allocated to them pursuant to this Section 7.2(e)(v);
(vi) Sixth, to the Partners in proportion to and to the extent
of the excess of (A) the respective aggregate amount allocated to them
pursuant to Section 7.2(d)(iv) hereof over (B) the respective amounts
previously allocated to them pursuant to this Section 7.2(e)(vi);
(vii) Seventh, to the Partners in proportion to and to the
extent of the excess of (a) the respective aggregate amount allocated
to them pursuant to Section 7.2(d)(iii) hereof over (B) the respective
amounts previously allocated pursuant to this Section 7.2(e)(vii); and
(viii) Thereafter, pro rata among all the Partners in
proportion to their Partnership Percentage Interests.
(f) Notwithstanding Sections 7.2(d) and (e) hereof,
(i) For federal income tax purposes but not for purposes of
crediting or charging Capital Accounts, depreciation or gain or loss
realized by the Partnership with respect to any property that was
contributed to the Partnership (including any dividend or other income
realized by the Partnership with respect to Berkshire's contribution to
the Partnership of the BRI common stock and operating partnership
units) or that was held by the Partnership at a time when the Book
Value of the Partnership Assets was adjusted pursuant to the third
sentence of Section 7.1(b) shall, in accordance with the "traditional
method" under Section 704(c) of the Code and Treasury Regulation
Sections 1.704- 1(b)(2)(iv)(d) and (f) and 1.704-3(b), be allocated
among the Partners in a manner which takes into account the differences
between the adjusted basis for federal income tax purposes to the
Partnership of its interest in such property and the fair market value
of such interest at the time of its contribution or revaluation.
(ii) If there is a net decrease in the Minimum Gain of the
Partnership during a taxable year (including any Minimum Gain
attributable to Partner-Funded Debt), each Partner at the end of such
year shall be allocated, prior to any other allocations required under
this Article 7, items of gross income for such year (and, if necessary,
for subsequent years) in the
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amount and proportions described in Treasury Regulation Sections
1.704-2(g) and 1.704-2(i)(4).
(iii) Notwithstanding the allocations provided for in Sections
7.2(d), (e) and (f) no allocation of an item of loss or deduction shall
be made to a Partner to the extent such allocation would cause or
increase a deficit balance in such Partner's Capital Account as of the
end of the taxable year to which such allocation relates. If any
Partner receives an adjustment, allocation or distribution that causes
or increases such a deficit balance, taking into account the rules of
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), such
Partner shall be allocated (after taking into account any allocations
made pursuant to Section 7.2(g)(ii)) items of income and gain in an
amount and manner to eliminate the Partner's Capital Account deficit
attributable to such adjustment, allocation or distribution as quickly
as possible. For purposes of this Section 7.2(g)(iii), there shall be
excluded from a Partner's deficit Capital Account balance at the end of
a taxable year of the Partnership (a) such Partner's share, determined
in accordance with Section 704(b) of the Code and Treasury Regulation
Section 1.704-2(g) of Minimum Gain (provided that in the case of
Minimum Gain attributable to Partner-Funded Debt, such Minimum Gain
shall be allocated to the Partner or Partners to whom such debt is
attributable pursuant to Treasury Regulation Section 1.704-2(i)) and
(b) the amount, if any, that such Partner is obligated to restore to
the Partnership under Treasury Regulation Section 1.704-1(b)(2)(ii)(c).
(iv) Notwithstanding the allocations provided for in
subsection (i) of this Section 7.2(g) and Sections 7.2(d), (e) and (f),
if there is a net increase in Minimum Gain of the Partnership during a
taxable year of the Partnership that is attributable to Partner-Funded
Debt then first Depreciation, to the extent the increase in such
Minimum Gain is allocable to depreciable property, and then a
proportionate part of other deductions and expenditures described in
Section 705(a)(2)(B) of the Code, shall be allocated to the lending or
guaranteeing Partner (and to joint lenders or guarantors in proportion
to their relative obligations), provided that the total amount of
deductions so allocated for any year shall not exceed the increase in
Minimum Gain attributable to such Partner-Funded Debt in such year.
(v) Subject to the provisions of Section 7.2(f)(iv), above,
all Non-recourse Deductions of the Partnership for any year shall be
allocated to the Class A, Class B and Class D Partners in the same
manner and proportion as their relative shares of Profits and Losses
for such year, and the Partnership shall allocate "excess non-recourse
liabilities" (as determined under Treasury Regulation Section
1.752-3(a)(3)) in the same ratio.
(vi) Any special allocation under Sections 7.2(f)(ii) through
(v) shall be taken into account (to the extent appropriate) in
computing subsequent allocations of Profits and Losses of any item
thereof pursuant to this Article 7 so that the net amount of any items
so allocated and the Profits, Losses and all items thereof allocated to
each Partner pursuant to this Article 7 shall, to the extent
permissible under Sections 704(b) of the Code and the Treasury
Regulations promulgated thereunder, be equal to the net amount that
would have been allocated to each Partner pursuant to this Article 7 if
such special allocation had not occurred.
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ARTICLE 8.
APPLICATIONS AND DISTRIBUTIONS
OF AVAILABLE CASH
8.1 Applications and Distributions.
(a) Distributions of Available Cash (subject to all restrictions
contained in the definition of such term) for each quarter shall be made to the
Partners by the Administering General Partner on behalf of the Partnership in
accordance with Section 8.1(b) within 60 days after the end of such quarter of
each Fiscal Year.
(b) Available Cash shall be distributed to the Partners in the
following order of priority (and the calculations described in the following
clauses shall be made as of the date of each distribution, on a cumulative
basis), subject to the other terms of this Article 8 and the terms of Section
6.3:
(1) First, to the Class A Preferred Limited Partners, pro rata
in accordance with their respective Class A Preferred Percentage
Interests, until each of the Class A Preferred Limited Partners has
received a cumulative, compounded quarterly to the extent not paid on a
quarterly basis, return of 7.5% per annum on the amount of such Class A
Preferred Limited Partner's Capital Contribution taking into account
the amount and timing of all prior distributions under this Section
8.1(b)(1) (any shortfall in the full payment of such return, from time
to time, being referred to in this Agreement as an unpaid and accrued
distribution in respect of the Class A Preferred Units).
(2) Second, to holders of Class C Preferred Units (pro rata in
proportion to the amount of any accrued and unpaid return owing with
respect to the Class C Preferred Units held by each such Partner) until
each of such Partners has received, taking into account the amount and
timing of all prior distributions under this Section 8.1(b)(2) and of
all prior Capital Contributions made pursuant to Sections 6.1 and 6.2
(to the extent made in respect of Class C Preferred Units) by such
Partner, a Rate of Return on the aggregate Capital Contributions made
by it in respect of the Class C Preferred Units equal to twelve percent
(12%).
(3) Third, to the holders of Class B Units and Class D Units
on a pari passu basis (pro rata in proportion to the amount of any
accrued and unpaid return owing with respect to the Class B Units and
Class D Units held by each such Partner) until each such Partner has
received, taking into account the amount and timing of all prior
distributions under this Section 8.1(b)(3) and of all prior Capital
Contributions made in respect of such Class B Units or Class D Units,
as applicable, pursuant to Section 6.1 by such Partner, a Rate of
Return on the aggregate Capital Contributions made in respect of the
Class B Units and Class D Units equal to twelve percent (12%).
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(4) Fourth, to all of the Partners other than the Class A
Preferred Limited Partners and the Class E Limited Partners (pro rata
in proportion to their relative Capital Contributions) until each
Partner other than the Class A Preferred Limited Partners and the Class
E Limited Partners has received, taking into account the amount and
timing of all prior distributions under this Section 8.1(b)(4) and
under Sections 8.1(b)(2) and 8.1(b)(3) and of all prior Capital
Contributions made by such Partner, a Rate of Return on the aggregate
Capital Contributions made in respect of the Partnership Units held by
such Partner equal to fifteen percent (15%).
(5) Fifth, (i) 80% to all of the Partners other than the Class
A Preferred Limited Partners and the Class E Limited Partners (pro rata
in proportion to their relative Capital Contributions) and (ii) with
respect to periods during which BGP is the Administering General
Partner, fourteen percent (14%) to the Class D Partners (pro rata in
proportion to their relative Class D Percentage Interests), and (iii)
6% to the Class E Limited Partners as IMP (pro rata in proportion to
their respective Class E Percentage Interests) until each Partner other
than the Class A Preferred Limited Partners and the Class E Limited
Partners has received, taking into account the amount and timing of all
prior distributions under this Section 8.1(b)(5) and under Sections
8.1(b)(2), 8.1(b)(3) and 8.1(b)(4) and the amount and timing of all
prior Capital Contributions, a Rate of Return on the aggregate Capital
Contributions made in respect of the Partnership Units held by such
Partner equal to twenty percent (20%).
(6) Sixth, (i) with respect to periods during which BGP is the
Administering General Partner, seventy percent (70%) to the Class D
Partners (pro rata in proportion to their relative Class D Percentage
Interests) and (ii) thirty percent (30%) to the Class E Limited
Partners as IMP (in proportion to their respective Class E Percentage
Interests) until the Class D Partners, if applicable, and the Class E
Limited Partners have received under this Section 8.1(b)(6) together
with the amounts previously received under Section 8.1(b)(5)(ii) or
8.1(b)(5)(iii), (but only to the extent amounts previously received
under Section 8.1(b)(5)(ii) or 8.1(b)(5)(iii) are received after each
Partner other than the Class A Preferred Limited Partners and the Class
E Limited Partners has received a Rate of Return on the aggregate
Capital Contributions made by such Partner in respect of the
Partnership Units held by such Partner equal to seventeen and one half
percent (17 1/2%)) as applicable, an amount equal to twenty-five
percent (25%) of the Second Tier Differential.
(7) Seventh, (i) with respect to periods during which BGP is
the Administering General Partner, seventeen and one-half percent (17
1/2%) of the remainder to the Class D Partners (pro rata in proportion
to their relative Class D Percentage Interests), (ii) seven and
one-half percent (7 1/2%) of the remainder to the Class E Limited
Partners as IMP (pro rata in proportion to their respective Class E
Percentage Interests) and (iii) seventy-five percent (75%) of the
remainder to the Partners other than the Class A Preferred Limited
Partners and the Class E Limited Partners (pro rata in proportion to
their relative Capital Contributions).
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With respect to periods during which BGP is not the
Administering General Partner, amounts otherwise distributable to the holders of
the Class D Units pursuant to Sections 8.1(b)(5)(ii), (6)(i) and (7)(i) shall be
distributable under Sections 8.1(b)(5)(i), (6)(ii) and (7)(iii), respectively,
unless the General Partners (other than BGP) desire to admit a new Administering
General Partner, in which case the General Partners may jointly determine to
distribute part or all of such amounts instead to such new Administering General
Partner or otherwise as such other General Partners shall determine.
(c) The Partnership shall endeavor to distribute in each Fiscal Year
(and, to the extent required, the immediately following Fiscal Year) Available
Cash (strictly in accordance with the priorities set forth in Section 8.1(b)) in
an amount at least sufficient (taking into account all other distributions) for
the Investor Group Partners' (and if such Investor Group Partner is a
pass-through entity for tax purposes, the shareholders, members or partners
comprising such Investor Group Partner) payment of federal, state and local
income taxes arising in respect of each Investor Group Partner's share (or the
share of the shareholders, members or partners comprising such Investor Group
Partner) of the income of the Partnership for such Fiscal Year, assuming the
highest combined effective tax rate applicable to an individual resident in
Massachusetts (but the foregoing shall not be grounds for an Additional Capital
Call), provided, however, that in the case of phantom income for any member of
the Berkshire Group, such distribution shall be made in proportion to the
Partnership Percentage Interests of the Investor Group Partners provided,
however, that no distributions may be made pursuant to this clause (c) at any
time when distributions to be paid under Section 8.1(b)(1) are accrued and
unpaid and provided further that such distributions shall offset amounts
otherwise distributable to partners currently or in the future.
8.2 Liquidation. In the event of the sale or other disposition of all
or substantially all of the Partnership Assets, the Partnership shall be
dissolved and the proceeds of such sale or other disposition shall be
distributed to the Partners in liquidation as provided in Article 10, except
that to the extent that the Partnership receives a purchase money note or notes
in exchange for all or a portion of such assets, the Partnership shall continue
until such purchase money notes or notes have been paid in full.
ARTICLE 9.
TRANSFER OF COMPANY INTERESTS
9.1 Limitations on Assignments of Interests by Partners.
(a) Except as provided in this Article 9, no Partner shall Transfer (as
hereinafter defined) all or any portion of its Interest or permit such a
Transfer or contract to do so, without the consent of each of the General
Partners (which consent may be withheld in such General Partner's sole
discretion for any reason or no reason) and in strict compliance with the
provisions of this Article 9. Notwithstanding the foregoing, but subject to
Section 9.9, (i) each member of the Whitehall Group, the Blackstone Group or the
Berkshire Group may, at any time, and without the prior consent of the
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General Partners, Transfer all or any portion of its Interest to a Person
qualifying as an Affiliate under clause (i) of its definition hereof of such
transferring Partner and (ii) each member of the Berkshire Group and each Class
A Preferred Limited Partner and Class B Limited Partner may at any time, and
without the prior consent of the General Partners, and solely for estate
planning purposes, Transfer all or any portion of its Interest to one or more
family members of the Berkshire Principals, or to trusts established for such
family members or, as applicable, to family members of or trusts established for
the families of such Class A Preferred Limited Partners or Class B Limited
Partners. In addition each Class A Preferred Limited Partner and Class B Limited
Partner may transfer its Class A Preferred Units or Class B Units to one or more
Affiliates of such Class A Preferred Limited Partner or Class B Limited Partner
satisfying the requirements of clause (i) of the definition of "Affiliate". As
used herein "Transfer" of an Interest means, with respect to any Partner, any
transfer, sale, pledge, hypothecation, encumbrance, assignment or other
disposition of any portion of the Interest of such Partner or the proceeds
thereof (whether voluntarily, involuntarily, by operation of law or otherwise,
other than a pledge permitted under Section 9.1 (b)). Any purported Transfer in
violation of this Article 9 shall be void ab initio, and shall not bind the
Partnership, and the Partners making such purported transfer, sale or assignment
shall indemnify and hold the Partnership and the other Partners harmless from
and against any federal, state or local income taxes, or transfer taxes,
including without limitation, transfer gains taxes, arising as a result of, or
caused directly or indirectly by, such purported Transfer. The giving of any
consent to a Transfer in any one or more instances shall not limit or waive the
need for such consent in any other or subsequent instances. Notwithstanding the
foregoing, a Class A Preferred Limited Partner or a Class B Limited Partner may
(after giving the Partnership and the Class C Partners and Class D Partners the
right to purchase such Partnership Unit described in this Section 9.1(a))
Transfer all, but not less than all, of its Class A Preferred Units or Class B
Units, respectively, to an "accredited investor" (as such term is defined in
Regulation D under the Securities Act) as long as (i) prior to such Transfer,
such Class A Preferred Limited Partner or Class B Limited Partner offers to the
Partnership and the Class C Partners and the Class D Partners the right to
purchase such Partnership Units in accordance with the procedures described
below in this Section 9.1, (ii) such transferee agrees to be bound by all of the
provisions of this Agreement, (iii) prior to such Transfer outside legal counsel
to the Partnership delivers (at the sole expense of the transferring Partner
except as provided below) an opinion to the Partnership to the effect that such
transfer does not require registration under the Securities Act and does not
cause the Partnership to be a "publicly traded partnership" within the meaning
of Section 7704 of the Code (it being understood and agreed that (a) the
Partnership shall spend up to $50,000 in legal fees and expenses in any fiscal
year in respect of any such transfers, but that any legal fees or expenses in
excess of such amount shall be for the account of the transferring Partner or
Partners; (b) that the Partnership shall not be obligated to pay (and the
transferring Partner shall be obligated to pay) any and all fees and expenses
incurred by such transferring Partner including, without limitation, transfer
and similar taxes, and fees and expenses of legal counsel engaged by such
transferring Partners or the transferee and (c) the Partnership shall not charge
the transferring Partner with other fees and expenses incurred by the
Partnership in connection with such transfer), and (iv) such Transfer otherwise
complies with the provisions of Sections 9.5, 9.7, 9.8, 9.9, and this Section
9.1. Prior to any Transfer of Class A Preferred Units or Class B Units pursuant
to this Section 9.1(a), a Partner desiring to transfer such Partnership Units (a
"Transferring Partner") shall first give written notice (a "Notice of Sale") to
the Partnership and the General Partners, which Notice of Sale shall state the
Transferring Partner's desire
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to make such Transfer, the number and Class of Units held by such Transferring
Partner (the "Offered Interest") and the price and such other terms on which the
Transferring Partner proposes to Transfer its Interest (collectively, the "Offer
Terms"). Each Notice of Sale shall constitute an irrevocable offer by the
Transferring Partner to sell to the Partnership and the General Partners the
Offered Interest on the Offer Terms. No Offer Terms in respect of an Offered
Interest may include any form of consideration other than cash (which may be
paid at closing, in installments or after any period of time (as set forth in
the Offer Terms) or indebtedness (secured, unsecured, guaranteed, supported by a
letter of credit or otherwise) (as set forth in the Offer Terms) of the
Purchaser (as defined below) of such Offered Interest.
The Partnership may elect to purchase (or cause an Affiliate
designated by the Partnership to purchase) the Offered Interest on the Offer
Terms by delivering to the Transferring Partner, with a copy to the Partnership
and the General Partners, within twenty-five (25) days following the date the
Notice of Sale is received by the Partnership and all of the General Partners,
notice of such election (a "Notice of Purchase"). The decision of the
Partnership to purchase an Offered Interest shall be a Unanimous Decision.
In addition, if the Partnership does not elect to purchase the
Offered Interest on the Offer Terms the General Partners may, by delivering a
Notice of Purchase not more than five (5) days after the expiration of the
25-day period specified above, elect to purchase (or cause an Affiliate designed
by them to purchase) stating (x) the maximum share of the Offered Interest that
such General Partner (or such designated Affiliate) elects to purchase (the
"Maximum Share") (which Maximum Share may be greater than such General
Partners's proportionate share of the Offered Interest calculated in accordance
with its Partnership Percentage Interest), (y) that the election made by such
Notice of Purchase is irrevocable and (z) that such General Partner irrevocably
commits to purchase any share of the Offered Interest up to and including the
Maximum Share specified in preceding clause (x) on the Offer Terms. Each of the
General Partners that delivers a Notice of Purchase (each, a "Purchaser") shall
be allocated the Maximum Share of the Offered Interest set forth in such
Purchaser's Notice of Purchase, unless such allocation, together with the shares
of the Offered Interest allocated to the other Purchasers, exceeds one hundred
percent (100%) of the Offered Interest, in which case each Purchaser whose
Maximum Share is less than such Purchaser's proportionate share of the Offered
Interest calculated in accordance with its Percentage Interest shall receive its
Maximum Share, and the remaining share of the Offered Interest shall be
allocated among the remaining Purchasers ratably in accordance with their
respective Percentage Interests. A Notice of Purchase shall be deemed to be an
irrevocable commitment by the Purchaser to purchase from the Transferring
Partner on the Offer Terms the Maximum Share of the Offered Interest that such
Purchaser has elected to purchase pursuant to its Notice of Purchase.
If in the aggregate the Purchasers do not commit to purchase
the entire Offered Interest within the time periods specified in Section 9.2(b),
the Transferring Partner (i) shall be under no obligation to sell any portion of
the Offered Interest to any Purchaser, unless the Transferring Partner so
elects, and (ii) may, within a period of 6 months from and after the later of
(x) the date of the last Notice of Purchase delivered to the Transferring
Partner in accordance with Section 9.2(b) hereof and (y) the date which is
twenty five (25) days from the date of the Notice of Sale, Transfer the
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entire Offered Interest to one or more Persons at a price equal to or higher
than the price included in the Offer Terms. If the Transferring Partner shall
not have consummated the Transfer of the Offered Interest to any Person or
Persons prior to the expiration of such six month period then the provisions of
this Section 9.2 shall again apply.
(b) Subject to compliance with the remaining provisions of this Article
9 and notwithstanding anything to the contrary set forth in Section 9.1(a)
above, each of the Investor Group Partners, Class A Preferred Limited Partners
and Class B Limited Partners may, from time to time and without any consent or
approval, pledge or otherwise grant a security interest in all or part of such
Partner's Interest to an Institutional Lender to secure a loan made to such
Partner or its Affiliates (a "Pledgor") by such Institutional Lender (a
"Pledgee"); provided, however, that with regard to any such pledges made by a
member of the Berkshire Group, any Class A Preferred Limited Partner or any
Class B Limited Partner, (i) such pledged Interest may not be transferred to the
Pledgee by foreclosure, assignment in lieu thereof or other enforcement of such
pledge, (ii) such Partner may pledge only its economic interests in the
Partnership and no other rights hereunder, (iii) such pledges shall be securing
a loan which is fully recourse to such Partner and, in the case of a pledge by a
member of the Berkshire Group, The Berkshire Companies Limited Partnership (or
its successor) or one or more of the Berkshire Principals and (iv) Blackstone GP
and WHGP shall have the right to review and reasonably approve, the documents
relating to such loan to confirm the non-foreclosable nature of the pledge and
the recourse nature of the loan. Any right of the Pledgee in the Interest shall
be expressly subordinated to the rights (then existing or thereafter arising) of
any Partner in the Interest as a result of any claims for indemnification
pursuant to Section 4.3.
(c) Any direct or indirect transfer of interests in Berkshire or BGP
shall require the consent of all of the GPs to the extent such transfer results
in Berkshire or BGP no longer being controlled (directly or indirectly) by a
Berkshire Principal. Any direct or indirect transfer of interests in Whitehall
or WHGP shall require the consent of all of the GPs to the extent such transfer
results in Whitehall or WHGP no longer being controlled (directly or indirectly)
by or under common control with a member of the Whitehall Group or GS Group. Any
direct or indirect transfer of interests in Blackstone GP or Blackstone LP shall
require the consent of all of the GPs to the extent such transfer results in
Blackstone GP or Blackstone LP no longer being controlled (directly or
indirectly) by or under common control with Blackstone Real Estate Acquisitions
III L.L.C.
9.2 Sale of All of the Properties Before the Fifth Anniversary of the
Closing Date at the Option of Berkshire.
(a) Notwithstanding any other provisions herein, at any time during the
period beginning on the date that is the second anniversary of the Closing Date
and ending on the day that is the date immediately before the date that is the
fifth anniversary of the Closing Date, the Berkshire Group, may, by delivering
written notice (a "Sales Notice") to WHGP and Blackstone GP (the Berkshire
Group, or such member thereof as shall deliver such Sales Notice, being referred
to as a "Triggering Party" and the recipients of such Sales Notice each being
referred to as a "Non-Triggering Party", and collectively as the "Non-Triggering
Parties"), require the Partnership (and act on behalf of the Partnership with
full right, power and authority) to sell all or substantially all of the
Properties in one
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or more transactions to a Person not Affiliated with any member of the Berkshire
Group (including by merger of the Partnership), subject to the provisions of
this Section 9.2. Any such Sales Notice shall state the cash price (the "Total
Price") at which the Triggering Party desires to sell the Properties, free and
clear of any liens. Any sale of the Properties pursuant to this Section 9.2 may
be accomplished by a sale of the Partnership itself (including by merger of the
Partnership) or of all of the Partnership Assets, provided that such a proposed
transaction may provide for the members of the Berkshire Group to receive
consideration other than cash and for the other Partners to receive at their
election, either cash or such other consideration.
(b) Concurrently with the delivery of the Sales Notice referred to in
Section 9.2(a), the Triggering Party shall submit to the Non-Triggering Parties
an offer (the "Offer"), to sell (or cause the Partnership to sell) the
Properties to the Non-Triggering Parties (or their designees) for cash in
exchange for the Non-Triggering Parties (or their designees) paying to the
Partnership the Total Price, failing which the Triggering Party shall be
entitled to market the Properties, as more particularly set forth below in this
Section 9.2. The Offer shall also set forth any other material economic terms of
the purchase; provided that, any Offer may include a holdback for breaches of
representations or warranties (which may survive for claims made within no more
than one year from the transfer of the Properties) by the Partnership (which in
each case shall be as outlined by the Triggering Party in the Offer) not to
exceed 5% of the purchase price, which holdback amount may be available for no
more than the survival period of the representations and warranties; provided,
further, that the terms of the transaction shall not, in any event, provide for
the personal liability of any Partner in the event of the breach of such
representations and warranties.
(c) Within thirty (30) days after receiving the Offer, each
Non-Triggering Party shall deliver a notice (a "Sales Response Notice") to the
Triggering Party, stating the election by such Non-Triggering Party of one of
the two following options:
(1) to purchase (or have its Affiliate purchase) for the Total
Price the Properties on or before the date (the "Applicable Closing
Date") specified in such Sales Response Notice (which date shall be no
later than sixty (60) days after the Sales Response Notice is
delivered) and in accordance with the terms set forth in the Offer;
concurrently with the delivery of a Sales Response Notice, and as a
condition to its effectiveness under this Section 9.2(c), such
Non-Triggering Party shall also deliver to the Partnership (for the
account of the Triggering Party) a down payment equal to the product of
(i) 5% of the Total Price and (ii) the aggregate Partnership Percentage
Interest of the Triggering Party and each Non-Triggering Party that
does not elect to purchase the Properties pursuant to this clause (c)),
(provided that if more than one Non-Triggering party makes such an
election, each such non-Triggering Partner shall pay a pro rata portion
of such deposit based on its respective Partnership Percentage
Interest) which shall not be refundable except if the Partnership
defaults as a seller of the Properties; or
(2) to agree to the sale of the Properties in accordance with
the terms of the Offer, subject to such changes therein as are
contemplated by the terms of this Section 9.2
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provided below, in which event, such Non-Triggering Party shall have no
further rights to purchase the Properties, except as may be expressly
provided for below in this Section 9.2.
If any Non-Triggering Party fails to elect, by written notice, one of the above
two options within said thirty (30)-day period, or fails to deliver the down
payment required as a condition of such election, then it shall be conclusively
presumed that such Non-Triggering Party elected option (2) above (and such
Non-Triggering Party hereby consents to such sale in such case). In the event
that both the Whitehall Group and the Blackstone Group, as Non-Triggering
Parties, make an election pursuant to Section 9.2(c)(1), they shall each acquire
50% of each Property.
(d) Promptly after an election by a Non-Triggering Party pursuant to
Section 9.2(c)(1), the Partnership and such electing Non-Triggering Party (or
its Affiliate(s)) shall proceed
with such purchase and sale, the closing for
which shall be held on or before the Applicable Closing Date, during normal
business hours at the offices of counsel to the Non-Triggering Party. The Non-
Triggering Party shall be entitled to one five (5) Business Day adjournment,
whereupon time shall be of the essence with respect to the Non-Triggering
Party's obligation to close on the purchase of the Properties in accordance with
the terms of this Section 9.2(d) on or before the Applicable Closing Date, and
if the Non-Triggering Party does not close in accordance with this paragraph,
the Triggering Party shall be entitled, as the sole and exclusive remedies of
the Triggering Party, to market and sell the Properties on behalf of the
Partnership in accordance with this Section 9.2 as if the Non-Triggering Party
made the election described in Section 9.2(c)(2) and the Triggering Party and
each Non-Triggering Party that did not elect to purchase the Properties or that
is not in default shall be entitled, as its sole and exclusive remedy, to keep a
portion of the downpayment described in Section 9.2(c)(1) above (pro rata based
on its respective Partnership Interests) (unless the failure to close is due to
the default of the Partnership, in which case the Triggering Party shall not be
entitled to the foregoing remedies). No defaulting Non-Triggering Party shall
have any rights of first offer under this Section 9.2 after such default in
respect of any subsequent offers.
(e) Upon an election (or deemed election) by each Non-Triggering Party
pursuant to Section 9.2(c)(2), the Triggering Party shall have the right to
cause the Partnership to market the Properties for a period (the "Marketing
Period") of one hundred and eighty (180) days commencing with the earlier to
occur of (i) the thirtieth (30th) day after the delivery of the Offer to the
Non-Triggering Parties or (ii) the notice by each Non-Triggering Party to the
Triggering Party of each Non-Triggering Party's election to proceed under
Section 9.2(c)(2). The Partners shall cooperate fully with the efforts of the
Triggering Party to market the Properties and shall use their good faith efforts
to cause the sale of the Properties on the terms set forth in the Offer or on
terms more favorable to the Partnership.
(f) Subject to the provisions of Section 9.2(l), if (i) during the
Marketing Period, the Partnership receives a third-party offer to purchase the
Properties for all cash (a "Third Party Offer") that the Triggering Party
desires to accept, (ii) the sale price provided for therein (the "Third Party
Offer Price") is equal to 100% or more of the Total Price, (iii) the terms are
otherwise no less favorable to the Partnership than those set forth in the Offer
and shall not provide for any additional or separate consideration to the
Triggering Party (or its Affiliates), or to Berkshire, BGP, or any
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member of the Berkshire Group or any of their respective Affiliates (whether
through the payment of fees, salaries, consideration or otherwise) then the
Partnership shall sell the Properties in accordance with the terms of such Third
Party Offer (the Triggering Party being fully authorized and empowered to
execute and deliver all necessary documents, agreements and instruments on the
Partnership's or the Non-Triggering Parties' behalf and to make the
representations and warranties on the Partnership's (but not the Non-Triggering
Parties') behalf that were outlined in the Offer) and no Non-Triggering Party
shall have any right to purchase the Properties or to object to or otherwise
interfere with such sale, provided that the closing of such sale shall occur not
later than the one hundred eightieth (180th) day after the commencement of the
Marketing Period. In the event that the closing shall not occur within such one
hundred eighty (180)-day period, or the Partnership does not receive a Third
Party Offer that satisfies the conditions of this Section 9.2(f) during the
Marketing Period, then the Triggering Party shall have the right at any time
thereafter to further attempt to sell the Properties, subject to the rights of
the Non-Triggering Parties under Section 9.2(a), which shall be reinstated with
respect to any such further decision on the part of Triggering Party to sell the
Properties. Any purchase and sale or other agreement documenting such Third
Party Offer shall provide that the Non-Triggering Parties may exercise their
rights and the Partnership its obligations to the Non-Triggering Parties set
forth in the immediately previous sentence without penalty to the Partnership.
(g) If a Non-Triggering Party, having elected to proceed under Section
9.2(c)(1), defaults on its obligation to purchase the Properties as required
thereunder, then as set forth in clause (d) above the Triggering Party and each
Non-Triggering Party that does not elect to purchase the Properties or that is
not in default shall be entitled to retain, as liquidated damages, its portion
of the down payment received in contemplation of such sale (as determined
above), it being agreed that the amount represents a fair and equitable estimate
of the damages to be suffered by the Triggering Party or the Partnership if a
Non-Triggering Party were to so default and that actual damages would be highly
impracticable to determine. If the Partnership defaults on its obligation to
sell the Properties to a Non-Triggering Party pursuant to such Non-Triggering
Party's election to purchase the Properties under Section 9.2(c)(1), then such
Non-Triggering Party shall be entitled to specific performance by the
Partnership.
(h) Notwithstanding anything to the contrary, the Triggering Party
shall, subject to and in accordance with this Section 9.2, have full right,
power and authority (acting alone) to execute, deliver and perform, for and in
the name of the Partnership and, in the case of a sale of the Partnership, of
the Partners, and each Partner hereby agrees to execute, deliver and perform,
any and all documents, agreements and instruments, and to take any other actions
as may be required or desirable for the purpose of transferring the Properties,
to the maker of the Third Party Offer or a Non-Triggering Party, as the case may
be.
(i) The following provisions shall apply to a purchase by a
Non-Triggering Party pursuant to the election in Section 9.2(c)(1):
(i) If such Non-Triggering Party is any of the Whitehall
Group, the Blackstone Group or both of such Groups, such Non-Triggering
Party may elect either (a) to purchase the Properties, in which case,
the price payable to the Partnership shall be the Total Price (in
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the case of a purchase by such Non-Triggering Party pursuant to Section
9.2(c)(1)) less the principal and accrued interest on account of any
third party debt that will be assumed by such Non-Triggering Party or
be paid at closing by such Non-Triggering Party (or its designee) from
its own funds or (b) to purchase all of the Interests (other than the
Class A Preferred Units and Class B Units) not already owned by such
Non-Triggering Party, which Interests shall be sold free and clear of
any liens or encumbrances. Subject to subparagraph (iii) of this
Section 9.2(i), if such Non-Triggering Party elects to purchase the
Interests (other than the Class A Preferred Units and Class B Units)
not already owned by such Non-Triggering Party, such Non-Triggering
Party shall pay to the other Partners an amount in cash that the other
Partners would have received had the Properties been sold to a third
party for the Total Price (in the case of a purchase by a
Non-Triggering Party pursuant to Section 9.2(c)(1)) and the net
proceeds (after deducting all fees, costs and expenses incurred in
connection with such transaction) of such sale were distributed
pursuant to Section 10.3 and any required deposits shall be calculated
in respect of such amount. In the event more than one Non-Triggering
Party makes an election under this clause (k), such Non-Triggering
Partners shall purchase, on a pro rata basis (based on their respective
Partnership Percentage Interests), the Interests not owned by them and
to be purchased pursuant to this Section 9.2(i)(i). In the event that
two Non-Triggering Partners elect to purchase the Partnership's assets
pursuant to this Section 9.2, such Non-Triggering Partners shall use
commercially reasonable efforts to permit the Class A Limited Partners
and the Class B Limited Partners to invest in such entity in similar
proportions, and subject to substantially the same terms and
conditions, as the investment of the Class A Limited Partners and the
Class B Limited Partners in the Partnership and in a manner that
permits such Partners to defer the recognition of any gain attributable
to their Interests.
(ii) All transfer costs (including transfer taxes) shall be
paid in accordance with customary practices in the relevant
jurisdiction (unless the Offer provided otherwise) and there shall be
an adjustment of the purchase price at closing to reflect a proration
of any accrued income and expenses, excluding non-cash items, provided
that each of the Triggering Party and such Non-Triggering Party shall
bear its own attorneys' fees. Within forty-five (45) days after the
closing, such Non-Triggering Party shall direct the independent
accountants for the Partnership to complete an audit of the Partners'
proration and such independent accountants shall deliver their audit
report to the partners. If such audit report shall adjust such
proration, the party in whose favor such adjustment is made shall
promptly be paid by the other party the amount of such adjustment.
(iii) On payment of the purchase price, such Non-Triggering
Party shall, with respect to each Partnership debt, obligation and
claim against the Partnership for which the Partnership or any Partner
(or any guarantor affiliated therewith or which delivered the guaranty
on behalf of such Person) is or may be personally liable with respect
to the Properties at the option of such Non-Triggering Party either (i)
obtain a release of the Partnership and each such Partner (and any
guarantor affiliated therewith or which delivered the guaranty on
behalf of such Person) from all liability, direct or contingent, from
holders of such debt, obligation or claim or (ii) deliver to the
Partnership and each such Partner, an
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agreement in form and substance reasonably satisfactory to the
Partnership and each such Partner, which satisfaction may require a
creditworthy guarantor, to defend, indemnify and hold the Partnership
and each such Partner (and any guarantor affiliated therewith or which
delivered the guaranty on behalf of such Person) harmless from any
actions, including attorneys' fees and costs of litigation, claims or
loss arising from such debt, obligation or claim. In no event shall
such indemnity apply to liabilities resulting from the breach by any
Partner of its obligations under this Agreement. This subparagraph
(iii) shall not apply to any debt, obligation or claim which is fully
insured by public liability insurer(s) reasonably acceptable to the
Partnership and each Partner.
(j) Notwithstanding anything contained herein to the contrary, the
Berkshire Group may not, without the consent of each General Partner other than
BGP, sell all of the Properties of the Partnership in one or more transactions
pursuant to this Section 9.2 (i) to any member of the Berkshire Group or any
Affiliate thereof or (ii) unless the net proceeds from all sales that are, at
the time of the calculation pursuant to this clause (ii), subject to binding
agreements would result in a 12% per annum annually compounded Rate of Return
(taking into account the timing of the receipt of the proceeds of such sale and
the amount thereof and the timing and amount of prior distributions from the
Partnership pursuant to Section 8.1(b)) to each of the Whitehall Group and the
Blackstone Group in respect of all their Capital Contributions prior to the date
of the receipt of such sale proceeds (it being understood and agreed that the
Berkshire Group may, at its election, make payments to the Whitehall Group and
the Blackstone Group in amounts necessary to achieve such Rate of Return for all
of the members of the Whitehall Group and the Blackstone Group in respect of all
such Capital Contributions and, provided that as a result of any such payments
and the sale of the Properties contemplated hereby all of the members of the
Whitehall Group and the Blackstone Group achieve such Rate of Return in respect
of all of their Capital Contributions prior to such date, may consummate such
sales although the net proceeds of such sales alone would not be sufficient to
result in the achievement of such Rate of Return thresholds).
9.3 Sale of All of the Properties Before the Fifth Anniversary of the
Closing Date at the Option of Two General Partners.
(a) Notwithstanding any other provisions herein, at any time during the
period beginning on the date that is forty-two (42) months after the Closing
Date and ending on the day that is immediately before the date that is the fifth
anniversary of the Closing Date, WHGP and Blackstone GP, acting together,
(acting as if such decision were a Majority Decision) may, by delivering written
notice (a "Majority Sales Notice") to any General Partner that did not join in
such decision, require the Partnership (and act on behalf of the Partnership
with full right, power and authority) to sell all or substantially all the
Properties in one or more bona fide transactions to parties that are not
Affiliates of any Majority Triggering Party and in which no Majority Triggering
Party has a continuing interest.
(b) Subject to the provisions of Section 9.3(c), if following the
delivery of a Majority Sales Notice, the Partnership receives a third-party
offer to purchase the Properties for all cash (a "Majority Third Party Offer")
that the General Partners delivering the Majority Sales Notice (the "Majority
Triggering Parties") desire to accept, then the Partnership shall sell the
Properties in
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accordance with the terms of such Majority Third Party Offer (the Majority
Triggering Parties being fully authorized and empowered to execute and deliver
all necessary documents, agreements and instruments on the Partnership's behalf
or on behalf of the Partners other than the Majority Triggering Parties and to
make the representations and warranties on the Partnership's (but not such other
Partners') behalf that were outlined in the Majority Third Party Offer).
(c) Notwithstanding anything contained herein to the contrary, if a
sale of the Properties pursuant to this Section 9.3 closes during the period
beginning on the date that is forty-two (42) months after the Closing Date and
ending on the date that is fifty-four (54) months after the Closing Date, then
the Majority Triggering Parties shall ensure that in connection with such sale,
the members of the Berkshire Group and the Class B Limited Partners receive, in
accordance with Section 10.3, an amount at least equal to the excess of the
aggregate amount of Capital Contributions made by the members of the Berkshire
Group or the Class B Limited Partners, as applicable through the date of such
sale over the amount of any distributions from the Partnership previously
received by such member of the Berkshire Group (or its Affiliates or
predecessors).
Any sale of the Properties pursuant to this Section 9.3 may be
accomplished by a sale of the Partnership itself (including by merger of the
Partnership) or of all of the Partnership Assets. Notwithstanding anything to
the contrary, the Majority Triggering Parties shall, subject to and in
accordance with this Section 9.3, have full right, power and authority to
execute, deliver and perform, for and in the name of the Partnership and, in the
case of a sale of the Partnership, of the Partners, and each Partner hereby
agrees to execute, deliver and perform, any and all documents, agreements and
instruments, and to take any other actions, as may be required or desirable for
the purpose of transferring the Properties to the purchaser of the Partnership's
assets or the Partnership under this Section 9.3.
Any sale of the Properties pursuant to this Section 9.3 (x) shall not
contain any representations by any Partner without the consent of such Partner
(but may contain representations by the Partnership), and (y) may include a
holdback for breaches of representations or warranties (which may survive for
claims made within no more than one year from the transfer of the Properties) by
the Partnership not to exceed 5% of the purchase price, which holdback amount
may be available for no more than the survival period of the representations and
warranties; provided, further, that the terms of the transaction shall not, in
any event, provide for the personal liability of any Partner in the event of the
breach of such representations and warranties.
9.4 Sale of the Properties After the Fifth Anniversary. Notwithstanding
any other provisions herein, at any time after the date that is the fifth
anniversary of the Closing Date, each of the General Partners shall be
authorized unilaterally to cause a sale in which each General Partner will have
the option to receive consideration consisting of all cash of (i) all or
substantially all of the Properties or (ii) the Partnership in one or more bona
fide transactions to a Person in which none of the Whitehall Group, the
Blackstone Group or the Berkshire Group and no Affiliate of any of the Whitehall
Group, the Blackstone Group or the Berkshire Group has an interest; provided,
however, that BGP may not exercise such right until the date that is three
months following the fifth anniversary of the Closing Date, unless during such
three month period (i) the DK Employment Agreement is
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terminated for reasons other than Cause or Company Cause and (ii) neither WHGP
nor Blackstone GP has already exercised its rights under this Section 9.4. In
the event that one or more General Partners elect to cause the sale of the
Properties pursuant to this Section 9.4 by giving written notice of such
election to any General Partner not joining in such election, no other General
Partner may subsequently make an election pursuant to this Section 9.4 until the
date that is 180 days after the date such electing General Partner or General
Partners deliver such notice of election.
Any sale of the Properties pursuant to this Section 9.4 may be
accomplished by a sale of the Partnership itself (including by merger of the
Partnership) or of all of the Partnership Assets. Notwithstanding anything to
the contrary, the General Partners shall, subject to and in accordance with this
Section 9.4, have full right, power and authority to execute, deliver and
perform, for and in the name of the Partnership and, in the case of a sale of
the Partnership, of the Partners, and each Partner hereby agrees to execute,
deliver and perform, any and all documents, agreements and instruments, and to
take any other actions as may be required or desirable for the purpose of
transferring the Properties, to the purchaser of the Partnership's assets or the
Partnership under this Section 9.4.
Any sale of the Properties pursuant to this Section 9.4 (x) shall not
contain any representations by any Partner without the consent of such Partner
(but may contain representations by the Partnership) and (y) may include a
holdback for breaches of representations or warranties (which may survive for
claims made within no more than one year from the transfer of the Properties) by
the Partnership not to exceed 5% of the purchase price, which holdback amount
may be available for no more than the survival period of the representations and
warranties; provided, further, that the terms of the transaction shall not, in
any event, provide for the personal liability of any Partner in the event of the
breach of such representations and warranties.
9.5 Assignment Binding on Partnership. No Transfer of all or any part
of the Interest of a Partner permitted to be made under this Agreement shall be
binding upon the Partnership unless and until a duplicate original of such
assignment or instrument of transfer, duly executed and acknowledged by the
assignor or transferor, has been delivered to the Partnership, and such
instrument evidences (i) the written acceptance by the assignee of all of the
terms and provisions of this Agreement, (ii) the assignee's representation that
such assignment was made in accordance with all applicable laws and regulations
and (iii) the consent to the Transfer of the Interest required pursuant to
Section 9.1, if any. In addition, a Person to whom a Transfer may be made
pursuant to this Article 9, other than pursuant to Section 9.1(a), may also be
required, in the reasonable discretion of any of the General Partners, and as a
condition precedent to its becoming a transferee to make certain
representations, warranties and covenants to evidence compliance with U.S.
federal and state securities laws including, but not limited to, representations
as to its net worth, sophistication and investment intent.
9.6 Bankruptcy of a Limited Partner. The Partnership shall not be
dissolved or terminated by reason of the Bankruptcy, removal, withdrawal,
dissolution or admission of any Limited Partner.
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9.7 Substituted Partners.
(a) Partners who assign all their Interests pursuant to an assignment
or assignments permitted under this Agreement shall cease to be Partners of the
Partnership except that unless and until a Substituted Partner is admitted in
its stead, the assigning Partner shall not cease to be a Partner of the
Partnership under the Act and shall retain the rights and powers of a member
under the Act and hereunder, provided that such assigning Partner may, prior to
the admission of a Substituted Partner, assign its economic interest in its
Interest, to the extent otherwise permitted under Article 9. Any Person who is
an assignee of any portion of the Interest of a Partner and who has satisfied
the requirements of Article 9 shall become a Substituted Partner only when (i)
the Administering General Partner has entered such assignee as a Partner on the
books and records of the Partnership, which the Administering General Partner is
hereby directed to do upon satisfaction of such requirements, and (ii) such
assignee shall have paid all reasonable legal fees and filing costs in
connection with the substitution as a Partner except as otherwise provided in
Section 9.1(a).
(b) Any Person who is an assignee of any of the Interest of a Partner
but who does not become a Substituted Partner and desires to make a further
assignment of any such Interest, shall be subject to all the provisions of this
Article 9 to the same extent and in the same manner as any Partner desiring to
make an assignment of its Interest.
9.8 Acceptance of Prior Acts. Any person who becomes a Partner, by
becoming a Partner, accepts, ratifies and agrees to be bound by all actions duly
taken pursuant to the terms and provisions of this Agreement by the Partnership
prior to the date it became a Partner and, without limiting the generality of
the foregoing, specifically ratifies and approves all agreements and other
instruments as may have been executed and delivered on behalf of the Partnership
prior to said date and which are in force and effect on said date.
9.9 Additional Limitations. Notwithstanding anything contained in this
Agreement, no Transfer of an Interest shall be made, and any General Partner
shall have the right to prohibit and may refuse to accept any Transfer, unless
(i) registration is not required under the Securities Act of 1933, as amended,
in respect of such Transfer; (ii) such Transfer does not violate any applicable
federal or state securities, real estate syndication, or comparable laws; (iii)
except as otherwise provided in Section 9.2, 9.3 or 9.4 such Transfer will not
be subject to, or such Transfer, when aggregated with prior Transfers in
accordance with applicable law will not result in the imposition of, any state,
city or local transfer taxes, including, without limitation, any transfer gains
taxes, unless such assignor pays such taxes; and (iv) such Transfer will not
cause the Partnership to be treated as a "publicly-traded partnership" within
the meaning of Section 7704 of the Code. Any General Partner may elect prior to
any Transfer to require an opinion of counsel with respect to any of the
foregoing matters.
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9.10 Purchase of the Berkshire Group's Interest upon the Termination of
Douglas Krupp's Employment Under the DK Employment Agreement.
(a) In the event that Douglas Krupp is terminated as chief executive
officer of the Partnership as a result of a Performance Termination, the
Berkshire Group shall have the right (but not the obligation), exercisable at
any time within 60 days after such termination, to require the Partnership to
acquire its Interest (including the DK IMP) for a price equal to the Fair Market
Value (as such term is defined below) of its Interest (including the DK IMP) on
the date such right is exercised.
(b) In the event that Douglas Krupp (i) is terminated as chief
executive officer of the Partnership for Company Cause, or for Cause at any
time, or (ii) resigns or otherwise terminates the DK Employment Agreement on or
prior to the fifth anniversary of the Closing Date, the Partnership shall have
the right (but not the obligation), exercisable at any time within 60 days after
such termination or resignation, to purchase the Interest of the Berkshire Group
for a price equal to the greater of (x) the Fair Market Value of the Berkshire
Group's Interest (excluding the DK IMP which shall be forfeited upon the
occurrence of any of the events described in clause (i) and (ii) above) on the
date such right is exercised or (y) the amount equal to the aggregate amount of
Capital Contributions made by the Berkshire Group prior to the date of such
termination or resignation less any prior distributions made to the Berkshire
Group.
(c) In the event Douglas Krupp is terminated as chief executive officer
of the Partnership prior to the fifth anniversary of the Closing Date for any
reason other than for Company Cause, Cause, a Performance Termination or Douglas
Krupp's death or disability, the Partnership shall purchase the Interest of the
Berkshire Group for a cash price equal to the greater of (i) the Fair Market
Value of the Berkshire Group's Interest (including the DK IMP) at the date of
such termination or (ii) the sum of (x) an amount equal to a 12% Rate of Return
on the amount of the Berkshire Group's Capital Contributions made prior to the
date of such termination, for the five year period ending with fifth anniversary
of the Closing Date (taking into account the amount and timing of prior
distributions to the Berkshire Group and discounting back such amount to the
date of payment utilizing as the discount rate the then current Treasury rate
for Treasury obligations with a maturity equal to or approximating the term
between the date of such termination and the fifth anniversary of the Closing
Date) plus (y) an amount in cash equal to $10 million (in full payment of the DK
IMP).
(d) For purposes of this Section 9.10, "Fair Market Value" of the
Berkshire Group's Interest (either including or excluding the DK IMP as
specified above) will be the amount the Berkshire Group would have received upon
the full liquidation of the tangible assets then owned by the Partnership at the
fair market value of such assets (with all intangible assets being valued at
zero) and the distribution of the proceeds pursuant to Section 10.3. "Fair
Market Value" will be determined based upon what a willing buyer, under no
compulsion to buy, would pay a willing seller, under no compulsion to sell. If
all three General Partners cannot agree on a fair market value after a 30-day
resolution period, each of BGP, on the one hand, and WHGP and Blackstone GP, on
the other hand, shall select an independent, disinterested appraiser who is a
certified member of the Appraisal Institute with at least ten (10) years'
established experience in appraising properties and interests of the same
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type and in the same geographic areas as the Properties ("Appraiser") and have
an appraisal prepared (the "Initial Appraisals") within sixty (60) days after
the expiration of the thirty (30) day period described above. If the lower of
the Initial Appraisals is not more than ten percent (10%) less than the higher
of the Initial Appraisals, then the Initial Appraisals shall be averaged and
such average shall be the Fair Market Value for the Properties. If the lower of
the Initial Appraisals is more than ten percent (10%) less than the higher of
the Initial Appraisals, then within ten (10) days after the date on which the
last Initial Appraisal is delivered to the other party the two Appraisers shall
select a third Appraiser or, if the two Appraisers are unable to agree on a
third Appraiser within such time period, the third Appraiser shall be designated
by the American Arbitration Association's New York, New York, office at the
request of either party. The third Appraiser shall conduct a third, independent
appraisal (the "Third Appraisal") within twenty (20) days. If the Third
Appraisal is required, the Fair Market Value shall be the appraised value of
whichever Initial Appraisal is closest to the appraised value of the Third
Appraisal. Each such Initial Appraisal and Third Appraisal shall be made as of
the date of the termination of the DK Employment Agreement. Each side will bear
its own costs and expenses in the arbitration. If the requisite General Partners
(other than BGP) elect, at any time before the arbitration panel is selected, to
cause a sale of the Properties, rather than having the fair market value
determined by the arbitration panel, the Berkshire Group will receive its share
of the sale proceeds (either including or excluding its share of any IMP as
specified above) that instead of the amount it would have received based on the
arbitrated value.
9.11 Transfers by the Blackstone Group and the Whitehall Group. Each of
the Partners acknowledges and agrees that the Blackstone LP intends to Transfer
its Interests to one or more persons satisfying the condition of clause (i) of
the definition of Affiliate after the date hereof, and that no consent of any
Partner shall be required in connection therewith. Upon such transfer such
Affiliate(s) shall automatically become Substituted Partner(s) without any
further action and, upon Transfer by the Blackstone LP of all its entire
Interest, shall be deemed to have assumed all of Blackstone LP's obligations
hereunder with respect to such Interest so transferred and Blackstone LP shall
be released from any liabilities under or relating to this agreement with
respect to such Interests so transferred.
(b) Each of the Partners acknowledges and agrees that Whitehall may
Transfer its Interests to one or more persons satisfying the condition of clause
(i) of the definition of Affiliate after the date hereof, and that no consent of
any Partner shall be required in connection therewith. Upon such Transfer such
Affiliate(s) shall automatically become Substituted Partner(s) without any
further action and, upon Transfer by Whitehall of such Interest, shall be deemed
to have assumed all of Whitehall's obligations hereunder with respect to such
Interest so transferred and Whitehall shall be released from any liabilities
under or relating to this agreement with respect to such Interests so
transferred.
9.12 Purchase of the Class A Preferred Units and Class B Units.
(a) Each holder of Class A Preferred Units shall, from and after the
date that is the five years after the Closing Date, have the right, by
delivering written notice to the Partnership, to require the Partnership to
purchase all, but not less than all of its Class A Preferred Units for an amount
in
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cash equal to $12.25 per Class A Preferred Unit, plus an amount equal to the
accrued and unpaid distributions on such Class A Preferred Units for all fiscal
quarters ending on or prior to the Holder Purchase Date. Any notice of
redemption delivered pursuant to this Section 9.12(a), will be mailed to the
Partnership, by certified mail, postage prepaid, not less than 180 days prior to
the date upon which the holder designates such purchase is to occur (the "Holder
Purchase Date"). The Partnership shall pay the holders of the Class A Preferred
Units as to which such an election has duly been made hereunder the full amount
due under this Section 9.12(a) on the Holder Purchase Date.
(b) The Partnership shall have the right, from and after the earlier to
occur of (i) the sixth anniversary of the Closing Date, (ii) the consummation by
the Partnership (or its successor) of an underwritten public offering of its
equity securities, (iii) the time immediately prior to the consummation of a
merger, consolidation or other business combination (other than (x) a merger,
consolidation or other business combination with a General Partner or an
Affiliate of a General Partner or (y) a merger in which the holders of
Partnership Units prior to such merger, consolidation or other business
combination hold 51% or more of the partnership interests in the surviving
entity after the consummation of such merger, consolidation or other business
combination) involving, the Partnership or (iv) the sale of all or substantially
all of the assets of the Partnership (other than such a sale to a General
Partner or an Affiliate of a General Partner), to (1) redeem all the Class A
Preferred Units for a cash price equal to $12.25 per Class A Preferred Unit,
plus an amount equal to the accrued and unpaid distributions on such Class A
Preferred Units for all fiscal quarters ending on or prior to the date of such
redemption (it being understood and agreed that no payment shall be made in
respect of any other quarterly distribution period), and (2) redeem all of the
Class B Units held by any Partner for a cash price equal to the fair market
value of such Class B Units, as such fair market value shall be reasonably
determined by the General Partners (taking into account appraisals that have
been performed at the request of the Partnership prior to the date of such
determination, without imposing any obligation on the Partnership to obtain any
such appraisals). Any notice of redemption delivered pursuant to this Section
9.12(b) will be mailed by the Partnership, by certified mail, postage prepaid,
not less than 10 nor more than 60 days prior to the date upon which such
redemption is to occur (the "Partnership Redemption Date"), addressed to each
holder of record of the Partnership Units to be redeemed at such holder's
address as it appears on the records of the Partnership. No failure to give or
defect in such notice shall affect the validity of the proceedings for the
redemption of any Partnership Units. In addition to any information required by
law, each such notice shall state: (a) the Partnership Redemption Date, (b) the
redemption price, (c) the aggregate number of each class of Partnership Units to
be redeemed, and (d) the place or places where such Partnership Units to be
redeemed are to be surrendered for payment of the amount payable upon
redemption. Notwithstanding the foregoing, in the event of a public offering of
equity securities of the Partnership prior to the date that is five and one half
years after the Closing Date, the Partnership shall use its commercially
reasonable efforts to structure such offering in a manner that would permit the
holders of the Class A Preferred Units and Class B Units to remain Partners in
the Partnership; provided, however, if the lead underwriters of such public
offering advise the Partnership that such structure would adversely affect the
price to be obtained in such offering or otherwise materially adversely affect
the offering, the provisions of this sentence shall not apply and instead the
Partnership shall have the right to redeem the Class A Preferred Units or Class
B Units pursuant to this Section 9.12(b).
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(c) Except as provided above in clause (a) or clause (b), the
Partnership shall make no payment or allowance for unpaid distributions, whether
or not in arrears, on any Partnership Units purchased or called for redemption
or purchase pursuant to clause (a) or (b) of this Section 9.12. On and after a
Holder Purchase Date or a Partnership Redemption Date, distributions will cease
to accumulate on the Partnership Units for which the holder purchase option has
been exercised or Partnership Units called for redemption, as applicable, unless
the Partnership defaults in payment of the full redemption price therefor. If
any date fixed for redemption or purchase of Partnership Units is not a Business
Day, then payment of the redemption price payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the originally scheduled redemption date. If payment of the redemption or
purchase price is improperly withheld or refused and not paid by the
Partnership, distributions on such Partnership Units will continue to accumulate
from the originally scheduled redemption date to the date of payment.
(d) In the event the Partnership defaults in its obligations to
purchase Class A Preferred Units under Section 9.12(a) for a period of more than
fifteen (15) days, the coupon rate on such Class A Preferred Units shall
increase to a rate per annum, compounded quarterly, to the extent not paid on
quarterly basis, equal to 12% during such period of default and the Partnership
shall reimburse the holder of any such Class A Preferred Units as to which such
a default has occurred for all reasonable out of pocket expenses incurred by
such holder in enforcing the collection of such defaulted amounts.
(e) In the event that prior to the date that is five and one half years
after the Closing Date the Partnership proposes to make a distribution which,
after giving effect to such distribution, will result in the Investor Group
Partners having received cumulative distributions from the Partnership pursuant
to Section 8.1(b) or 8.1(c) equal to more than 50% of their aggregate Capital
Contributions, then (i) the Partnership shall, not fewer than thirty (30) days
prior to such scheduled distribution, provide notice of such proposed
distribution to the Class A Preferred Limited Partners and provide to the Class
A Preferred Limited Partners the opportunity to accelerate their rights under
this Section 9.12(a) to the date of such proposed distribution (and each such
Class A Preferred Limited Partner shall have the right to exercise such right by
delivering to the Partnership, by hand delivery or nationally recognized
overnight courier, such election not less than five (5) business days prior to
such proposed distribution and (ii) the Partnership shall, on or prior to the
date of such proposed distribution purchase all such the Class A Preferred Units
as to which such an election has been made at a price equal to the purchase
price specified in Section 9.12(a)
9.13 Subsequent Transactions.
(a) As a result of the closing of the Mergers under the BRI Merger
Agreement and the BRI OP Merger Agreement, immediately after the Closing Date
the Partnership shall be the sole owner (directly and/or indirectly) of all of
the ownership interests of BRI OP, and BRI OP shall be the sole owner (directly
and/or indirectly) of all of the Properties. The Administering General Partner
hereby acknowledges and agrees that, unless there has been a change in law that
would make the structure
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below not effective in achieving its intended purpose, it shall cause the
Partnership to undertake the following actions to occur promptly following the
closing of the loan contemplated by the Freddie Mac Parameters (but in no event
later than January 15, 2000) in a manner consistent with its obligations under
Section 4.8 hereof, (collectively, the "Section 9.13 Structure"):
(1) with respect to the 17 properties listed on Schedule
9.13(a)(1) attached:
(i) the Partnership shall form a limited liability
company under the laws of the State of Delaware (the "Property
LLC") with the Partnership as the sole member in the Property
LLC; and the Partnership shall elect that the Property LLC be
taxed as a partnership or a "disregarded entity" under any
applicable federal and state taxation laws;
(ii) each Property listed on Schedule 9.13(a)(1)
attached hereto shall be transferred to the Property LLC
either (A) through an asset transfer with the entity which
directly owns such Property (each such entity, a "Property
Owning Entity") as the transferor, (B) by transfer of all of
the ownership interests in the Property Owning Entity for such
Property, or (C) by other means that minimize expenses or
taxes (including transfer taxes) without impairing the tax
benefits afforded by the Section 9.13 Structure;
(2) with respect to the 22 Properties listed on Schedule
9.13(a)(2):
(i) the Partnership shall acquire 100% of the
outstanding common shares of capital stock of one or more
newly formed REITs, and 100 individuals or entities to be
selected jointly by the Blackstone GP and WHGP shall acquire
preferred shares of the stock of each REIT;
(ii) the REITs described in clause (i) shall elect to
be treated as real estate investment trusts (as defined in
Parts II and III of Subchapter M of Chapter 1 of Subtitle A of
the Code) and shall comply with any and all requirements,
restrictions and limitations imposed on real estate investment
trusts under the Code or any other applicable laws or
governmental rules or regulations;
(iii) the Partnership shall form one or more Delaware
limited partnerships whose partners shall consist of the
Partnership with a 1% general partnership interest and one of
the REITs described in clause (i) with a 99% limited
partnership interest;
(iv) each Property listed on Schedule 9.13(a)(2)
shall be transferred to a limited partnership described in
clause (iii) either (A) through an asset transfer with the
Property Owning Entity of such Property, as the transferor,
(B) by transfer of all of the ownership interests in the
Property Owning Entity of such Property or (C) by other means
that minimize expenses or taxes (including transfer taxes),
without impairing the tax benefits afforded by the Section
9.13 structure;
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(3) with respect to the 33 Properties listed on Schedule
9.13(a)(3):
(i) the Partnership shall acquire 100% of the
outstanding common shares of capital stock of a newly formed
REIT ("REIT 33"), and 100 individuals or entities to be
selected jointly by the Blackstone GP and the Whitehall GP
shall purchase 100 preferred shares of the stock of REIT 33;
(ii) REIT 33 shall elect to be treated as a real
estate investment trust (as defined in Parts II and III of
Subchapter M of Chapter 1 of Subtitle A of the Code) and shall
comply with any and all requirements, restrictions and
limitations imposed on real estate investment trusts under the
Code or any other applicable laws or governmental rules or
regulations; and
(iii) the Partnership shall transfer to REIT 39 a 99%
interest in BRI OP, and the REIT 33 shall become a 99% limited
partner in BRI OP.
(b) In the event that the Administering General Partner does not cause
the Partnership to undertake the actions set forth in Section 9.13(a) to occur
(unless there has been a change in law that would make the Section 9.13
Structure not effective in achieving its intended purpose) by January 15, 2000,
the Blackstone GP and the Whitehall GP shall each be entitled, without the
consent of any other Partner, to cause such actions to occur at any time after
such date, and each of the Blackstone GP and the Whitehall GP shall have the
full right, power and authority (acting alone) to execute, deliver and perform,
for and in the name of the Partnership, any and all documents, agreements and
instruments, and to take any other actions, as may be required or desirable in
order to cause the actions set forth in Section 9.13(a) to occur.
(c) If in lieu of (i) implementing the structure set forth in Section
9.13(a) (the "Section 9.13 Structure") or (ii) maintaining the ownership
structure of the Properties and BRI OP in effect immediately after the closings
under the BRI Merger Agreement and BRI OP Merger Agreement, any General Partner
proposes a change in the structure (a "Revised Section 9.13 Structure") of the
ownership of any of the Properties or entities then supporting one or more
Guarantees contemplated by Section 4.8 or BRI OP (other than in connection with
a third party transaction otherwise authorized under this Agreement), and such
Revised Section 9.13 Structure, in the opinion of each General Partner (in its
sole discretion) does not (i) generate increased Unrelated Business Taxable
Income for the Partnership, (ii) diminish or impair the economic and tax
benefits received by the Investor Group Partners under this Agreement and the
Section 9.13 Structure, or (iii) otherwise adversely affect the rights
(including the governance rights under Article 3 and the sale rights under
Article 9) and remedies of the Investor Group Partners under this Agreement and
the Section 9.13 Structure, then the General Partners, subject to the other
provisions of this Agreement, including, without limitation, Section 4.8, shall
cause the Partnership to implement the Revised Section 9.13 Structure, in lieu
of the Section 9.13 Structure but otherwise in accordance with this Section
9.13. The Blackstone GP and the Whitehall GP each agrees to use commercially
reasonable efforts to cooperate with BGP in developing a Revised Section 9.13
Structure which meets the requirements set forth in this Section 9.13(c) and
eliminates the necessity of (or reduces the amount of) the guarantees from BGP
or its Affiliates. Notwithstanding
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the foregoing provisions of this Section 9.13(c), the Partnership shall not
undertake, and no Partner shall cause the Partnership to undertake, any
restructuring involving any Revised Section 9.13 Structure hereof unless either
(i) an opinion of counsel reasonably satisfactory to BGP is obtained to the
effect that such restructuring would not increase the risk that any Limited
Partner or BGP would be required to recognize taxable income or (ii) the
Partnership agrees to fully indemnify BGP and any Limited Partner that is
required to recognize taxable income as a result of the consummation of such
Revised Section 9.13 Structure.
(d) Any expenses incurred by the Partnership or the General Partners in
implementing the Section 9.13 Structure (or Revised Section 9.13 Structure, as
applicable), including, without limitation attorneys and accountants fees and
disbursements, transfer taxes, recording costs, and the formation costs of the
REIT and the Property LLC, shall constitute expenses of the Partnership.
ARTICLE 10.
DISSOLUTION OF THE PARTNERSHIP;
WINDING UP AND DISTRIBUTION OF ASSETS
10.1 Dissolution.
(a) The Partnership shall be dissolved and its affairs shall be wound
up upon the first to occur of the following:
(1) the dissolution or Bankruptcy of any General Partner or
the occurrence of any other event that terminates the continued
membership of a General Partner in the Partnership, unless the business
of the Partnership is continued by the consent of the majority of the
outstanding Partnership Interests ninety (90) days following the
occurrence of any such event;
(2) the sale or other disposition of all of the Partnership
Assets and receipt of the final payment of any installment obligation
received as a result of any such sale or disposition;
(3) the written consent of all of the General Partners;
(4) any event which makes it unlawful for the Partnership's
business to be continued;
(5) the issuance of a decree by any court of competent
jurisdiction that the Partnership be dissolved and liquidated;
(6) December 31, 2049.
(b) No Partner shall have the right to (i) withdraw or resign as a
Partner of the Partnership, (ii) redeem, or request redemption of, its Interest
or any part thereof, other than pursuant to Section 9.10(a), or (iii) dissolve
itself voluntarily.
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10.2 Winding Up.
(a) In the event of the dissolution of the Partnership pursuant to
Section 10.1(a), the Majority-in-Interest may wind up the Partnership's affairs.
(b) Upon dissolution of the Partnership and until the filing of a
certificate of cancellation as provided in the Act, two General Partners (acting
as if such action were a Majority Decision) or a liquidating trustee, as the
case may be, may, in the name of, and for and on behalf of, the Partnership,
prosecute and defend suits, whether civil, criminal or administrative, gradually
settle and close the Partnership's business, dispose of and convey the
Partnership's property, discharge or make reasonable provision for the
Partnership's liabilities, and distribute to the Partners in accordance with
Section 10.3 any remaining assets of the Partnership, all without affecting the
liability of Partners and without imposing liability on any liquidating trustee.
(c) Upon the completion of winding up of the Partnership, two General
Partners (acting as if such action were a Majority Decision) or liquidating
trustee, as the case may be, shall file a certificate of cancellation in the
Office of the Secretary of State of Delaware as provided in the Act.
10.3 Distribution of Assets. Upon the winding up of the Partnership,
the assets shall be distributed as follows:
(1) to the payment of expenses of the liquidation;
(2) to the payment of debts and liabilities of the
Partnership, in order of priority as provided by law, other than debts
and liabilities owed to Partners;
(3) to the setting up of any reserves that the two General
Partners or the liquidating trustee, as the case may be, shall
determine are reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership or the Partners;
(4) to the payment of debts and liabilities of the
Partnership owed to Partners;
(5) to the Partners who are holders of Class A Preferred
Units, in proportion to the respective number of Class A Preferred
Units, in an amount not to exceed an amount per Class A Preferred Unit
equal to $12.25, plus an amount equal to the accrued and unpaid
distributions for each quarterly period ended prior to the date of such
redemption (it being understood and agreed that no payment shall be
made in respect of any other distribution period); and
(6) to the Partners other than holders of Class A Preferred
Units in accordance with Section 8.1(b).
10.4 Special Allocation. It is intended that, to the extent possible,
at the liquidation of the Partnership each Partner's Capital Account balance
will be equal to such Partner's Targeted Capital
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Account Balance. Notwithstanding anything in Article 7, if the ending Capital
Account balance of any partner immediately prior to the distributions to be made
pursuant to Section 10.3 is more or less than such Partner's Targeted Capital
Account Balance, then Partnership Profit and Loss, including items of income,
gain, loss and deduction, shall be specially allocated among the Partners for
the year in which liquidating distributions are made pursuant to Section 10.3
until each Partner's actual Capital Account balance, to the extent possible, is
equal to such Partner's Targeted Capital Account Balance. The special allocation
provision provided by this Section 10.4 shall be applied in such a manner so as
to cause the difference between each Partner's Targeted Capital Account Balance
and the actual balance in its Capital Account (determined after this allocation,
but immediately prior to the distributions pursuant to this Article 10) to be
the smallest dollar amount possible.
ARTICLE 11.
AMENDMENTS
11.1 Amendments. Subject to Sections 3.7(b) and 3.7(c), amendments may
be made to this Agreement from time to time by the Administering General Partner
with the consent of each of the General Partners and without the consent of any
Limited Partner; provided, however, that no such amendment shall without such
Partner's consent reduce the amounts distributable to any Partner (in a manner
that is not pro rata with respect to all Interests of a class of Interests),
increase the obligations or liabilities of any Partner hereunder, or otherwise
impair the rights of any Partner under this Agreement, other than an impairment
of rights that is pro rata with other Partners holding the same class of
Interests. Without the consent of the holders of a majority of the outstanding
Class A Preferred Units and Class B Units (excluding holders that are General
Partners or Affiliates of General Partners), voting together as a single class,
this Agreement may not be amended to change materially the nature of the
business of the Partnership or to change this sentence. No amendment,
modification, supplement, discharge or waiver hereof or hereunder shall require
the consent of any Person not a party to this Agreement. Notwithstanding the
foregoing, (a) no consent of any Partner other than WHGP and Blackstone GP shall
be required for an amendment entered into to reflect any assignment made
pursuant to Section 9.10, (b) no amendment of the proviso clause of the first
sentence of this Section 11.1 shall be made without the consent of all Partners,
(c) no amendment of Section 3.7(b) or this clause (c) shall be made without the
consent of the holders of a majority of the outstanding Class A Preferred Units
(excluding holders that are General Partners or Affiliates of General Partners),
and (d) no amendment of Section 3.7(c) or this clause (d) shall be made without
the consent of the holders of a majority of the outstanding Class B Units
(excluding holders that are General Partners or Affiliates of General Partners).
11.2 Additional Partners. If this Agreement shall be amended as a
result of adding or substituting a Partner, the amendment to this Agreement
shall be signed by the General Partners, by the Person to be added or
substituted and by the assigning Partner, if any. In making any amendments, the
Administering General Partner shall prepare and file for recordation such
documents and certificates as shall be required to be prepared and filed.
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ARTICLE 12.
MISCELLANEOUS
12.1 Further Assurances. Each party to this Agreement agrees to
execute, acknowledge, deliver, file and record such further certificates,
amendments, instruments and documents, and to do all such other acts and things,
as may be required by law or as, in the reasonable judgment of any General
Partner, may be necessary or advisable to carry out the intent and purpose of
this Agreement.
12.2 Notices. Unless otherwise specified in this Agreement, all
notices, demands, elections, requests or other communications that any party to
this Agreement may desire or be required to give hereunder shall be in writing
and shall be given by hand by depositing the same in the United States mail,
first class postage prepaid, certified mail, return receipt requested, or by a
recognized overnight courier service providing confirmation of delivery, to the
addresses set forth in Sections 2.5 and 2.6, as applicable, or at such other
address as may be designated by the addressee thereof (which in the case of the
Partnership, shall be designated by the Administering General Partner) upon
written notice to all of the Partners. All notices given pursuant to this
Section 12.2 shall be deemed to have been given (i) if delivered by hand on the
date of delivery or on the date delivery was refused by the addressee or (ii) if
delivered by United States mail or by overnight courier, on the date of delivery
as established by the return receipt or courier service confirmation (or the
date on which the return receipt or courier service confirms that acceptance of
delivery was refused by the addressee).
12.3 Headings and Captions. All headings and captions contained in this
Agreement and the table of contents hereto are inserted for convenience only and
shall not be deemed a part of this Agreement.
12.4 Variance of Pronouns. All pronouns and all variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the person or entity may require.
12.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one Agreement.
12.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT
OF LAW PROVISIONS THEREOF.
12.7 Consent to Jurisdiction. Each party hereto hereby irrevocably
consents and agrees, for the benefit of each party, that any legal action, suit
or proceeding against it with respect to its obligations, liabilities or any
other matter under or arising out of or in connection with this Agreement and
with respect to the enforcement, modification, vacation or correction of an
award rendered in an arbitration proceeding may be brought in any state or
federal court located in the Borough of Manhattan, The City of New York (a "New
York Court"), and hereby irrevocably accepts and submits
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to the non-exclusive jurisdiction of each New York Court, as the case may be,
with respect to any such action, suit or proceeding. Each party hereto also
hereby irrevocably consents and agrees, for the benefit of each other party,
that any legal action, suit or proceeding against it shall be brought in any New
York Court, and hereby irrevocably accepts and submits to the exclusive
jurisdiction of each such New York Court with respect to any such action, suit
or proceeding. Each party hereto waives any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions, suits or
proceedings brought in any such New York Court and hereby further waives and
agrees not to plead or claim in any such New York Court that any such action,
suit or proceeding brought therein has been brought in an inconvenient forum.
12.8 Arbitration.
(a) Arbitration shall be the exclusive method for resolution of any
claims or disputes arising in connection with this Agreement, and the
determination of the arbitrators shall be final and binding (except to the
extent there exist grounds for vacation or an award under applicable arbitration
statutes) on the Partners. The parties agree that they will give conclusive
effect to the arbitrators' determination and award and that judgment thereon may
be entered in any court having jurisdiction. Each party shall bear its own
costs, in any arbitration.
(b) The number of arbitrators shall be three, each of whom shall be
disinterested in the dispute or controversy and shall be impartial with respect
to all parties hereto. The Whitehall Group, the Blackstone Group, and the
Berkshire Group shall each appoint one arbitrator within ten (10) business days
of notice from a party that arbitration is requested. Notwithstanding the
foregoing, in the event one or more Class A Limited Partners or Class B Limited
Partners are claimants in such arbitration proceedings, such Class A Limited
Partners and/or Class B Limited Partners shall collectively have the right to
designate one arbitrator to such arbitration panel, the Partnership (as if such
decision were a Majority Decision) or the General Partners involved in such
proceeding, as applicable, collectively shall appoint one arbitrator, and such
two appointed arbitrators shall appoint the third arbitrator. In the event the
parties fail to agree upon the arbitrators, the arbitrators (or such number
thereof as shall not have been agreed upon) shall be appointed under the
commercial arbitration rules of the American Arbitration Association.
(c) The place of arbitration shall be the Borough of Manhattan, The
City of New York. The arbitration shall be conducted in the English language.
The arbitrators shall give effect insofar as possible to the desire of the
parties hereto that the dispute or controversy be resolved in accordance with
good commercial practice. The arbitrators shall decide such dispute in
accordance with the law of the State of Delaware. The arbitrators shall decide
such dispute within thirty (30) days of selection of the arbitrators. The
arbitration shall be conducted in accordance with the commercial arbitration
rules of the American Arbitration Association.
12.9 Partition. The Partners hereby agree that no Partner nor any
successor-in-interest to any Partner shall have the right to have the property
of the Partnership partitioned, or to file a complaint or institute any
proceeding at law or in equity to have the property of the Partnership parti-
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tioned, and each Partner, on behalf of himself, his successors, representatives,
heirs and assigns, hereby waives any such right.
12.10 Invalidity. Every provision of this Agreement is intended to be
severable. The invalidity and unenforceability of any particular provision of
this Agreement in any jurisdiction shall not affect the other provisions hereof,
and this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
12.11 Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors, executors, administrators, legal
representatives, heirs and legal assigns and shall inure to the benefit of the
parties hereto and, except as otherwise provided herein, their respective
successors, executors, administrators, legal representatives, heirs and legal
assigns. No Person other than the parties hereto and their respective
successors, executors, administrators, legal representatives, heirs and
permitted assigns shall have any rights or claims under this Agreement.
12.12 Entire Agreement. This Agreement supersedes all prior agreements
among the parties with respect to the subject matter hereof and contains the
entire Agreement among the parties with respect to such subject matter.
12.13 Waivers. No waiver of any provision hereof by any party hereto
shall be deemed a waiver by any other party nor shall any such waiver by any
party be deemed a continuing waiver of any matter by such party.
12.14 No Brokers. Each of the Partners hereto warrants to each other
that, except as set forth in Section 2.9(b) (it being understood, however, that
BRI and BRIOP, in connection with the Merger, hired Lazard Freres & Co LLC,
Lehman Brothers Inc. and Prudential Securities Incorporated as their financial
advisors and paid fees to such parties), there are no brokerage commissions or
finders' fees (or any basis therefor) resulting from any action taken by such
Partner or any Person acting or purporting to act on their behalf upon entering
into this Agreement. Each Partner agrees to indemnify and hold harmless each
other Partner for all costs, damages or other expenses arising out of any
misrepresentation made in this Section 12.14.
12.15 Maintenance as a Separate Entity. The Partnership shall maintain
books and records and bank accounts separate from those of its Affiliates; shall
at all times hold itself out to the public as a legal entity separate and
distinct from any of its Affiliates (including in its operating activities, in
entering into any contract, in preparing its financial statements, and on its
stationery and any signs it posts), and shall cause its Affiliates to do the
same and to conduct business with it on an arm's-length basis; shall not
commingle its assets with assets of any of its Affiliates; shall not guarantee
any obligation of any of its Affiliates; shall cause its business to be carried
on by the General Partners and shall keep minutes of all meetings of the
Partners.
12.16 Confidentiality. Each Partner agrees not to disclose or permit
the disclosure of any of the terms of this Agreement or of any other
confidential, non-public or proprietary information relating to this Agreement
(collectively, "Confidential Information"), provided that such disclosure
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may be made (a) to any Person who is a member, partner, officer, director or
employee of such Partner or counsel to or accountants of such Partner solely for
their use and on a need-to-know basis, provided that such Persons are notified
of the Partners' confidentiality obligations hereunder, (b) with the prior
consent of the other Partners, (c) subject to the next paragraph, pursuant to a
subpoena or order issued by a court, arbitrator or governmental body, agency or
official, (d) to any lender providing financing to the Partnership, (e) in
connection with a purchase agreement under Section 9.2, to the sellers
thereunder (f) to a bona fide potential transferee of an Interest who agrees in
writing with the Partnership to be bound by the provisions of this Section 12.16
or (g) as required by law or regulation.
In the event that a Partner shall receive a request to disclose any
Confidential Information under a subpoena or order, such Partner shall (i)
promptly notify the other General Partners thereof, (ii) consult with the other
General Partners on the advisability of taking steps to resist or narrow such
request and (iii) if disclosure is required or deemed advisable, cooperate with
any of the other General Partners in any attempt it may make to obtain an order
or other assurance that confidential treatment will be accorded the Confidential
Information that is disclosed.
No Partner shall issue any press release or other public communication
about the formation or existence of the Partnership without the express written
consent of BGP, WHGP and Blackstone GP.
12.17 No Third Party Beneficiaries. This Agreement is not intended and
shall not be construed as granting any rights, benefits or privileges to any
Person not a party to this Agreement. Without limiting the generality of the
foregoing, no creditor of the Partnership, or of any Partner shall have any
right whatsoever to require any Partner to contribute capital to the
Partnership.
12.18 Power of Attorney.
(a) Each of the Limited Partners (other than the Investor Group
Partners) does hereby irrevocably constitute and appoint each of WHGP,
Blackstone GP and, for so long as it is the Administering General Partner, BGP
with full power of substitution, as its true and lawful attorney, in its name,
place and stead, to execute, acknowledge, swear to, deliver, record and file, as
appropriate and in accordance with this Agreement (i) all amendments to the
original Certificate required or permitted by law or the provisions of this
Agreement, (ii) all certificates and other instruments requiring execution by
the Partners or any of them and deemed necessary or advisable by WHGP,
Blackstone GP or BGP to qualify or continue the Partnership as a Partnership
wherein the Partners have limited liability in the jurisdictions where the
Partnership may be conducting its operations, (iii) all instruments requiring
execution by the Partners or any of them and that WHGP, Blackstone GP or BGP
deems appropriate to reflect a change or modification of this Agreement or the
Partnership in accordance with this Agreement, including, without limitation,
the substitution of assignees as Substituted Partners pursuant to Section 9.6
(provided, however, that any such modification is otherwise in accordance with
this Agreement), and (iv) all conveyances and other instruments deemed necessary
or advisable by WHGP, Blackstone GP or BGP to effect the dissolution and
termination of the Partnership in accordance with this Agreement. Nothing
contained in this Section 12.18 shall
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empower any General Partner to take any action requiring the consent of any
other General Partner hereunder unless such consent is first obtained.
(b) The powers of attorney granted pursuant to this Section 12.18 are
coupled with an interest and shall be irrevocable and survive and not be
affected by the subsequent death, incapacity, disability, Bankruptcy or
dissolution of the grantor; may be exercised by any of the General Partners
either by signing separately as attorney-in-fact for each Partner or by the
General Partners acting as attorneys-in-fact for all of them; and shall survive
the delivery of an assignment by a Partner of the whole or any fraction of its
Interest, except that, where the whole of such Partner's Interest has been
assigned or diluted in accordance with this Agreement, the power of attorney of
the assignor shall survive the delivery of such assignment for the sole purpose
of enabling the General Partners to execute, acknowledge, swear to, deliver,
record and file any instrument necessary or appropriate to effect such
substitution. In the event of any conflict between this Agreement and any
document, instrument, conveyance or certificate executed or filed by any General
Partner pursuant to such power of attorney, this Agreement shall control.
(c) Each Partner shall execute and deliver to any General Partner,
within five days after the receipt of such General Partner's request therefor,
such further designations, powers of attorney and other instruments as such
General Partner deems necessary or appropriate to carry out the provisions of
this Agreement.
(d) Notwithstanding the foregoing provisions of this Section 12.18, in
the event that BGP has been removed as the Administering General Partner or any
General Partner has been removed or has resigned as a General Partner pursuant
to the terms of this Agreement or has voluntarily ceased to manage or administer
the day-to-day business of the Partnership as contemplated by Section 3.2, then,
in either case, the power of attorney granted to BGP or such General Partner, as
applicable, pursuant to this Section 12.18 shall immediately be revoked and
terminated.
12.19 Construction of Documents. The parties hereto acknowledge that
they were represented by counsel in connection with the review, negotiation and
drafting of this Agreement and that this Agreement shall not be subject to the
principle of construing their meaning against the party that drafted same.
12.20 Time of Essence. Time is of the essence in the performance of
each and every term of this Agreement.
12.21 Default by Partnership. In the event that on or prior to the
Closing Date, one or more of the Investor Group Partners defaults in its
obligations to make Capital Contributions hereunder, then (i) in the event such
default results in the Partnership defaulting in its obligations under the BRI
Merger Agreement and the Partnership's deposit thereunder being retained by BRI,
such defaulting Partner or Partners shall immediately pay in cash to the
non-defaulting Partners, as sole and liquidated damages under this Agreement,
the amount of any Capital Contributions previously made to the Partnership by
such non-defaulting Partners and (ii) the defaulting Partner or Partners shall
forfeit their respective Interests in the Partnership and immediately be deemed
to have withdrawn from the
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Partnership. To the extent there is more than one defaulting Partner
under this Section, amounts to be paid by the defaulting Partners hereunder
shall be paid by each such defaulting Partner in relative proportion to their
relative Partnership Percentage Interests. Amounts due to any Partner under this
Section and not paid shall accrue interest and compound annually at a rate per
annum (until paid in full) equal to the lesser of (i) 20% or (ii) the maximum
rate permitted by law.
12.22 Subsidiary Joint Ventures. The Partnership agrees that it will
not, without the consent of the holders of a majority of the Class A Preferred
Units (excluding any Class A Preferred Units held by a General Partner or an
Affiliate of a General Partner), voting as a separate class, transfer Properties
of the Partnership having a total value of more than one-third of the total
value of all of the Properties of the Partnership to one or more joint venture
companies, partnerships or similar entities, if such joint venture companies,
partnerships, or similar entities issue equity securities to a party other than
the Partnership that rank prior to the Class A Preferred Units with respect to
distributions or receipt of proceeds upon liquidation.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement of Limited Partnership as of the day and year first above written.
GENERAL PARTNERS:
WXI/BRH Gen-Par LLC
By /s/ Steven Feldman
------------------------------
Name: Steven Feldman
Title: Vice President
BRE/Berkshire GP L.L.C.
By /s/ Kenneth C. Whitney
------------------------------
Name: Kenneth C. Whitney
Title: Vice President
Aptco Gen-Par, L.L.C.
By /s/ Douglas Krupp
------------------------------
Name: Douglas Krupp
Title: Authorized Signatory
LIMITED PARTNERS:
Whitehall Street Real Estate
Limited Partnership XI
By: WH Advisors, L.L.C. XI
By /s/ Steven Feldman
------------------------------
Name: Steven Feldman
Title: Vice President
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BRE/Berkshire L.P. L.L.C.
By /s/ Kenneth C. Whitney
------------------------------
Name: Kenneth C. Whitney
Title: Vice President
Aptco Holdings, L.L.C.
By /s/ Douglas S. Krupp
------------------------------
Name: Douglas S. Krupp
Title: Authorized Signatory
Stone Street Real Estate Fund 1998 L.P.
By: Stone Street Advantage Realty Corp.,
its General Partner
By /s/ Alan Kava
------------------------------
Name: Alan Kava
Title: Vice President
Bridge Street Real Estate Fund 1998 L.P.
By: Stone Street Advantage Realty Corp.,
its General Partner
By: /s/ Alan Kava
------------------------------
Name: Alan Kava
Title: Vice President
Stone Street WXI/BRH Corp.
By /s/ Alan Kava
------------------------------
Name: Alan Kava
Title: Vice President
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For the purposes of Section 4.4(c):
The Berkshire Companies Limited Partnership
By: /s/ Douglas S. Krupp
--------------------------------
Name: Douglas S. Krupp
Title: Authorized Signatory
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Exhibit 8
---------
April 13, 1999
CONFIDENTIAL
Berkshire Realty Holdings, L.P.
c/o The Berkshire Group
One Beacon Street
Boston, Massachusetts 02108
Attn: Douglas S. Krupp, CEO
Re: Commitment Letter
Ladies and Gentlemen:
Affiliates of Douglas S. Krupp ("Krupp"), Blackstone Real Estate Acquisitions
III L.L.C. ("Blackstone") and Whitehall Street Real Estate Limited Partnership
XI ("Whitehall" and, collectively with Krupp and Blackstone and/or their
affiliates, the "Investors") have formed and intend to capitalize Berkshire
Realty Holdings, L.P., a Delaware limited partnership ("Holdings"), which will
propose a transaction to the Board of Directors of a publicly held Delaware
corporation ("Bruin"), pursuant to which (i) Bruin would merge with Holdings and
all the outstanding Bruin capital stock (and rights to acquire Bruin capital
stock) being converted in the merger into the right to receive cash equal to a
price per share (and total purchase price) not to exceed $12.25 per share (the
"Bruin Merger") and (ii) immediately prior to such merger, a subsidiary of
Holdings would be merged into BRI OP Limited Partnership, a Delaware limited
partnership ("OP"), in a transaction pursuant to which OP and OP's current
general partner ("OP GP") would become wholly owned by Holdings (the "OP Merger"
and together with the Bruin Merger, the "Transaction"). Currently, 79.16% of the
partnership interests of OP are directly or indirectly owned by Bruin. This
letter is referred to herein as the Commitment Letter.
Financing of $755 million, but in no event in excess of 75.5% of the Transaction
Value (as defined below) is being sought by you in connection with the
Transaction (the "Facility"). A portion of the proceeds of the Facility would be
made available to Holdings to finance a portion of the consideration to be paid
to Bruin stockholders and option/warrantholders in the Bruin Merger and the cash
option in the OP Merger. Additional information regarding the Transaction is set
forth in the partnership agreement of Holdings among the Investors and the draft
agreements for the Bruin Merger and the OP Merger which you have furnished to us
(the "Partnership Agreement").
Based on our understanding of the Transaction as set forth above and in other
documents referred to above, and the other information which you have provided
to us, each of Whitehall and Blackstone commits to provide, on a several and not
joint basis, 50% of the Facility on the terms
<PAGE>
and subject to the conditions set forth herein (provided that Whitehall shall
not be obligated to fund its portion of the Facility unless Blackstone funds its
portion of the Facility, and Blackstone shall not be obligated to fund its
portion of the Facility unless Whitehall funds its portion of the Facility).
LENDERS: Whitehall and Blackstone, together with their respective
permitted participants and co-lenders (each, a "Lender" and,
collectively the "Lenders").
TRANSFERABILITY: Prior to closing, Borrower and Lenders will agree upon the
terms pursuant to which Lenders may transfer their interest in
the loan (it being understood and agreed that Lenders may sell
participation interests in the loan, provided that Whitehall
retains the agent role).
BORROWER: OP and/or, at Lenders' election, certain other property-
owning OP subsidiaries.
GUARANTORS: Holdings and those OP subsidiaries owning the 58
properties identified on Schedule I hereto which are not
borrowers. In addition, Guarantors shall include all other
subsidiaries of OP for which no third party consent for such
guarantee is required or as to which all required third party
consents have been obtained (as to special purpose entities,
OP shall arrange for charter amendments, as necessary to
permit granting of guarantees). Borrower and Guarantors
to use all commercially reasonable efforts to obtain such
consents. The Investors (or special purpose entities holding
the Investors' interest in Holdings) shall be non-recourse
guarantors of the Loan, to be secured by an assignment or
pledge of their interests in Holdings (see "Security" below).
AMOUNT: $755 million in the aggregate, but in no event in excess of
75.5% of the Transaction Value, defined as the aggregate of
(i) the cash required to consummate the Transaction, (ii)
assumed debt of at least $233,000,000, (iii) equity
contributed or deemed contributed by Investors and (iv) all
fees and expenses of Holdings and its subsidiaries relating
thereto. The amount borrowed under the Facility is referred
to as the Loan. Borrower may borrow less than the entire
Loan at closing. In such event, the collateral to secure the
Loan will be reduced in accordance with loan allocation
amounts among the properties (such allocated loan amounts
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shall be agreed upon by the Lenders and Borrower before
the merger agreement is signed).
TERM: Twelve (12) months from initial funding.
USE OF PROCEEDS: Proceeds will be used to finance a portion of the aggregate
consideration to be paid by Holdings in the Bruin Merger,
as needed to fund the cash option in the OP Merger, to
refinance specified existing indebtedness of OP and its
subsidiaries, to repay intercompany indebtedness owed to
Bruin to enable Bruin to finance the redemption of its
outstanding Series A Preferred Stock, and to fund certain
fees and expenses associated with the Transaction.
INTEREST:
Rate: Absent a default, the Loan will bear interest at the
rate of 3.75% above the reserve adjusted London Interbank
Offered Rate ("LIBOR Rate") for one month interest periods;
provided, however, that notwithstanding the foregoing, the
minimum interest rate shall at all times be 8.65%.
Payment Dates: Interest will be payable monthly.
Other Terms: All interest will be calculated based on a 360-day year and
actual days elapsed. The financing documentation will
contain (a) customary LIBOR breakage provisions and
LIBOR borrowing mechanics, (b) LIBOR Rate definitions
and (c) customary provisions for determination of interest in
the event that LIBOR is not available for any period.
Default Rate: From and after the occurrence of a default, the interest rates
applicable to the Loan will be increased by 2% per annum over
the interest rate otherwise applicable and such interest and
fees will be payable on demand.
COMMITMENT FEE: 1.0% of the maximum amount of the Facility, payable at the
drawing of the Facility upon the closing of the Transaction.
STRUCTURING FEE: 0.25% of the maximum amount of the Facility, payable at
the same time as the commitment fee.
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TAKEDOWN FEE: 0.50% of the amount borrowed, payable upon borrowing.
REPAYMENT FEE: A repayment fee of 0.50% of the then outstanding amount
of the Facility, if any, shall be due on June 15, 2000.
PREPAYMENTS: Borrowers may voluntarily prepay all or any portion of the
Loan in minimum amounts of $1 million at any time, upon at
least 5 days' prior written notice. All voluntary prepayments
will be accompanied by LIBOR breakage costs, if any.
SECURITY: First mortgage liens (recorded) and title insurance on 58
properties identified on Schedule I hereto. Pledge by
Holdings of entire equity of OP GP. In addition, the
Investors (or special purpose entities holding the Investors'
interest in Holdings) will guarantee the Loan (on a non-
recourse basis) and assign or pledge their interest in
Holdings as security for such guaranty. At Lenders'
election, a first priority perfected lien on and security
interest in all assets of Holdings, OP and the subsidiaries of
OP not covered by the preceding sentences to the extent
available without the requirement to obtain any third party
consent or as to which all required third party consents are
obtained. Borrower and Guarantors to use all commercially
reasonable efforts to obtain such consents. Lenders will
have dominion over all cash if requested by Whitehall and
Blackstone, which arrangement shall permit the release of
cash to Borrower and Guarantors absent a default;
provided, however, that to the extent that the holders of
debt in respect of the 24 properties identified on Schedule II
hereto shall have the right to and shall prohibit such an
arrangement, Lenders shall not be entitled to same. The
Loan will be cross-collateralized and cross-defaulted in a
manner satisfactory to Lenders. The Parties will use
reasonable good faith efforts to minimize or avoid mortgage
recording taxes and title insurance premiums on the 58
properties on Schedule I; it being understood that there will
be no mortgages or title insurance obtained with respect to
the 24 properties on Schedule II.
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PARTIAL RELEASES Permitted in connection with third party sales and certain
FROM MORTGAGE OR partial refinancings provided that Lenders receive at least
NEGATIVE minimum release prices based on allocated loan amounts to
COVENANT: be agreed upon by the parties. Minimum release price is to be
equal to greater of the property's allocated loan amount or
100% of sale or refinancing proceeds capped at 110% of the
property's allocated loan amount. Borrower and Lenders to
agree on allocated loan amounts prior to the execution of the
merger agreement.
DOCUMENTATION: The documentation for the Financing will contain
representations and warranties, conditions precedent described
below, closing document deliveries and similar customary
conditions precedent, affirmative and negative covenants (but
no financial ratios, maintenance or other similar financial
condition tests), indemnities, events of default and remedies,
in each case customarily found in documentation for similar
transactions. The OP and/or Holdings will provide customary
environmental indemnity to the Lenders. This Commitment Letter
does not contain all the terms that will be included in the
documentation for the Financing.
CONDITIONS: The commitment of Lenders for the Facility is conditioned upon
satisfaction of all the following (all to Lenders'
satisfaction):
-- Relevant documents, such as all transaction documents
for the Bruin Merger and the OP Merger and other
material agreements to which Borrower is a party, must
be acceptable to Lenders in all material respects.
-- The Bruin Merger and the OP Merger each shall have been
consummated in compliance with all applicable law and
regulations.
-- The material terms of the Bruin Merger and the OP
Merger, including, without limitation, the consideration
offered and the conditions precedent, shall not have
been modified, amended or supplemented in any respect
and no provision
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<PAGE>
contained therein shall have been waived, without
Lenders' prior written consent.
-- All necessary governmental and material third party
waivers and consents shall have been received.
-- Receipt of opinions of counsel from Borrower's counsel
(including local counsel as requested) reasonably
acceptable to Lenders.
-- Receipt of customary mortgage title insurance policies,
existing land surveys, evidence of insurance and
addition of Lenders as loss payees, and the like.
-- Absence of a default under the Financing.
-- Holdings shall have received the equity from Blackstone
and Whitehall contemplated by the Summary of Terms
(i.e., a minimum of $125 million from each), and not
less than 5,416,000 shares of Bruin stock and/or OP
Units currently owned by Krupp and his affiliates.
-- The Transaction shall have closed, and the Loan shall
have been drawn, no later than December 31, 1999 (the
"Commitment Termination Date").
-- Definitive agreements for the Bruin Merger and the OP
Merger shall have been executed by April 14, 1999,
provided, however, that if definitive agreements are not
executed by April 14, 1999 and Lenders do not extend
this Commitment Letter, this Commitment Letter will
terminate and neither Borrower nor Lenders will be
liable hereunder.
OTHER TERMS: The documentation for the Facility will require, among
other things, compliance with covenants pertaining to the
following (all in form and substance satisfactory to
Lenders):
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-- Financial reporting on a monthly basis. All financial
statements shall be prepared on a consolidated and
consolidating basis.
-- Compliance with all applicable law, decrees and material
agreements, or obtaining of applicable consents and
waivers.
-- Limitations on commercial transactions, management
agreements, service agreements and borrowing
transactions with officers, directors, employees and
affiliates.
-- Prohibition on new indebtedness, other than the
Facility, and other than refinancings of existing
indebtedness (i) in respect of the 24 properties listed
on Schedule II, provided the same are on terms not
materially more onerous to the Borrower than the
existing indebtedness being refinanced and (ii) in
respect of the 58 properties identified on Schedule I,
provided that payment of the appropriate release price
is made.
-- Prohibitions on liens, mortgages and security interests
except those in existence and identified, those incurred
in connection with permitted refinancings, and liens on
indebtedness permitted to be incurred for the financing
of permitted purchases of properties which liens are
limited to the properties purchased, and which
obligations are solely those of the property owning
subsidiary.
-- Limitations on, or prohibitions of, cash dividends,
other distributions to equity holders, payments in
respect of subordinated debt and redemption of common or
preferred stock. Such limitations and/or prohibitions
shall not preclude, in the absence of a default under
the Loan, distributions to certain OP Unit Holders who
convert their interests to Class A (Preferred) Interests
or tax distributions, as contemplated by the Holdings
partnership agreement.
7
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-- Limitations on mergers, acquisitions, or sale of a
material portion of assets (other than sales accompanied
by payment of specified release prices).
-- Prohibitions of a direct or indirect change in control
of Borrower or Holdings (other than changes which
increase the control of Whitehall and Blackstone). The
foregoing shall not prohibit any change in ownership
within Whitehall or Blackstone.
-- Customary provisions regarding responsibility for
misappropriation of funds.
-- Limitations on capital expenditures.
-- Agent's and Lenders' rights of inspection and access to
facilities, management and auditors.
-- Payment of Lenders' costs and expenses in documenting,
closing and servicing the Loan (including reasonable
attorneys' fees and costs, title insurance premiums and
mortgage recording taxes).
-- Escrow for real estate taxes.
-- Governing law: New York.
The commitment of Lenders hereunder is subject to the execution and delivery of
final legal documentation acceptable to Lenders and their counsel incorporating,
without limitation, the terms set forth in this Commitment Letter and other
terms satisfactory to the Lenders.
By signing this Commitment Letter, you acknowledge that this Commitment Letter
supersedes any and all discussions and understandings, written or oral, between
or among Lenders and any other person as to the Facility, including any prior
commitment letters for debt financing for the Transaction. No amendments,
waivers or modifications of this Commitment Letter or any of its contents shall
be effective unless expressly set forth in writing and executed by you and
Lenders.
This letter and the agreements contained herein are solely for the benefit of
Holdings and do not confer upon any other person or entity (including, without
limitation, any partner in Holdings) any rights or remedies and may not be
enforced by any person or entity other than Holdings. As described above, the
commitments of Whitehall and Blackstone hereunder are several and not
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<PAGE>
joint and are subject to all of the terms of this Commitment Letter, including,
without limitation, the conditions to the obligations of the Lenders hereunder.
This Commitment Letter is being provided to you on the condition that, except as
required by law or SEC Regs (as defined below), neither it nor its contents will
be disclosed publicly or privately except to those individuals who are your
advisors who have a need to know of them as a result of their being specifically
involved in the Bruin Merger and the OP Merger and the Facility and then only on
the condition that such matters may not, except as required by law or
regulations of the Securities and Exchange Commission ("SEC Regs"), be further
disclosed and except that, following your acceptance hereof, you may disclose
this Commitment Letter to Bruin and its advisors. No person, other than the
parties signatory hereto, is entitled to rely upon this Commitment Letter or any
of its contents. No person shall, except as required by law or SEC Regs, use the
name of, or refer to Lenders or any of their respective affiliates, in any
correspondence, discussions, press release, advertisement or disclosure made in
connection with the Transaction without the prior written consent of Lenders.
You agree to indemnify and hold harmless each Lender, and its affiliates, and
the directors, officers, employees, agents, attorneys and representatives of any
of them (each, an "Indemnified Person"), from and against all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including, but
not limited to, reasonable attorneys' fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal), which may
be instituted or asserted against or incurred by any such Indemnified Person in
connection with, or arising out of, this Commitment Letter, the Financing, the
documentation related thereto, any actions or failures to act in connection
therewith, and any and all environmental liabilities and legal costs and
expenses arising out of or incurred in connection with any disputes between or
among any parties to any of the foregoing, and any investigation, litigation, or
proceeding related to any such matters. Your obligation for such reimbursement
may be assumed by Borrower at closing. Notwithstanding the foregoing, no
indemnitor shall be liable for any indemnification to any Indemnified Person to
the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results solely from that Indemnified Person's gross
negligence or willful misconduct, as finally determined by a court of competent
jurisdiction. Under no circumstances shall any Lender, or any of its affiliates
be liable to you or any other person for any punitive, exemplary, consequential
or indirect damages in connection with this Commitment Letter, the Facility or
the documentation related thereto, regardless of whether the commitment herein
is terminated or the Transaction or the Facility closes. For purposes of this
paragraph, the term "affiliate" shall not include any affiliated entity which is
an Investor.
You and Lenders expressly waive any right to trial by jury of any claim, demand,
action or cause of action arising in connection with this Commitment Letter, any
transaction relating hereto, or any other instrument, document or agreement
executed or delivered in connection herewith, whether sounding in contract, tort
or otherwise. You and Lenders consent and agree that the state or federal courts
located in New York County, City of New York, New York, shall have exclusive
jurisdiction to hear and determine any claims or disputes between or among any
of the
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<PAGE>
parties hereto pertaining to this Commitment Letter or the Facility under
consideration and any investigation, litigation, or proceeding related to or
arising out of any such matters, provided, however, that you and Lenders
acknowledge that any appeals from those courts may have to be heard by a court
located outside of such jurisdiction. You and Lenders expressly submit and
consent in advance to such jurisdiction in any action or suit commenced in any
such court, and hereby waive any objection which either of them may have based
upon lack of personal jurisdiction, improper venue or inconvenient forum. The
definitive documentation for the Facility shall contain Borrower's and
Guarantors' agreement to the foregoing.
This Commitment Letter is governed by and shall be construed in accordance with
the law of the State of New York applicable to contracts made and performed in
that State.
Lenders shall have access to all relevant facilities, personnel and accountants,
and copies of all documents which Lenders may reasonably request, including
business plans, financial statements (historical and pro forma), books, records,
and other documents. Lenders agree to treat any confidential information so
received as they would their own confidential information.
This Commitment Letter shall be of no force and effect unless and until this
Commitment Letter is executed and delivered to Lenders on or before 5:00 p.m.
New York City time on April 14, 1999, at both (i) 85 Broad Street, New York, New
York 10004 and (ii) 345 Park Avenue, 31st Floor, New York, New York 10154. Once
effective, the commitment of Lenders to provide financing in accordance with the
terms of this Commitment Letter shall terminate if the Bruin Board of Directors
rejects Holdings's proposal relating to the Transaction or if definitive
agreements have not been executed by April 14, 1999 (in which case, none of the
Holdings, the Investors or their respective affiliates shall have any liability
hereunder whether on account of fees, reimbursement obligations or otherwise) or
if the Loan does not close by the Commitment Termination Date.
10
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We look forward to continuing to work with you toward completing this
transaction.
Sincerely,
WHITEHALL STREET REAL ESTATE LIMITED
PARTNERSHIP XI
By: WH ADVISORS, L.L.C., XI,
its General Partner
By: /s/ Steven Feldman
-----------------------------------------
Name: Steven Feldman
Title: Vice President
BLACKSTONE REAL ESTATE ACQUISITIONS III
By: /s/ Kenneth C. Whitney
-----------------------------------------
Name: Kenneth C. Whitney
Title: Vice President
AGREED AND ACCEPTED THIS
13th DAY OF APRIL, 1999.
BERKSHIRE REALTY HOLDINGS, L.P.
By: /s/ Douglas Krupp
-------------------------------------
Authorized Signatory
11
Exhibit 9
---------
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BERKSHIRE REALTY HOLDINGS, L.P.,
BRI ACQUISITION, LLC
AND
BERKSHIRE REALTY COMPANY, INC.
DATED AS OF APRIL 13, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
THE MERGER..................................................................1
1.1 The Merger...........................................................1
1.2 Closing..............................................................2
1.3 Effective Time.......................................................3
1.4 Effect of Merger on Certificate of Incorporation and By-laws.........3
1.5 Directors and Officers...............................................3
1.6 Effect on Shares.....................................................4
1.7 Merger Consideration.................................................4
1.8 Transactions Relating to Seller Partnership..........................5
1.9 Exchange of Certificates; Pre-Closing Dividends: Fractional Shares...6
1.10 Dissenting Shares....................................................7
1.11 Alternative Structure of Merger......................................8
1.12 Further Assurances...................................................8
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER....................................9
2.1 Organization, Standing and Power of Seller...........................9
2.2 Seller Subsidiaries..................................................9
2.3 Capital Structure...................................................10
2.4 Other Interests.....................................................12
2.5 Authority; Noncontravention; Consents...............................12
2.6 SEC Documents; Financial Statements; Undisclosed Liabilities........14
2.7 Absence of Certain Changes or Events................................15
2.8 Litigation..........................................................16
2.9 Properties..........................................................16
2.10 Environmental Matters...............................................18
2.11 Related Party Transactions..........................................20
2.12 Employee Benefits...................................................20
2.13 Employee Matters....................................................23
2.14 Taxes...............................................................23
2.15 No Payments to Employees, Officers or Directors.....................25
2.16 Brokers.............................................................26
2.17 Compliance With Laws................................................26
2.18 Contracts; Debt Instruments.........................................26
2.19 Opinions of Financial Advisors......................................29
2.20 State Takeover Statutes.............................................29
2.21 Proxy Statement and Consent Solicitation Statement..................29
2.22 Investment Company Act of 1940......................................29
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Page
2.23 Definition of Knowledge of Seller...................................29
2.24 Insurance...........................................................29
2.25 Board Recommendation................................................30
2.26 Representations in Partnership Merger Agreement.....................30
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER.........................31
3.1 Organization, Standing and Power of Parent and Buyer................31
3.2 [Intentionally Omitted].............................................32
3.3 Ownership of Parent and Buyer.......................................32
3.4 Authority; Noncontravention; Consents...............................32
3.5 Litigation..........................................................33
3.6 Undisclosed Liability...............................................33
3.7 Brokers.............................................................33
3.8 Compliance With Laws................................................33
3.9 Contracts; Debt Instruments.........................................34
3.10 Solvency............................................................34
3.11 [Intentionally Omitted].............................................34
3.12 Proxy Statement and Consent Solicitation Statement..................34
3.13 Investment Company Act of 1940......................................35
3.14 Parent and Buyer Not Interested Stockholders........................35
3.15 Definition of Knowledge.............................................35
3.16 [Intentionally Omitted].............................................35
3.17 Sufficient Funds....................................................35
3.18 Pro Forma Capitalization Table......................................35
3.19 Representations in Partnership Merger Agreement.....................36
ARTICLE 4
COVENANTS..................................................................36
4.1 Acquisition Proposals...............................................36
4.2 Conduct of Seller's Business Pending Merger.........................37
4.3 Conduct of Parent's and Buyer's Business Pending Merger.............41
4.4 Other Actions.......................................................42
4.5 Partnership Merger Agreement........................................43
4.6 Private Placement...................................................43
4.7 Irrevocable Letter of Credit........................................43
ARTICLE 5
ADDITIONAL COVENANTS.......................................................44
5.1 Preparation of the Proxy Statement; Seller Stockholders Meeting.....44
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Page
5.2 Access to Information: Confidentiality.............................46
5.3 Reasonable Best Efforts; Notification...............................46
5.4 Tax Treatment.......................................................47
5.5 Public Announcements................................................47
5.6 Transfer Taxes......................................................48
5.7 Benefit Plans.......................................................48
5.8 Indemnification.....................................................48
5.9 Declaration of Dividends and Distributions..........................50
5.10 Resignations........................................................51
5.11 Outside Property Management Agreements..............................51
5.12 Stockholder Claims..................................................51
ARTICLE 6
CONDITIONS.................................................................51
6.1 Conditions to Each Party's Obligation to Effect the Merger..........52
6.2 Conditions to Obligations of Parent and Buyer.......................52
6.3 Conditions to Obligations of Seller.................................54
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER..........................................56
7.1 Termination.........................................................56
7.2 Certain Fees and Expenses...........................................57
7.3 Effect of Termination...............................................60
7.4 Amendment...........................................................60
7.5 Extension: Waiver...................................................60
ARTICLE 8
GENERAL PROVISIONS.........................................................60
8.1 Nonsurvival of Representations and Warranties.......................60
8.2 Notices.............................................................60
8.3 Interpretation......................................................62
8.4 Counterparts........................................................62
8.5 Entire Agreement; No Third-Party Beneficiaries......................62
8.6 Governing Law.......................................................63
8.7 Assignment..........................................................63
8.8 Enforcement.........................................................63
8.9 Severability........................................................63
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Page
EXHIBITS
Exhibit A Financing Commitments
Exhibit B Pro Forma Capitalization Table of Parent and its Subsidiaries
Exhibit C Form of Letter of Credit
Exhibit D Form of Tax Opinions
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INDEX OF DEFINED TERMS
DEFINED TERM SECTION
- ------------ -------
Accrued Dividends.................................................1.7(a)
Acquisition Proposal..............................................4.1(a)
Additional Filings................................................5.1(a)
Affiliate...........................................................2.11
Agreement.......................................................Preamble
AICPA Statement...................................................5.1(b)
Alternative Merger..................................................1.11
Break-Up Expenses.................................................7.2(a)
Break-Up Fee......................................................7.2(a)
Buyer...........................................................Preamble
Buyer Disclosure Letter........................................Article 3
Buyer Material Adverse Effect.....................................3.1(b)
Buyer Operating Partnership....................................Recital E
Cash Collateral...................................................4.7(a)
Certificates......................................................1.9(c)
Certificate of Merger................................................1.3
Change of Control Preference......................................1.7(a)
Claims............................................................5.8(b)
Class A Preferred Units..............................................1.8
Class B Units........................................................1.8
Closing...........................................................1.2(a)
Closing Date..............................................1.2(a), 1.2(b)
Code.............................................................2.12(a)
Commitment........................................................4.2(r)
Common Merger Consideration.......................................1.7(a)
Consent Solicitation Statement....................................5.1(a)
Controlled Group Member.............................................2.12
Development.......................................................2.9(g)
Development Agreements............................................4.2(i)
DGCL.................................................................1.1
DLLCA................................................................1.1
Dissenting Shares...................................................1.10
Effective Time...............................................1.2(b), 1.3
Election Notice.....................................................1.11
Employee Plan.......................................................2.12
Encumbrances......................................................2.9(a)
Environmental Law...................................................2.10
Environmental Liabilities and Costs.................................2.10
Equity Commitments..................................................3.17
ERISA...............................................................2.12
Escrow Agent......................................................4.7(a)
Escrow Agreement..................................................4.7(a)
Financing Commitment................................................3.17
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DEFINED TERM SECTION
- ------------ -------
Fee Plan..........................................................1.7(c)
Flow-Through Entity..............................................2.14(b)
GAAP.................................................................2.6
Governmental Entity...............................................2.5(b)
HSR Act...........................................................2.5(b)
Hazardous Materials..............................................2.10(a)
Indebtedness.....................................................2.18(b)
Indemnified Parties...............................................5.8(a)
Indemnifying Parties..............................................5.8(b)
Injunction........................................................7.1(d)
Knowledge of Buyer..................................................3.15
Knowledge of Parent.................................................3.15
Knowledge of Seller.................................................2.23
Laws..............................................................2.5(b)
Lazard..............................................................2.16
Lehman..............................................................2.16
Letter of Credit..................................................4.7(a)
Liens.............................................................2.2(b)
Liquidation Vote.....................................................4.2
Material Contract................................................2.18(a)
Merger...................................................Recital A, 1.11
Merger Consideration..............................................1.7(a)
1940 Act............................................................2.22
Option Consideration..............................................1.7(b)
Ordinary Course Liabilities.......................................4.2(q)
Outside Property Management Agreements...........................2.18(e)
Parent..........................................................Preamble
Parent Material Adverse Effect....................................3.1(a)
Parent's Closing Notice...........................................1.2(d)
Partial Period.......................................................5.9
Partial Period Dividend..............................................5.9
Partnership Merger ..................................................1.8
Partnership Merger Agreement...................................Recital E
Paying Agent......................................................1.9(a)
Pension Plan........................................................2.12
Person............................................................2.2(a)
Preferred Merger Consideration....................................1.7(a)
Property Restrictions.............................................2.9(a)
Proxy Statement...................................................5.1(a)
Prudential..........................................................2.16
REIT.............................................................2.14(b)
SEC...............................................................2.5(b)
Securities Act.......................................................2.6
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DEFINED TERM SECTION
- ------------ -------
Seller..........................................................Preamble
Seller Common Shares..............................................2.3(a)
Seller Contribution Agreements...................................2.18(a)
Seller Disclosure Letter.......................................Article 2
Seller Financial Statement Date......................................2.7
Seller General Partner..............................................2.25
Seller Material Adverse Change.......................................2.7
Seller Material Adverse Effect.......................................2.1
Seller OP Units......................................................1.8
Seller Options....................................................2.3(b)
Seller Partner Approval...........................................2.5(a)
Seller Partnership.............................................Recital E
Seller Partnership Agreement......................................2.3(e)
Seller Permits......................................................2.17
Seller Plan.......................................................2.3(a)
Seller Preferred Shares...........................................2.3(a)
Seller Properties...........................................2.9(a), 2.10
Seller SEC Documents.................................................2.6
Seller Shareholder Approval.......................................2.5(a)
Seller Shareholders Meeting.......................................5.1(c)
Seller Subsidiaries...............................................2.2(a)
Seller Unit Holder...................................................1.8
Seller's Closing Notice...........................................1.2(c)
Seller's Environmental Reports......................................2.10
Share Unit Account................................................1.7(c)
Share Units.......................................................1.7(c)
Subsidiary........................................................2.2(a)
Superior Acquisition Proposal.....................................4.1(d)
Surviving Company..............................................1.1, 1.11
Surviving Operating Partnership................................Recital E
Takeover Statute....................................................2.20
Tax(es)..........................................................2.14(a)
Tax Authority....................................................2.14(a)
Tax Return(s)....................................................2.14(a)
Tax Protection Agreements........................................2.18(i)
Third Party Provisions...............................................8.5
Transactions........................................................2.25
Transfer Taxes.......................................................5.6
Welfare Plan........................................................2.12
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of April 13,
1999, is by and among Berkshire Realty Holdings, L.P., a Delaware limited
partnership ("Parent"), BRI Acquisition, LLC, a Delaware limited liability
company and subsidiary of Parent ("Buyer"), and Berkshire Realty Company, Inc.,
a Delaware corporation ("Seller").
RECITALS:
A. The sole member of Buyer and the Board of Directors of Seller deem it
advisable and in the best interests of their respective members and
stockholders, subject to the conditions and other provisions contained herein,
that Buyer shall merge with and into Seller (the "Merger").
B. Seller has received fairness opinions relating to the transactions
contemplated hereby as more fully described herein.
C. Buyer and Seller desire to make certain representations, warranties and
agreements in connection with the transactions contemplated hereby.
D. Contemporaneously with the execution of this Agreement, BRI Acquisition
Sub, LP, a Delaware limited partnership ("Buyer Operating Partnership"), and BRI
OP Limited Partnership, a Delaware limited partnership (the "Seller
Partnership"), and Parent will enter into a Merger Agreement (the "Partnership
Merger Agreement") pursuant to which, immediately prior to the Merger, Buyer
Operating Partnership will be merged with and into Seller Partnership with
Seller Partnership as the surviving entity ("Surviving Operating Partnership").
E. Immediately following the Merger, Parent may liquidate Seller and, as a
result of such liquidation, Parent would acquire all of the assets, and assume
all of the liabilities, of Seller.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the terms and conditions of
this Agreement (including, without limitation, Section 1.11), and in accordance
with Section 264 of the Delaware General Corporation Law ("DGCL") and
<PAGE>
Section 18-209 of the Delaware Limited Liability Company Act ("DLLCA"), Buyer
shall be merged with and into Seller, with Seller as the surviving entity (the
entity surviving the Merger, the "Surviving Company").
1.2 Closing.
(a) Subject to Section 1.2(b), Seller's compliance with Section
1.2(c) and the satisfaction (or waiver by the parties entitled to the benefit
thereof) of the conditions set forth in Article 6, the closing of the Merger
(the "Closing") will take place at 10:00 a.m., local time in Boston,
Massachusetts on the date (the "Satisfaction Date") which is the first business
day to occur on or after the day which is the later of (i) the 10th calendar day
following satisfaction (or waiver by the parties entitled to the benefit
thereof) of the conditions set forth in Article 6 (other than Sections 6.2(d),
6.2(g), 6.2(i), 6.3(d) and 6.3(g)) and (ii) October 15, 1999, at the offices of
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, unless another
date or place is agreed to in writing by the parties. The date on which the
Closing occurs shall be referred to herein as the "Closing Date."
(b) Notwithstanding the provisions of Section 1.2(a) and subject to
Parent's compliance with Section 4.7(b) hereof, Parent may elect to extend the
Closing Date to any business day on or prior to December 29, 1999 by delivering
written notice of such election to Seller as contemplated under Section 1.2(d).
(c) On the first business day after the satisfaction (or waiver by
Parent and Buyer) of the conditions set forth in Sections 6.1 and 6.2 (other
than Sections 6.2(d), 6.2(g) and 6.2(i)), Seller shall deliver a written notice
("Seller's Closing Notice") to Parent and Buyer which (i) sets forth the date
that is the Satisfaction Date and (ii) certifies, as of the date of such notice,
the satisfaction (or waiver by Parent and Buyer) of the conditions set forth in
Sections 6.1 and 6.2 (other than Sections 6.2(d), 6.2(g) and 6.2(i)).
(d) At least three business days prior to the Satisfaction Date (as
indicated in Seller's Closing Notice), Parent shall deliver a written notice to
Seller ("Parent's Closing Notice") indicating one of the following: (i) Parent's
determination to exercise the election contemplated by Section 1.2(b) and to
extend the Closing Date to such business day on or prior to December 29, 1999 as
is set forth in such notice, or (ii) Parent's determination not to exercise the
election contemplated by Section 1.2(b), in which case the Closing Date shall be
the Satisfaction Date.
(e) If the Closing Date is extended as contemplated by Section
1.2(b), then for purposes of the conditions set forth in Section 6.2 (other than
Sections 6.2(g) and 6.2(i)), all references in the lettered subsections thereof
to the terms "Closing Date" and "Effective Time" shall be deemed to mean the
Satisfaction Date, and the certificates and other documents to be delivered by
the parties pursuant to such Sections shall be delivered on and as of the
Satisfaction Date. The parties
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hereto agree that other than with respect to the conditions set forth in Section
6.2(g) and 6.2(i) (which conditions shall be satisfied or waived by the parties
entitled to the benefit thereof as of the Closing Date), none of the conditions
set forth in Section 6.2 shall be required to be satisfied at any time after the
Satisfaction Date. Notwithstanding the foregoing, for purposes of determining
whether Parent or Buyer has the right to terminate this Agreement pursuant to
Section 7.1(b), the conditions set forth in Section 6.2(b) shall, in all
circumstances, be evaluated as of the Closing Date.
(f) If the conditions set forth in Sections 6.1 and 6.2 are not
satisfied (or waived by Parent and Buyer), or if the certificates and other
documents required to be delivered pursuant to Section 6.2 are not delivered, in
each case on and as of the Satisfaction Date (as indicated in Seller's Closing
Notice), then (i) the Satisfaction Date shall be deemed not to have occurred,
(ii) Seller's Closing Notice and Parent's Closing Notice shall be void and of no
further effect, (iii) the Closing shall remain subject to Seller's further
compliance with Section 1.2(c) hereof and the Closing shall occur as provided in
Section 1.2(a) and (iv) Parent shall have retained its right, subject to its
compliance with Section 1.2(b), to extend the Closing Date as contemplated
thereunder.
(g) If the Satisfaction Date occurs on or before October 29, 1999
and the Closing Date is extended as contemplated by Section 1.2(b) to a date
that is after October 29, 1999, then notwithstanding anything to the contrary
contained in the first paragraph of Section 5.9, Seller may declare a dividend
not to exceed $.25 per Seller Common Share for the dividend for the fourth
quarter of 1999 (i.e., with a record date of November 1, 1999).
1.3 Effective Time. On the Closing Date, the Surviving Company shall
execute and file a certificate of merger (the "Certificate of Merger"), executed
in accordance with Delaware law, and shall make all other filings and recordings
required under Delaware law. The Merger shall become effective at the time
("Effective Time") the Certificate of Merger is filed with the Secretary of
State of the State of Delaware, or at such time as Buyer and Seller shall agree
should be specified in the Certificate of Merger (not to exceed thirty (30) days
after the Certificate of Merger is filed with the Secretary of State of the
State of Delaware). Unless otherwise agreed, the parties shall cause the
Effective Time to occur on the Closing Date.
1.4 Effect of Merger on Certificate of Incorporation and By-laws. Subject
to Section 1.11, the Restated Certificate of Incorporation, as amended, of
Seller and the By-laws of Seller, as in effect immediately prior to the
Effective Time, shall constitute the Restated Certificate of Incorporation and
By-laws, respectively, of the Surviving Company, from and after the Effective
Time, until further amended in accordance with applicable Delaware law.
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1.5 Directors and Officers. Subject to Section 1.11, the directors and
officers of the Surviving Company shall be the Persons who were the directors
and officers, respectively, of Seller immediately prior to the Effective Time.
Such directors and officers shall continue to serve for the balance of their
unexpired terms or their earlier death, resignation or removal.
1.6 Effect on Shares. The effect of the Merger on the shares of Seller
shall be as provided in this Article 1. Each membership interest of Buyer
outstanding immediately prior to the Merger shall be converted, without any
action on the part of the holder thereof, into one share of the common stock of
the Surviving Company.
1.7 Merger Consideration.
(a) Subject to Section 1.10 and Section 5.9 below, at the Effective
Time, by virtue of the Merger and without any action on the part of Parent,
Buyer, Seller or the holders of the following securities, each Seller Common
Share (as defined in Section 2.3(a)) issued and outstanding immediately prior to
the Effective Time (other than Seller Common Shares held by Parent, Buyer, any
wholly-owned subsidiary of Parent or Buyer, or in the treasury of Seller, which
shares, by virtue of the Merger and without any action on the part of the holder
thereof, shall be canceled and shall cease to exist with no payment being made
with respect thereto, and other than Dissenting Shares (as defined in Section
1.10)) shall be converted into the right to receive $12.25 in cash (the "Common
Merger Consideration"), without interest thereon, upon surrender of the
certificate formerly representing such share. In addition, at the Effective
Time, by virtue of the Merger and without any action on the part of Parent,
Buyer, Seller or the holders of the following securities, each Seller Preferred
Share (as defined in Section 2.3(a)) issued and outstanding immediately prior to
the Effective Time (other than Dissenting Shares) shall be converted into the
right to receive the "Change of Control Preference" in the amount of $28.75 per
Seller Preferred Share together with 115% of any Accrued Dividends per Seller
Preferred Share ("Change of Control Preference" and "Accrued Dividends" each
being defined in the Certificate of Designation of the Seller Preferred Shares)
(the "Preferred Merger Consideration"), without interest thereon, upon surrender
of the certificate formerly representing such share. The Surviving Company shall
have the right to, and shall, take all steps necessary to ensure compliance, and
shall comply, with all withholding obligations with respect to any foreign
stockholders of Seller in connection with the payment of the Merger
Consideration. The Preferred Merger Consideration, together with the Common
Merger Consideration, is hereinafter referred to as the "Merger Consideration".
(b) Each outstanding Seller Option (as defined in Section 2.3(b))
shall be subject to the terms of this Agreement. As of the Effective Time, each
outstanding Seller Option, whether or not then vested or exercisable, shall have
the expiration date thereof accelerated to the Closing Date and shall be
converted into the right to receive from the Surviving Company an amount of cash
equal to the product of (i) the number of Seller Common Shares subject to the
Seller Option and (ii) the
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<PAGE>
excess, if any, of the Common Merger Consideration over the exercise price per
Seller Common Share of such option (the "Option Consideration"). Prior to the
Effective Time, Seller shall take all steps necessary to give written notice to
each holder of a Seller Option that all Seller Options shall expire effective as
of the Effective Time and be converted into the right to receive the Option
Consideration. The Surviving Company shall cause the Paying Agent (as defined in
Section 1.9(a)) to pay each holder of Seller Options, promptly following the
Effective Time, the Option Consideration for all Seller Options held by such
holder. The Board of Directors of Seller or any committee thereof responsible
for the administration of Seller's stock option plans shall take any and all
action necessary to effectuate the matters described in this Section 1.7(b) on
or before the Effective Time. Any amounts payable pursuant to this Section
1.7(b) shall be subject to any required withholding of taxes and shall be paid
without interest. Parent agrees to provide the Surviving Company with sufficient
funds to permit the Surviving Company to satisfy its obligations under this
Section 1.7(b).
(c) The Seller has adopted a Directors Retainer Fee Plan (the "Fee
Plan") pursuant to which eligible directors may elect to receive certain fees in
cash or in Seller Common Shares or to defer payment of such fees and credit such
fees to an account (the "Share Unit Account") consisting of units that are
equivalent in value to Seller Common Shares ("Share Units"). The Seller shall
take all actions necessary so that all Share Units outstanding immediately prior
to the Effective Time shall be canceled immediately prior to the Effective Time
in exchange for the right of each holder of Share Units to receive an amount in
cash equal to the product of (A) the number of Share Units in such holder's
Share Unit Account outstanding immediately prior to the Effective Time and (B)
the Common Merger Consideration to be delivered by the Surviving Company
immediately following the Effective Time. All applicable withholding taxes
attributable to the payments contemplated by this Section 1.7(c) shall be
deducted from the amounts payable under this Section 1.7(c) and any amounts
payable under this Section 1.7(c) shall be payable without interest. Except as
provided in this Section 1.7(c), the Fee Plan shall terminate at the Effective
Time.
1.8 Transactions Relating to Seller Partnership. Contemporaneously with
the execution of this Agreement, Parent and Buyer shall cause Buyer Operating
Partnership to enter into the Partnership Merger Agreement with Seller
Partnership pursuant to which, among other things, (i) Buyer Operating
Partnership will be merged with and into Seller Partnership (the "Partnership
Merger") with Seller Partnership surviving as the Surviving Operating
Partnership and (ii) each holder ("Seller Unit Holder") of units in the Seller
Partnership ("Seller OP Units") will be offered the option of receiving either
(A) an amount per Seller OP Unit equal to the Common Merger Consideration or (B)
one Class A Preferred Unit (as defined in the Partnership Merger Agreement) for
each Seller OP Unit held by such holder or (C) one Class B Unit (as defined in
the Partnership Merger Agreement) for each Seller OP Unit held by such holder.
Seller hereby consents to the cancellation of the Seller OP Units it owns
immediately prior to the effective time of the Partnership
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<PAGE>
Merger in accordance with the provisions of the Partnership Merger Agreement.
Buyer hereby consents to the cancellation of its general partnership interest in
Buyer Operating Partnership owned immediately prior to the effective time of the
Partnership Merger in accordance with the provisions of the Partnership Merger
Agreement.
1.9 Exchange of Certificates; Pre-Closing Dividends: Fractional Shares.
(a) Prior to the Effective Time, Buyer shall appoint a paying agent
reasonably acceptable to Seller to act as agent (the "Paying Agent") for the
payment of the Merger Consideration upon surrender of certificates formerly
representing issued and outstanding Seller Common Shares or Seller Preferred
Shares, as applicable, and payment in respect of Seller Options and amounts
owing under the Fee Plan.
(b) Parent and Buyer shall provide to the Paying Agent on or before
the Effective Time, for the benefit of the holders of Seller Common Shares,
Seller Preferred Shares, Seller Options and Share Units, cash payable in
exchange for the issued and outstanding Seller Common Shares, cash payable in
exchange for the issued and outstanding Seller Preferred Shares, cash payable in
respect of Seller Options and cash payable in respect of Share Units.
(c) Promptly after the Effective Time, the Surviving Company shall
cause the Paying Agent to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Seller Common Shares or Seller Preferred Shares (the "Certificates")
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent and shall be in such form and
have such other provisions as Buyer may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Paying Agent, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor the applicable
Merger Consideration, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Seller Common Shares or
Seller Preferred Shares which is not registered in the transfer records of
Seller, payment may be made to a Person (as defined in Section 2.2(a)) other
than the Person in whose name the Certificate so surrendered is registered if
such Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment either shall pay any transfer or
other Taxes (as defined in Section 2.14(a)) required by reason of such payment
being made to a Person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Company that such Tax or Taxes
have been paid or are not applicable. Until surrendered as contemplated by this
Section 1.9, each Certificate (other than Certificates representing Dissenting
Shares) shall be deemed at any time after the
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<PAGE>
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration, without interest. No interest will be paid or will accrue
on the Merger Consideration upon the surrender of any Certificate.
(d) All Merger Consideration paid upon the surrender of Certificates
in accordance with the terms of this Section 1.9 shall be deemed to have been
paid in full satisfaction of all rights pertaining to the Seller Common Shares
or Seller Preferred Shares, as applicable, formerly represented by such
Certificates; provided, however, that Seller shall transfer to the Paying Agent
cash sufficient to pay any dividends or make any other distributions with a
record date on or prior to the Effective Time which may have been declared or
made by Seller on such Seller Common Shares, including without limitation any
dividends permitted by the second paragraph of Section 5.9 hereof, or Seller
Preferred Shares, as applicable, in accordance with the terms of this Agreement
or prior to the date of this Agreement and which remain unpaid at the Effective
Time and have not been paid prior to such surrender, and there shall be no
further registration of transfers on the stock transfer books of Seller of the
Seller Common Shares and Seller Preferred Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Company for any reason, they shall
be canceled and exchanged as provided in this Section 1.9.
(e) None of Parent, Seller, Buyer, the Surviving Company or the
Paying Agent shall be liable to any Person in respect of any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. Any portion of the Merger
Consideration delivered to the Paying Agent pursuant to this Agreement that
remains unclaimed for 12 months after the Effective Time shall be redelivered by
the Paying Agent to the Surviving Company, upon demand, and any holders of
Certificates who have not theretofore complied with Section 1.9(c) shall
thereafter look only to the Surviving Company for delivery of the Merger
Consideration and any unpaid dividends, subject to applicable escheat and other
similar Laws (as defined in Section 2.5(b)).
1.10 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, Seller Common Shares and Seller Preferred Shares outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
appraisal for such shares in accordance with Section 262 of the DGCL
("Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration as provided in Section 1.7, unless and until such holder
fails to perfect or withdraws or otherwise loses his right to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails to
perfect or withdraws or loses his right to appraisal, such Dissenting Shares
shall thereupon be treated as if they had been converted as of the Effective
Time into the right to receive the Merger Consideration, if any, to which such
holder is entitled, without interest thereon. Seller shall give Buyer prompt
notice of any demands received by Seller for appraisal of shares and, prior to
the Effective Time, Buyer shall have the right to participate in all
negotiations and
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<PAGE>
proceedings with respect to such demands. Prior to the Effective Time, Seller
shall not, except with the prior written consent of Buyer, make any payment with
respect to, or settle or offer to settle, any such demands.
1.11 Alternative Structure of Merger. While it is currently contemplated
that the Merger shall be effected through the merger of Buyer with and into
Seller, Parent shall have the option, in its sole discretion and without
requiring the further consent of Seller or Seller's Board of Directors or
stockholders, to cause the Merger to be effected through an alternative
transaction structure of Seller merging into Parent, with Parent being the
Surviving Company (the "Alternative Merger"), in which case (i) each general
partnership interest and limited partnership interest of Parent issued and
outstanding immediately prior to the Effective Time shall be converted in the
Merger into a corresponding general partnership interest or limited partnership
interest, as the case may be, of the Surviving Company, (ii) the limited
partnership agreement of Parent shall be the limited partnership agreement of
the Surviving Company and (iii) the general partners and officers of Parent
shall be the general partners and officers of the Surviving Company. Parent
shall make such election by delivering to Seller a notice (the "Election
Notice") electing to effect the Alternative Merger. The Election Notice shall be
available for the inspection of any stockholder of Seller upon request during
normal business hours. Any such election may be made only after the respective
approvals of the Merger and the Partnership Merger by the stockholders of Seller
and Seller Unit Holders and after satisfaction (or waiver by the parties
entitled to the benefits thereof) of all other conditions to the consummation of
the Merger set forth in Article 6. For purposes of this Agreement, (i) all
references to the term "Merger" shall be deemed to include the Alternative
Merger, except for such references contained in the second sentence of Section
1.6 and in this Section 1.11, and (ii) all references to the term "Surviving
Company" shall be deemed to include Parent in its capacity as the surviving
entity in the Alternative Merger. As part of the Proxy Statement and the Consent
Solicitation Statement and in the manner required by applicable law, Seller
shall describe the provisions of this Section 1.11. In the event the Alternative
Merger is effectuated, the parties agree that for Federal income tax purposes,
the Merger shall be treated as an asset acquisition by Parent, followed by a
liquidation of Seller.
1.12 Further Assurances. If, at any time after the Effective Time, the
Surviving Company shall determine or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Company the right, title or interest in, to or under any of the rights,
properties or assets of Seller acquired or to be acquired by the Surviving
Company as a result of, or in connection with, the Merger or otherwise to carry
out this Agreement, the Surviving Company shall be authorized to execute and
deliver, in the name and on behalf of each of Parent, Buyer and Seller or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of Parent, Buyer and Seller or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and
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under such rights, properties or assets in the Surviving Company or otherwise to
carry out this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Parent and Buyer, except as set forth in
the letter of even date herewith signed by the President of Seller and delivered
to Buyer prior to the execution hereof (the "Seller Disclosure Letter") (it
being understood that the Seller Disclosure Letter shall be arranged in sections
corresponding to the sections contained in this Article 2, and the disclosures
in any section of the Seller Disclosure Letter shall qualify all of the
representations in the corresponding section of this Article 2 and, in addition,
other sections in this Article 2 to the extent it is clear from a reading of the
disclosure that such disclosure is applicable to such other sections) as
follows:
2.1 Organization, Standing and Power of Seller. Seller is a corporation
duly organized and validly existing under the Laws of Delaware. Seller has the
requisite corporate power and authority to carry on its business as now being
conducted. Seller is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate, would
not have a Seller Material Adverse Effect. Seller has delivered to Buyer
complete and correct copies of Seller's Certificate of Incorporation and
By-laws, in each case, as amended to the date of this Agreement. As used in this
Agreement, "Seller Material Adverse Effect" shall mean a material adverse effect
on the business, properties, assets, financial condition, or results of
operations of Seller and its Subsidiaries, taken as a whole, including the
prevention of the ability of Seller, the Seller General Partner (as defined
below) or the Seller Partnership to consummate any of the Transactions (as
defined below).
2.2 Seller Subsidiaries.
(a) Section 2.2 of the Seller Disclosure Letter sets forth (i) each
Subsidiary (as defined below) of Seller (the "Seller Subsidiaries"), (ii) the
ownership interest therein of Seller, (iii) if not wholly owned by Seller, the
identity and ownership interest of each of the other owners of such Seller
Subsidiary and (iv) each apartment community owned by such Subsidiary. As used
in this Agreement, "Subsidiary" of any Person (as defined below) means any
corporation, partnership, limited liability company, joint venture, trust or
other legal entity of which such Person (either directly or through or together
with another Subsidiary of such Person) owns 50% or more of the capital stock or
other equity interests of such corporation, partnership, limited liability
company, joint venture or other legal entity, including, without limitation, the
Seller Partnership, but does not include short-term money
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market investments and other participation interests in short-term investments.
As used herein, "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(b) (i) All the outstanding shares of capital stock owned by Seller
of each Seller Subsidiary that is a corporation have been validly issued and are
(A) fully paid, nonassessable and free of any preemptive rights, (B) owned by
Seller or by another Seller Subsidiary and (C) owned free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens") or any other limitation or
restriction (including any contractual restriction on the right to vote or sell
the same) other than restrictions under applicable securities laws; and (ii) all
equity interests in each Seller Subsidiary that is a partnership, joint venture,
limited liability company or trust which are owned by Seller, by another Seller
Subsidiary or by Seller and another Seller Subsidiary are owned free and clear
of all Liens or any other limitation or restriction (including any contractual
restriction on the right to vote or sell the same) other than restrictions under
applicable securities laws. Each Seller Subsidiary that is a corporation is duly
incorporated and validly existing under the Laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to carry on
its business as now being conducted, and each Seller Subsidiary that is a
partnership, limited liability company or trust is duly organized and validly
existing under the Laws of its jurisdiction of organization and has the
requisite power and authority to carry on its business as now being conducted.
Each Seller Subsidiary is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, would not have a Seller Material
Adverse Effect. True and correct copies of the certificate of incorporation,
By-laws, organization documents and partnership, joint venture and operating
agreements of each Seller Subsidiary, and all amendments to the date of this
Agreement, have been made available or previously delivered to Buyer.
2.3 Capital Structure.
(a) The authorized shares of capital stock of Seller consist of
60,000,000 shares of preferred stock, $0.01 par value per share, of which
2,737,000 shares are issued and outstanding as of the date hereof and are
designated as Series 1997-A Convertible Preferred Shares (the "Seller Preferred
Shares"), and 140,000,000 shares of Common Stock, $0.01 par value per share (the
"Seller Common Shares"), of which 36,727,591 are issued and outstanding as of
the date hereof. As of the date hereof, (i) 3,300,000 Seller Common Shares have
been reserved for issuance under the Amended and Restated Stock Option Plan of
Seller (the "Seller Plan"), under which options in respect of 1,534,300 Seller
Common Shares have been granted and are outstanding as of the date hereof, (ii)
9,982,255 Seller Common Shares are reserved for issuance upon conversion of
Seller OP Units,
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(iii) 5,680,917 Seller Common Shares are reserved for issuance upon conversion
of the Seller Preferred Shares and (iv) no Seller Preferred Shares or Seller
Common Shares are held in the Seller's treasury.
(b) Set forth in Section 2.3 of the Seller Disclosure Letter is a
true and complete list of the following: (i) each qualified or nonqualified
option to purchase Seller Common Shares granted under the Seller Plan or any
other formal or informal arrangement ("Seller Options"); (ii) each grant of
Seller Common Shares to employees which are subject to any risk of forfeiture;
and (iii) all other warrants or other rights to acquire stock, all limited stock
appreciation rights, phantom stock, dividend equivalents, performance units and
performance shares granted under the Seller Plan which are outstanding as of the
date hereof. On the date of this Agreement, except as set forth in this Section
2.3 or Section 2.3 of the Seller Disclosure Letter, no shares of capital stock
of Seller were outstanding or reserved for issuance.
(c) All outstanding shares of capital stock of Seller are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of Seller having the right under applicable law or Seller's Certificate of
Incorporation or By-laws to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of
Seller may vote.
(d) There are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which Seller or any Seller Subsidiary is a party or by which any such entity is
bound, obligating Seller or any Seller Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock,
voting securities or other ownership interests of Seller or any Seller
Subsidiary or obligating Seller or any Seller Subsidiary to issue, grant, extend
or enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking (other than to Seller or a Seller
Subsidiary). There are no outstanding obligations of Seller or any Seller
Subsidiary to repurchase, redeem or otherwise acquire any shares of stock of
Seller or shares of stock or other ownership interests of any Seller Subsidiary.
(e) As of the date hereof, 46,376,824 Seller OP Units are validly
issued and outstanding, fully paid and nonassessable except to the extent
provided by applicable law, of which 36,414,986 are owned by Seller and 312,605
are owned by Berkshire Apartments, Inc. Section 2.3 of the Seller Disclosure
Letter sets forth the name of each Seller Unit Holder and the number of Seller
OP Units owned by each such Seller Unit Holder as of the date of this Agreement.
The Seller OP Units are subject to no restriction established by Seller or under
applicable law (other than restrictions on sale imposed by applicable securities
laws) except as set forth in the Amended and Restated Limited Partnership
Agreement of the Seller Partnership (the "Seller Partnership Agreement") and
Seller Contribution Agreements. Seller Partnership has not issued or granted and
is not a party to any outstanding
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commitments of any kind relating to, or any presently effective agreements or
understandings with respect to, issuing interests in Seller Partnership or
securities convertible into interests in Seller Partnership.
(f) All dividends on Seller Common Shares and distributions on
Seller OP Units which have been declared prior to the date of this Agreement
have been paid in full (except for the dividend on Seller Common Shares and
distributions on Seller OP Units payable on May 15, 1999).
2.4 Other Interests. Neither Seller nor any of its Subsidiaries owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or entity (other
than investments in the Seller Subsidiaries and short-term investment
securities). Neither Seller nor any of the Seller Subsidiaries is in material
breach of any provision of any agreement, document or contract governing its
rights in or to any such interests owned or held by it. To the Knowledge of
Seller (as defined in Section 2.23), no other party to any such agreement,
document or contract is in material breach of any of its obligations under any
such agreement, document or contract, nor has Seller or any of Seller's
Subsidiaries received any notice of any such material breach.
2.5 Authority; Noncontravention; Consents.
(a) Seller has the requisite corporate power and authority to enter
into this Agreement and, subject to the adoption of this Agreement by holders of
(i) a majority of the outstanding Seller Preferred Shares and (ii) a majority of
the Seller Common Shares and Seller Preferred Shares (voting on an as-converted
basis), voting as a single class, representing a majority of the issued and
outstanding Seller Common Shares (after giving effect to a deemed conversion of
the Seller Preferred Shares) of the Seller (collectively, the "Seller
Shareholder Approval"), to consummate the transactions contemplated by this
Agreement to which Seller is a party. The execution and delivery of this
Agreement by Seller and the consummation by Seller of the transactions
contemplated by this Agreement to which Seller is a party have been duly
authorized by all necessary corporate action on the part of Seller, except for
and subject to the Seller Shareholder Approval and approval by the holders of a
majority of the limited partnership interest in the Seller Partnership (the
"Seller Partner Approval"). This Agreement has been duly executed and delivered
by Seller and constitutes a valid and binding obligation of Seller, enforceable
against Seller in accordance with and subject to its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar Laws relating to
creditors' rights and general principles of equity. The respective Boards of
Directors of Seller and the Seller General Partner have duly and validly
approved, and taken all corporate or partnership action required to be taken by
them for the consummation of the Transactions, including but not limited to all
actions required to render inapplicable to the Merger and this Agreement (and
the transactions provided for herein) the restrictions on "business
combinations" (as defined in Section 203(a)(1) of the DGCL) set forth in Section
203 of the DGCL.
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(b) The execution and delivery of this Agreement by Seller do not,
and the consummation of the transactions contemplated by this Agreement to which
Seller is a party and compliance by Seller with the provisions of this Agreement
will not, require any consent, approval or notice under, or conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of Seller or any
Seller Subsidiary under, (i) the Certificate of Incorporation or the Amended and
Restated By-laws of Seller or the comparable certificate of incorporation or
organizational documents or partnership or similar agreement (as the case may
be) of any Seller Subsidiary, each as amended or supplemented to the date
hereof, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
reciprocal easement agreement, lease, joint venture agreement, development
agreement, benefit plan or other agreement, instrument, permit, concession,
franchise or license applicable to Seller or any Seller Subsidiary or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation (collectively, "Laws")
applicable to Seller or any Seller Subsidiary, or their respective properties or
assets, other than, in the case of clause (ii) (other than such items relating
to the incurrence of indebtedness) or (iii), any such conflicts, violations,
defaults, rights, loss or Liens that individually or in the aggregate would not
reasonably be expected to (x) have a Seller Material Adverse Effect or (y)
prevent or delay beyond December 31, 1999 the consummation of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to Seller or any Seller Subsidiary in
connection with the execution and delivery of this Agreement by Seller or the
consummation by Seller of the transactions contemplated by this Agreement,
except for (i) the filing with the Securities and Exchange Commission (the
"SEC") and the New York Stock Exchange of the Proxy Statement (as defined in
Section 5.1(a)) and any filings required by the Exchange Act (including Schedule
13E-3), (ii) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, (iii) the filing of a certificate of merger with the
Secretary of State of the State of Delaware with respect to the Partnership
Merger, (iv) any filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (v) the filing of a Form D
with the SEC with respect to the transaction contemplated by the Partnership
Merger Agreement and (vi) such other consents, approvals, orders,
authorizations, registrations, declarations and filings (A) as are set forth in
Section 2.5 of the Seller Disclosure Letter, (B) as may be required under (y)
federal, state or local environmental Laws or (z) the "blue sky" laws of various
states, to the extent applicable or (C) which, if not obtained or made, would
not prevent or delay beyond December 31, 1999 the consummation of any of the
transactions contemplated by this Agreement or otherwise prevent or delay beyond
December 31,
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1999 Seller from performing its obligations under this Agreement in any material
respect or have, individually or in the aggregate, a Seller Material Adverse
Effect.
2.6 SEC Documents; Financial Statements; Undisclosed Liabilities.
(a) Seller has filed all Seller SEC Documents (as defined below) on
a timely basis. Section 2.6 of the Seller Disclosure Letter contains a complete
list of all Seller SEC Documents filed by Seller or Seller Partnership with the
SEC since January 1, 1999 and on or prior to the date of this Agreement. All of
the Seller SEC Documents (other than preliminary material), as of their
respective filing dates, complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
in each case, the rules and regulations promulgated thereunder applicable to
such Seller SEC Documents. None of the Seller SEC Documents at the time of
filing contained, or will contain at the time of filing if not yet filed, any
untrue statement of a material fact or omitted, or will omit at the time of
filing if not yet filed, to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
such statements have been modified or superseded by later Seller SEC Documents
filed and publicly available. The consolidated financial statements of Seller
included in the Seller SEC Documents complied (or, with respect to the Seller
SEC Documents that have not been filed on or before the date hereof, will
comply) as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared (or will be prepared) in accordance with generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, as permitted by the applicable rules and regulations of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented (or will fairly present) in
all material respects, in accordance with the applicable requirements of GAAP
and the applicable rules and regulations of the SEC, the consolidated financial
position of Seller and its Subsidiaries, as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Seller has no Subsidiaries which are not consolidated for
accounting purposes.
(b) Except (i) for liabilities or obligations incurred in the
ordinary course of business, (ii) for liabilities or obligations incurred in
connection with the transactions contemplated by this Agreement, or (iii) as
disclosed in the Seller SEC Documents filed after December 31, 1998 or in the
Seller Disclosure Letter, Seller and its Subsidiaries have no material
liabilities or obligations (whether absolute, accrued, contingent or otherwise).
As used herein, "Seller SEC Documents" shall mean all reports, schedules, forms,
statements and other documents required to be filed by the Seller with the SEC
since January 1, 1996; provided that with respect to all representations and
warranties of Seller contained in this Article 2 (except those
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contained in Section 2.6(a)), references to Seller SEC Documents shall refer
only to those filings made prior to the date hereof.
2.7 Absence of Certain Changes or Events. Except as disclosed in the
Seller SEC Documents, since the date of the most recent audited financial
statements included in the Seller SEC Documents (the "Seller Financial Statement
Date"), Seller and its Subsidiaries have conducted their business only in the
ordinary course (taking into account prior practices, including the acquisition
of properties and issuance of securities) and, except as disclosed in the Seller
SEC Documents or the Seller Disclosure Letter, there has not been (a) any Seller
Material Adverse Change (as defined below), (b) except for regular quarterly
distributions not in excess of $.25 per Seller Common Share or Seller OP Unit
and dividends on the Seller Preferred Shares in accordance with the terms of
Seller's Certificate of Incorporation, respectively (or as necessary to maintain
REIT status), in each case subject to rounding adjustments as necessary and with
customary record and payment dates, and except as permitted by Section 5.9 of
this Agreement, any authorization, declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the Seller Common Shares, the Seller OP Units or the Seller Preferred Shares,
(c) any split, combination or reclassification of the Seller Common Shares, the
Seller OP Units or the Seller Preferred Shares or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for, or giving the right to acquire by exchange or exercise,
shares of stock of Seller or partnership interests in Seller partnerships or any
issuance of an ownership interest in, any Seller Subsidiary, (d) any damage,
destruction or loss, whether or not covered by insurance, that has or would
reasonably be likely to have a Seller Material Adverse Effect, (e) any change in
financial or tax accounting methods, principles or practices by Seller or any
Seller Subsidiary materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in GAAP, (f) (x) any
granting by Seller or any of its Subsidiaries to any officer or other key
employee of Seller or any of its Subsidiaries of any increase in compensation,
except for normal increases in the ordinary course of business consistent with
past practice or as required under employment agreements in effect as of
December 31, 1998, (y) any granting by Seller or any of its Subsidiaries to any
such officer or key employee of any increase in severance or termination pay,
except as was required under any employment, severance or termination agreements
in effect as of December 31, 1998 or (z) any entry by Seller or any of its
Subsidiaries into any employment, severance or termination agreement with any
such officer or key employee except in the ordinary course of business
consistent with past practice, (g) any acquisition or disposition of any real
property, or any commitment to do so, made by Seller or any of its Subsidiaries
or (h) any making or revocation of any material tax election. As used in this
Agreement, "Seller Material Adverse Change" shall mean (i) any material adverse
change in the business, properties, assets, financial condition or results of
operations of Seller and its Subsidiaries, taken as a whole, or (ii) any other
change that would prevent or delay beyond December 31, 1999 the ability of
Seller, the Seller General Partner or the Seller Partnership from consummating
any of the Transactions.
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2.8 Litigation. Except as disclosed in the Seller SEC Documents, and other
than personal injury and other routine tort litigation arising from the ordinary
course of operations of Seller and its Subsidiaries (a) which are covered by
adequate insurance or (b) for which all material costs and liabilities arising
therefrom are reimbursable pursuant to common area maintenance or similar
agreements, as of the date hereof, there are no suits, actions or proceedings
pending (in which service of process has been received by an employee of Seller
or an Seller Subsidiary) or, to the Knowledge of Seller, threatened in writing
against or affecting Seller or any Seller Subsidiary that, individually or in
the aggregate, would reasonably be expected to (i) have a Seller Material
Adverse Effect or (ii) prevent or delay beyond December 31, 1999 the
consummation of any of the material transactions contemplated by this Agreement,
nor are there any judgments, decrees, injunctions, rules or orders of any court
or arbitrator or suits, actions or proceedings pending or threatened in writing
by any Governmental Entity outstanding against Seller or any of its Subsidiaries
with respect to any of the Transactions. Notwithstanding the foregoing, (y)
Section 2.8 of the Seller Disclosure Letter sets forth, as of the date hereof,
each and every (i) uninsured claim with respect to which if determined adversely
would reasonably be expected to result in a dollar cost to Seller or its
Subsidiaries in excess of $100,000, (ii) equal employment opportunity claim
against Seller or a Seller Subsidiary with respect to which if determined
adversely would reasonably be expected to result in a cost in excess of $100,000
and (iii) claim against Seller or a Seller Subsidiary relating to sexual
harassment and/or discrimination pending or, to the Knowledge of Seller,
threatened as of the date hereof with respect to which if determined adversely
would reasonably be expected to result in a cost in excess of $100,000, in each
case with a brief summary of such claim or threatened claim and (z) no claim is
pending or has been made within the five-year period ending on the date of this
Agreement under any director's or officer's liability insurance policy
maintained at any time by Seller or by any of its Subsidiaries.
2.9 Properties.
(a) Seller or a Seller Subsidiary set forth in Section 2.2 of the
Seller Disclosure Letter owns good and marketable fee simple title to each of
the real properties identified in Section 2.2 of the Seller Disclosure Letter
(collectively, the "Seller Properties" and each, a "Seller Property"), which are
all of the real properties owned by them as of the date hereof. Except as set
forth in the existing title reports identified in clause (iii) below and except
for any easements granted in the ordinary course of business since the date of
such title reports which do not have a material adverse effect on the operation
of any of the Seller Properties, no other Person has any real property ownership
interest in any of the Seller Properties. The Seller Properties are not subject
to any rights of way, written agreements, Laws, ordinances and regulations
affecting building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions") or Liens (including Liens for Taxes),
mortgages or deeds of trust, claims against title, charges which are Liens,
security interests or other encumbrances on title (the "Encumbrances"), except
for
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(i) Property Restrictions and Encumbrances set forth in Section 2.9(a)(i) of the
Seller Disclosure Letter, (ii) Property Restrictions imposed or promulgated by
law or any governmental body or authority with respect to real property,
including zoning regulations, which, individually or in the aggregate, would not
have a Seller Material Adverse Effect, (iii) Property Restrictions and
Encumbrances disclosed on existing title reports or existing surveys (in either
case copies of which title reports and surveys have been delivered to Sullivan &
Cromwell or made available to Buyer's representatives at the offices of Hale and
Dorr LLP on or prior to February 18, 1999); provided that such Encumbrances
secure either indebtedness which is described in the Seller Disclosure Letter or
indebtedness which has been discharged in full, and (iv) mechanics', carriers',
workmen's, repairmen's Liens and other Encumbrances and Property Restrictions,
if any, which, individually or in the aggregate, would not have a Seller
Material Adverse Effect. Section 2.9 of the Seller Disclosure Letter lists each
of the Seller Properties which is under development as of the date of this
Agreement and describes the status of such development as of the date hereof.
(b) Valid policies of title insurance have been issued insuring
Seller or the applicable Seller Subsidiary's fee simple title to each of the
Seller Properties owned by it in amounts at least equal to the purchase price
thereof paid by Seller or its Subsidiary subject only to the matters disclosed
above and in Section 2.9(b) of the Seller Disclosure Letter. Such policies are,
at the date hereof, in full force and effect. No claim has been made against any
such policy.
(c) Seller has not failed to obtain and maintain in full force and
effect a certificate, permit or license from any governmental authority having
jurisdiction over any of the Seller Properties which failure, individually or in
the aggregate, would have a Seller Material Adverse Effect. There is no pending
threat of modification or cancellation of any of same which, individually or in
the aggregate, would have a Seller Material Adverse Effect. There is no notice
of any violation of any federal, state or municipal law, ordinance, order,
regulation or requirement issued by any governmental authority which,
individually or in the aggregate, would have a Seller Material Adverse Effect.
There has been no physical damage to any Seller Properties which, individually
or in the aggregate, would have a Seller Material Adverse Effect for which there
is no insurance in effect covering the cost of the restoration.
(d) Neither Seller nor any of the Seller Subsidiaries has received
any notice with respect to any Seller Property to the effect that any
condemnation or rezoning proceedings are pending or threatened which,
individually or in the aggregate, would have a Seller Material Adverse Effect.
All work to be performed, payments to be made and actions to be taken by Seller
or the Seller Subsidiaries prior to the date hereof pursuant to any agreement
entered into with a governmental body or authority in connection with a site
approval, zoning reclassification or other similar action (e.g., Local
Improvement District, Road Improvement District, Environmental Mitigation)
material to Seller and the Seller Subsidiaries taken as a
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whole have been performed, paid or taken, as the case may be, and Seller has no
Knowledge of any planned or proposed work, payments or actions that may be
required after the date hereof pursuant to such agreements that are material to
Seller and the Seller Subsidiaries taken as a whole.
(e) Except as set forth in Section 2.9(e) of the Seller Disclosure
Letter, all of the Seller's Properties are self-managed.
(f) The rent roll for the Seller's Properties as of February 1, 1999
has been previously delivered to Buyer and was complete and correct in all
material respects as of the date thereof.
(g) Except as set forth in Section 2.9(g) of the Seller Disclosure
Letter, no Seller Property is currently under development or subject to any
agreement with respect to development, and neither Seller nor any Seller
Subsidiary shall enter into any such agreements between the date hereof and the
Effective Time without the prior written approval of Buyer; provided, however,
that "development" shall not include capital improvements made in the ordinary
course of business to existing Seller Properties and repairs made to existing
Seller Properties.
(h) No Governmental Entity having jurisdiction over any Seller
Property under development has denied or rejected any applications by Seller for
a certificate, permit or license with respect to such Seller Property, which
denial or rejection, individually or in the aggregate, would have a Seller
Material Adverse Effect.
(i) For purposes of this Section 2.9, all individual items that are
qualified by Seller Material Adverse Effect and do not cause a representation
set forth in this Section 2.9 to be untrue because such items individually do
not have a Seller Material Adverse Effect shall be aggregated and the
representations set forth in this Section 2.9 shall be deemed to be untrue if
the aggregate of all of such individual matters has a Seller Material Adverse
Effect.
(j) All buildings, structures and other improvements in, on or
within the Seller Properties are in good operating condition and repair, subject
to continued repair and replacement in accordance with past practice except for
any failures to be in such condition and repair that would not, individually or
in the aggregate, have a Seller Material Adverse Effect.
2.10 Environmental Matters.
(a) Except as disclosed in the Seller SEC Documents and Seller's
Environmental Reports (as defined below) previously made available to Buyer, to
Seller's knowledge, none of Seller, any of the Seller Subsidiaries or any other
Person has caused or permitted (i) the presence of any hazardous substances,
hazardous materials, toxic substances or waste materials, pollutants,
contaminants, and materials
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regulated or defined or designated as hazardous, extremely or imminently
hazardous, dangerous, or toxic pursuant to any local, county, state, territorial
or federal governmental authority or with respect to which such a governmental
authority otherwise requires environmental investigation, monitoring, reporting
or remediation (collectively, "Hazardous Materials") on any of the Seller
Properties that is not in compliance with, or that would result in any liability
under, any Environmental Law or (ii) any spills, releases, discharges or
disposal of Hazardous Materials to have occurred or be presently occurring on or
from the Seller Properties as a result of any construction on or operation and
use of the Seller Properties, which presence or occurrence would, individually
or in the aggregate, have a Seller Material Adverse Effect; and in connection
with the construction on or operation and use of the Seller Properties, Seller
and the Seller Subsidiaries have complied with all applicable local, state and
federal Environmental Laws, including all regulations, ordinances and
administrative and judicial orders relating to the generation, recycling, reuse,
sale, storage, handling, transport and disposal of any Hazardous Materials,
except to the extent such failure to comply, individually or in the aggregate,
would not have a Seller Material Adverse Effect. With respect to each Seller
Property, since the date of the most recent Seller's Environmental Report
relating to such Seller Property, except where the failure of any of the
following to be true individually or in the aggregate would not have a Seller
Material Adverse Effect, (i) the assets, properties, businesses and operations
of Seller and its Subsidiaries are and have been in compliance with applicable
Environmental Laws, (ii) Seller and its Subsidiaries have obtained, currently
maintain and, as currently operating, are in compliance with all Seller Permits
necessary under any Environmental Law for the conduct of the business and
operations of Seller and its Subsidiaries in the manner now conducted, and there
are no actions or proceedings pending or threatened to revoke or materially
modify such Seller Permits, (iii) no Hazardous Materials have been used, stored,
manufactured, treated, processed or transported to or from any such Seller
Property except as necessary to the customary conduct of business and in
compliance with law and in a manner that does not result in liability under
Environmental Laws; (iv) there have been no spills, releases, discharges or
disposals of Hazardous Materials on or from such Seller Property; and (v) Seller
and Seller Subsidiaries have not received any notice of potential
responsibility, letter of inquiry or notice of alleged liability from any Person
regarding such Seller Property or the business conducted thereon. For the
purposes of this Paragraph 2.10 only, "Seller Properties" shall be deemed to
include all property formerly owned, operated or leased by Seller or Seller
Subsidiaries; solely, however, as to the period of time when such property was
so owned, operated or leased by Seller or the Seller Subsidiaries. Seller has
previously delivered or made available to Buyer complete copies of all final
versions of environmental investigations and testing or analysis (other than
those which have been superseded by more recent investigations, testing or
analyses) that are in the possession, custody or control of any of Seller or any
of the Seller Subsidiaries with respect to the environmental condition of the
Seller Properties, all of which are listed in Section 2.10 of the Seller
Disclosure Letter ("Seller's Environmental Reports").
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(b) Except as set forth in Seller's Environmental Reports, (i) there
are no asbestos-containing materials, lead-based paints, or radon at, in or part
of any facility owned, operated or leased by Seller or any of its Subsidiaries,
the presence of which, individually or in the aggregate, would reasonably be
expected to result in Seller incurring Environmental Liabilities and Costs
aggregating $30 million or more and (ii) there are no underground storage tanks
owned, operated or controlled by Seller or its Subsidiaries on any real property
owned, operated or leased by Seller, the presence of which, individually or in
the aggregate, would be reasonably expected to result in Seller incurring
Environmental Liabilities and Costs aggregating $30 million or more.
(c) For purposes of this Agreement, the terms below shall have the
following meanings:
"Environmental Law" means any law (including, without limitation,
common law), regulation, ordinance, guideline, code, decree, judgment, order,
permit or authorization or other legally enforceable requirement of any
Governmental Entity relating to or imposing liability with respect to worker or
public safety or the indoor or outdoor environment or natural resources,
including, without limitation, pollution, contamination, Hazardous Materials,
cleanup, regulation and protection of the air, natural resources, water or soils
in the indoor or outdoor environment; and
"Environmental Liabilities and Costs" means all losses, liabilities,
damages, fines, penalties, obligations, costs or expenses (including, without
limitation, fees, disbursements, expenses of legal counsel, experts and
engineers and the costs of investigation and cleanup studies and to remove,
treat or clean up Hazardous Materials) incurred, assessed or levied pursuant to
any Environmental Law.
2.11 Related Party Transactions. Set forth in Section 2.11 of the Seller
Disclosure Letter is a list of all arrangements, agreements and contracts
entered into by Seller or any of the Seller Subsidiaries with any Person who is
an officer, director or Affiliate (as defined below) of Seller, or any entity of
which any of the foregoing is an Affiliate, except those of a type available to
Seller employees generally. Such documents, copies of all of which have
previously been delivered or made available to Buyer, are listed in Section 2.11
of the Seller Disclosure Letter. As used in this Agreement, the term "Affiliate"
shall have the same meaning as such term is defined in Rule 405 promulgated
under the Securities Act.
2.12 Employee Benefits. As used herein, the term "Employee Plan" includes
any pension, retirement, savings, disability, medical, dental, health, life,
death benefit, group insurance, profit sharing, deferred compensation, stock
option, bonus, incentive, vacation pay, tuition reimbursement, severance pay, or
other material employee benefit plan, trust, employment agreement, contract,
agreement, policy or commitment (including, without limitation, any pension
plan, as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended
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and the rules and regulations promulgated thereunder ("ERISA") ("Pension Plan"),
and any welfare plan as defined in Section 3(1) of ERISA ("Welfare Plan")),
whether any of the foregoing is funded, insured or self-funded, written or oral,
(i) sponsored or maintained by Seller or its Subsidiaries (each a "Controlled
Group Member") and covering any Controlled Group Member's active or former
employees (or their beneficiaries), (ii) to which any Controlled Group Member is
a party or by which any Controlled Group Member (or any of the rights,
properties or assets thereof) is bound or (iii) with respect to which any
current Controlled Group Member may otherwise have any material liability
(whether or not such Controlled Group Member still maintains such Employee
Plan). Each Employee Plan is listed in Section 2.12 of the Seller Disclosure
Letter. With respect to the Employee Plans:
(a) Except as disclosed in Section 2.12 of the Seller Disclosure
Letter, no Controlled Group Member has any continuing liability under any
Welfare Plan which provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment, except as may be required by Section 4980B of the
Internal Revenue Code of 1986, as amended (the "Code"), or Section 601 (et seq.)
of ERISA, or under any applicable state law, and at the expense of the
participant or the beneficiary of the participant.
(b) Each Employee Plan complies in all material respects with the
applicable requirements of ERISA and any other applicable law governing such
Employee Plan, and each Employee Plan has at all times been properly
administered in all material respects in accordance with all such requirements
of law, and in accordance with its terms and the terms of any applicable
collective bargaining agreement to the extent consistent with all such
requirements of law. Each Pension Plan which is intended to be qualified is
qualified under Section 401(a) of the Code, has received a favorable
determination letter from the IRS stating that such Plan meets the requirements
of Section 401(a) of the Code and that the trust associated with such Plan is
tax exempt under Section 501(a) of the Code and to the Knowledge of Seller no
event has occurred which would jeopardize the qualified status of any such plan
or the tax exempt status of any such trust under Sections 401(a) and Section
501(a) of the Code, respectively, except in circumstances in which, individually
or in the aggregate, the failure to so qualify or be tax exempt would not have a
Seller Material Adverse Effect. No lawsuits, claims (other than routine claims
for benefits) or complaints to, or by, any Person or Governmental Entity have
been filed or are pending which, individually or in the aggregate, would have a
Seller Material Adverse Effect and, to the Knowledge of Seller, there is no fact
or contemplated event which would be expected to give rise to any such lawsuit,
claim (other than routine claims for benefits) or complaint with respect to any
Employee Plan that would have a Seller Material Adverse Effect. Without limiting
the foregoing, except in the case of the following clauses (i) through (vi) as
would not individually or in the aggregate have a Seller Material Adverse
Effect, the following are true with respect to each Employee Plan:
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(i) all Controlled Group Members have filed or caused to be
filed every material return, report statement, notice, declaration
and other document required by any law or governmental agency,
federal, state and local (including, without limitation, the
Internal Revenue Service and the Department of Labor) with respect
to each such Employee Plan, each of such filings has been complete
and accurate in all material respects and no Controlled Group Member
has incurred any material liability in connection with such filings;
(ii) all Controlled Group Members have delivered or caused to
be delivered to every participant, beneficiary and other party
entitled to such material, all material plan descriptions, returns,
reports, schedules, notices, statements and similar materials,
including, without limitation, summary plan descriptions and summary
annual reports, as are required under Title I of ERISA, the Code, or
both, and no Controlled Group Member has incurred any material
liability in connection with such deliveries;
(iii) all contributions and payments with respect to Employee
Plans that are required to be made by a Controlled Group Member with
respect to periods ending on or before the Closing Date (including
periods from the first day of the current plan or policy year to the
Closing Date) have been, or will be, made or accrued before the
Closing Date in accordance with the appropriate plan document,
actuarial report, collective bargaining agreements or insurance
contracts or arrangements or as otherwise required by ERISA or the
Code;
(iv) with respect to each such Employee Plan, to the extent
applicable, Seller has delivered to or has made available to Buyer
true and complete copies of (A) plan documents, or any and all other
documents that establish the existence of the plan, trust,
arrangement, contract, policy or commitment and all amendments
thereto, (B) the most recent determination letter, if any, received
from the Internal Revenue Service, (C) the three most recent Form
5500 Annual Reports (and all schedules and reports relating thereto)
and actuarial reports and (D) all related trust agreements,
insurance contract or other funding agreements that implement each
such Employee Plan;
(v) no payment made or to be made to an officer, director or
employee pursuant to an Employee Plan either before, on, or after
consummation of the transactions contemplated by this Agreement
shall constitute an "excess parachute payment" within the meaning of
Section 280G of the Code; and
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(vi) consummation of the transactions contemplated by this
Agreement shall not (A) give rise to a severance pay obligation with
respect to those employees who continue employment with the
Surviving Corporation or (B) enhance or trigger (including
acceleration of vesting, payment or funding) any benefits under any
Employee Plan.
(c) With respect to each Employee Plan, there has not occurred, and
no Person or entity is contractually bound to enter into, any "prohibited
transaction" within the meaning of Section 4975(c) of the Code of Section 406 of
ERISA, which transaction is not exempt under Section 4975(d) of the Code or
Section 408 of ERISA which, individually or in the aggregate, would have a
Seller Material Adverse Effect.
(d) No Controlled Group Member has maintained or been obligated to
contribute to any Employee Plan subject to Code Section 412 or Title IV of
ERISA.
2.13 Employee Matters. Neither Seller nor any of the Seller Subsidiaries
is a party to, or bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or other labor organization,
nor has Seller or any of the Seller Subsidiaries agreed that any unit of its
employees is appropriate for collective bargaining. No union or other labor
organization has been certified as bargaining representative for any of Seller's
employees. To the Knowledge of Seller, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made or
threatened involving employees of Seller or any of the Seller Subsidiaries.
2.14 Taxes.
(a) Each of Seller and the Seller Subsidiaries and any consolidated,
combined, unitary or aggregate group for tax purposes of which Seller or any
Seller Subsidiary is or has been a member has timely filed all Tax Returns (as
defined below) required to be filed by it (after giving effect to any timely
filed extension properly granted by a Tax Authority (as defined below) having
authority to do so) and has timely paid (or Seller has timely paid on its
behalf) all Taxes (as defined below) shown on such Tax Returns as required to be
paid by it except (i) as set forth in Section 2.14 of the Seller Disclosure
Letter, (ii) Taxes that are being contested in good faith by appropriate
proceedings and for which Seller or the applicable Seller Subsidiary shall have
set aside on its books adequate reserves or (iii) where the failure to file such
Tax Returns or pay such Taxes would not have a Seller Material Adverse Effect.
Each such Tax Return is complete and accurate except where any failure to be
complete and accurate would not have a Seller Material Adverse Effect. The most
recent audited financial statements contained in the Seller SEC Documents
reflect an adequate reserve for all Taxes payable by Seller and the Seller
Subsidiaries for all taxable periods and portions thereof through the date of
such financial
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statements except where any failure would not have a Seller Material Adverse
Effect. Since the Seller Financial Statement Date, Seller has incurred no
liability for Taxes under Sections 857(b), 857(f), 860(c) or 4981 of the Code,
including without limitation any Tax arising from a prohibited transaction
described in Section 857(b)(6) of the Code, and neither Seller nor any Seller
Subsidiary has incurred any material liability for Taxes other than in the
ordinary course of business. No event has occurred, and no condition or
circumstance exists, which presents a risk that any Tax described in the
preceding sentence will be imposed upon Seller or any Seller Subsidiary except
where any failure would not have a Seller Material Adverse Effect. No material
deficiencies for any Taxes have been proposed, asserted or assessed against
Seller or any Seller Subsidiary, and no requests for waivers of the time to
assess any such Taxes are pending and no extensions of time to assess any such
Taxes are in effect. All Taxes required to be withheld, collected and paid over
to any Tax Authority by the Seller and any Seller Subsidiary have been timely
withheld, collected and paid over to the proper Tax Authority except where
failure to do so would not have a Seller Material Adverse Effect. Except as set
forth in Section 2.14 of the Seller Disclosure Letter, there are no material
pending actions or proceedings by any Taxing Authority for assessment or
collection of any Tax. Complete copies of all federal, state and local income or
franchise Tax Returns that have been filed by Seller and each Seller Subsidiary
for all taxable years beginning on or after January 1, 1996, all extensions
filed with any Tax Authority that are currently in effect and all written
communications with a Taxing Authority relating thereto, have been or will
hereafter promptly be delivered to the Buyer and the representatives of the
Buyer. No claim has been made by a Taxing Authority in a jurisdiction where
Seller or any Seller Subsidiary does not file Tax Returns that it is or may be
subject to taxation by the jurisdiction except where the failure to file such
Tax Return would not have a Seller Material Adverse Effect. Neither the Seller
nor any Seller Subsidiary holds any material asset (A) the disposition of which
would be subject to rules similar to Section 1374 of the Code as a result of an
election under Internal Revenue Service Notice 88-19, or (B) that is subject to
a consent filed pursuant to Section 341(f) of the Code and the regulations
thereunder. Except as set forth in Section 2.14 of the Seller Disclosure Letter,
neither the Seller, nor any Seller Subsidiary is obligated to make after the
Closing any payment that would not be deductible pursuant to Section 162(m) of
the Code except where the lack of such deduction would not have a Seller
Material Adverse Effect. Except as set forth in Section 2.14 of the Seller
Disclosure Letter, neither Seller nor any Seller Subsidiary is party to, nor has
any liability under (including liability with respect to any predecessor
entity), any indemnification, allocation or sharing agreement with respect to
Taxes. As used in this Agreement, "Tax" or "Taxes" shall include all federal,
state, local and foreign income, property, sales, use, occupancy, transfer,
recording, withholding, franchise, employment, excise and other taxes, tariffs
or governmental charges of any nature whatsoever, together with penalties,
interest or additions to tax with respect thereto. As used in this Agreement,
"Tax Return" or "Tax Returns" shall include all original and amended returns and
reports (including elections, claims, declarations, disclosures, schedules,
estimates, computations and information returns) required to be supplied to a
Tax Authority in any jurisdiction. As used in
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this Agreement, "Tax Authority" shall mean the Internal Revenue Service and any
other domestic or foreign bureau, department, entity, agency or other
Governmental Entity responsible for the administration of any Tax.
(b) Seller (i) for all taxable years commencing with its initial
taxable year through December 31, 1998 has been properly subject to taxation as
a real estate investment trust (a "REIT") within the meaning of Section 856 of
the Code and has qualified as a REIT for such years, (ii) has operated since
December 31, 1998, and will continue to operate to the Closing, in such a manner
as to qualify as a REIT for the taxable year beginning January 1, 1999
determined as if the taxable year of the REIT ended as of the Closing and (iii)
has not taken or omitted to take any action which would reasonably be expected
to result in a challenge to its status as a REIT, and no such challenge is
pending or to Seller's Knowledge threatened. Each Seller Subsidiary which is a
partnership, joint venture or limited liability company (i) has been since its
formation and continues to be treated for federal income tax purposes as a
partnership or disregarded as a separate entity, as the case may be, and has not
been treated for federal income tax purposes as a corporation or an association
taxable as a corporation and (ii) has not since the later of its formation or
the acquisition by Seller of a direct or indirect interest therein owned any
assets (including, without limitation, securities) that would cause Seller to
violate Section 856(c)(4) of the Code. The nature of the assets of the Seller
and the Seller Subsidiaries is such that the sale of all of the assets owned by
them would not cause the Seller to be disqualified as a REIT under Code Section
856(c)(2) or 856(c)(3) or otherwise. The Seller has not elected and will not
elect to pay Tax on any capital gain recognized on or after January 1, 1999.
Each Seller Subsidiary which is a corporation has been since its formation a
qualified REIT subsidiary under Section 856(i) of the Code. Seller Partnership
is not a publicly traded partnership within the meaning of Section 7704 of the
Code, and the interests in the Seller Partnership are not considered to be (i)
traded on an established securities market or (ii) readily tradable on a
secondary market or the substantial equivalent thereof under either Internal
Revenue Service Notice 88-75 or Treasury Regulations Section 1.7704-1. In the
case of a partner of Seller Partnership that is a Flow-Through Entity (as
defined below), no Person owning an interest in such Flow-Through Entity
(directly or through another Flow-Through Entity) is treated as a partner of the
Seller Partnership under either Internal Revenue Service Notice 88-75 or
Treasury Regulation Section 1.7704-1(h)(3). For purposes of this Section
2.14(b), "Flow-Through Entity" means an entity classified as a partnership, a
grantor trust or an S corporation for federal income tax purposes.
(c) For purposes of this Section 2.14, all individual items that are
qualified by Seller Material Adverse Effect and do not cause a representation
set forth in this Section 2.14 to be untrue because such items individually do
not have a Seller Material Adverse Effect shall be aggregated and the
representations set forth in this Section 2.14 shall be deemed to be untrue if
the aggregate of all of such individual matters has a Seller Material Adverse
Effect.
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2.15 No Payments to Employees, Officers or Directors. Section 2.15 of the
Seller Disclosure Letter contains a true and complete list of all cash and
non-cash payments, rights to property or other contract rights which will become
payable, accelerated or vested to or in each employee, officer or director of
Seller or any Seller Subsidiary as a result of the Merger. There is no
employment or severance contract, or other agreement requiring payments or an
increase in existing payments, cancellation of indebtedness or other obligation
to be made on a change of control or otherwise as a result of the consummation
of any of the transactions contemplated by this Agreement, with respect to any
employee, officer or director of Seller or any Seller Subsidiary.
2.16 Brokers. No broker, investment banker, financial advisor or other
Person, other than Lazard Freres & Co. LLC ("Lazard"), Lehman Brothers Inc.
("Lehman") and Prudential Securities Incorporated ("Prudential"), the fees and
expenses of which are as described in the engagement letters dated May 22, 1998,
as amended on July 27, 1998, May 26, 1998, and December 17, 1998, respectively,
and, in the case of Prudential, as further amended on April 13, 1999, true and
correct copies of which have previously been given to Buyer, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of Seller or any Seller Subsidiary.
2.17 Compliance With Laws. Except as set forth on Section 2.17 of the
Seller Disclosure Letter, (i) neither Seller nor any of the Seller Subsidiaries
has violated or failed to comply with any statute, law, ordinance, regulation,
rule, judgment, decree or order of any Governmental Entity applicable to its
business, properties or operations, except to the extent that such violation or
failure has not had or would not reasonably be expected to have a Seller
Material Adverse Effect; (ii) Seller and its Subsidiaries have, and are in
compliance with, all permits, licenses, certificates, franchises, registrations,
variances, exemptions, orders and approvals of all Governmental Entities which
are material to the operation of their businesses, taken as a whole ("Seller
Permits"), except where the failure to comply has not had or would not
reasonably be expected to have a Seller Material Adverse Effect; and (iii) no
investigation by any Governmental Entity with respect to the Seller or the
Seller Subsidiaries is pending or, to the knowledge of the Seller, threatened,
other than investigations which, individually or in the aggregate, would not
reasonably be expected to have a Seller Material Adverse Effect.
2.18 Contracts; Debt Instruments.
(a) Except as disclosed in the Seller SEC Documents, there is no
contract or agreement that purports to limit in any material respect the
geographic location in which Seller or any Seller Subsidiary may conduct its
business. Neither Seller nor any Seller Subsidiary (i) is in violation of or in
default under any material loan or credit agreement, note, bond, mortgage,
indenture, lease, permit, concession, franchise, license or any other material
contract, agreement, arrangement or
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understanding, to which it is a party or by which it or any of its properties or
assets is bound (each, a "Material Contract"), nor (ii) to the Knowledge of
Seller does such a violation or default exist, except to the extent that such
violation or default referred to in clauses (i) or (ii), individually or in the
aggregate, would not have a Seller Material Adverse Effect. Each Material
Contract which has not been filed as an Exhibit to any of the Seller SEC
Documents has been previously delivered to Sullivan & Cromwell or made available
to Buyer's representatives at the offices of Hale and Dorr LLP on or prior to
February 18, 1999, and a list of all Material Contracts that have not been so
filed is set forth in Section 2.18(a) of the Seller Disclosure Letter. Seller
has previously delivered to Sullivan & Cromwell or made available to Buyer's
representatives at the offices of Hale and Dorr LLP on or prior to February 18,
1999, all contracts and other agreements relating to the contribution of assets
to Seller Partnership in exchange for Seller OP Units (the "Seller Contribution
Agreements"). Except as set forth in Section 2.18(a) of the Seller Disclosure
Letter, neither Seller nor any of its Subsidiaries is in default in any respect
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Material Contract to which it is a
party where such default, individually or in the aggregate, would reasonably be
expected to have a Seller Material Adverse Effect.
(b) Section 2.18(b) of the Seller Disclosure Letter sets forth a
list as of the date hereof of each loan or credit agreement, note, bond,
mortgage, indenture and any other agreement and instrument pursuant to which any
Indebtedness (as defined below) of Seller or any of Seller Subsidiaries, other
than Indebtedness payable to Seller or a Seller Subsidiary, is outstanding or
may be incurred in an amount in excess of $50,000, together with the amount
outstanding thereunder as of the date hereof. For purposes of this Section 2.18,
"Indebtedness" shall mean (i) indebtedness for borrowed money, whether secured
or unsecured, (ii) obligations under conditional sale or other title retention
agreements relating to property purchased by such Person, (iii) capitalized
lease obligations, (iv) obligations under interest rate cap, swap, collar or
similar transaction or currency hedging transactions (valued at the termination
value thereof) and (v) guarantees of any such indebtedness of any other Person.
(c) To the extent not set forth in response to the requirements of
Section 2.18(b), Section 2.18 of the Seller Disclosure Letter sets forth as of
the date hereof each interest rate cap, interest rate collar, interest rate
swap, currency hedging transaction, and any other agreement relating to a
similar transaction, in each case involving $50,000 or more, to which Seller or
any Seller Subsidiary is a party or an obligor with respect thereto.
(d) Neither Seller nor any of the Seller Subsidiaries is a party to
any agreement relating to the management of any of the Seller Properties by any
Person other than Seller Partnership.
(e) Neither Seller nor any of the Seller Subsidiaries is a party to
any agreement pursuant to which Seller or any Seller Subsidiary manages any real
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properties other than Seller Properties, except for the agreements described in
Section 2.18 of the Seller Disclosure Letter (the "Outside Property Management
Agreements"). The Outside Property Management Agreements constitute legal,
valid, binding and enforceable obligations of Seller and, to Seller's Knowledge,
of each other party thereto, and there exists no default of Seller or, to
Seller's Knowledge, any other party thereto, except for any defaults that would
not reasonably be expected to have a Seller Material Adverse Effect.
(f) Section 2.18 of the Seller Disclosure Letter lists all
agreements entered into by Seller or any of the Seller Subsidiaries relating to
the development or construction of, or additions or expansions to, any Seller
Properties which are currently in effect and under which Seller or any of the
Seller Subsidiaries currently has, or expects to incur, any obligation in excess
of $1,000,000 per Seller Property or $10,000,000 in the aggregate. True and
correct copies of such agreements have previously been delivered or made
available to Buyer.
(g) Section 2.18(g) of the Seller Disclosure Letter lists all
agreements entered into by Seller or any of the Seller Subsidiaries providing
for the sale or exchange of, or option to sell or exchange, any Seller
Properties or the purchase of or exchange, or option to purchase or exchange,
any real estate which are currently in effect.
(h) Neither Seller nor any Seller Subsidiary has any continuing
contractual liability (i) for indemnification or otherwise under any agreement
relating to the sale of real estate previously owned, whether directly or
indirectly, by Seller or any Seller Subsidiary,(ii) to pay any additional
purchase price for any of the Seller Properties, or (iii) to make any
reprorations or adjustments to prorations involving an amount in excess of
$100,000 that may previously have been made with respect to any property
currently or formerly owned by Seller.
(i) Neither Seller nor any Seller Subsidiary has entered into or is
subject, directly or indirectly, to any "Tax Protection Agreements." As used
herein, a Tax Protection Agreement is an agreement, oral or written, (A) that
has as one of its purposes to permit a Person to take the position that such
Person could defer federal taxable income that otherwise might have been
recognized upon a transfer of property to Seller Partnership or any other Seller
Subsidiary that is treated as a partnership for federal income tax purposes, and
(B) that (i) prohibits or restricts in any manner the disposition of any assets
of Seller or any Seller Subsidiary, (ii) requires that Seller or any Seller
Subsidiary maintain, or put in place, or replace, indebtedness, secured by one
or more of the Seller Properties, or (iii) requires that Seller or any Seller
Subsidiary offer to any Person at any time the opportunity to guarantee or
otherwise assume, directly or indirectly, the risk of loss for federal income
tax purposes for indebtedness or other liabilities of Seller or any Seller
Subsidiary.
(j) Except as set forth in Section 2.18(j) of Seller Disclosure
Letter and except for obligations to provide funds to the Seller Partnership or
to Seller
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Subsidiaries owned entirely by Seller and/or Seller Partnership, there are no
material outstanding contractual obligations of Seller or its Subsidiaries to
provide any funds to, or make investments in, any other Person.
(k) Except as set forth in Section 2.18(k) of the Seller Disclosure
Letter and Section 2.18(i), neither Seller nor any of the Seller Subsidiaries is
party to any agreement which would restrict any of them from prepaying any of
their Indebtedness without penalty or premium at any time or which requires any
of them to maintain any amount of Indebtedness with respect to any of the Seller
Properties.
2.19 Opinions of Financial Advisors. Seller has received the opinions of
Lazard, Lehman and Prudential, each dated April 13, 1999, a signed copy of each
of which is being provided to Buyer concurrently with the execution and delivery
of this Agreement, with respect to the fairness of the cash consideration to be
received by the holders (other than Parent and its Subsidiaries) of Seller
Common Shares and Seller OP Units in connection with the Merger and the
Partnership Merger.
2.20 State Takeover Statutes. Seller has taken all action necessary to
exempt the transactions contemplated by this Agreement, including without
limitation the Merger and the Alternative Merger, among Parent, Buyer and Seller
and their respective Affiliates from the operation of any "fair price,"
"moratorium," "control share acquisition" or any other anti-takeover statute or
similar statute other than Section 203 of the DGCL enacted under the state or
federal Laws of the United States or similar statute or regulation (a "Takeover
Statute"). Assuming the accuracy of the representation and warranty of Parent
and Buyer set forth in Section 3.14, the action of the Board of Directors of the
Seller in approving the Merger and this Agreement (and the transactions provided
for herein) is sufficient to render inapplicable to the Merger and this
Agreement (and the transactions provided for herein, including without
limitation the Alternative Merger) the restrictions on "business combinations"
(as defined in Section 203 of the DGCL) set forth in Section 203 of the DGCL.
2.21 Proxy Statement and Consent Solicitation Statement. The information
relating to Seller and the Seller Subsidiaries included in the Proxy Statement
(as defined in Section 5.1(a)) and the Consent Solicitation Statement (as
defined in Section 5.1(a)) will not, as of the date of mailing of the Proxy
Statement and the Consent Solicitation Statement, respectively, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.22 Investment Company Act of 1940. Neither Seller nor any of Seller
Subsidiaries is, or at the Effective Time will be, required to be registered
under the Investment Company Act of 1940, as amended (the "1940 Act").
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2.23 Definition of Knowledge of Seller. As used in this Agreement, the
phrase "Knowledge of Seller" (or words of similar import) means the knowledge of
those individuals identified in Section 2.23 of the Seller Disclosure Letter.
2.24 Insurance. Seller and Seller Subsidiaries maintain insurance coverage
for Seller and Seller Subsidiaries and their respective properties and assets of
a type and in amounts typical of similar companies engaged in the respective
businesses in which Seller and Seller Subsidiaries are engaged. All such
insurance policies (a) are in full force and effect, and with respect to all
policies neither of Seller nor any Seller Subsidiary is delinquent in the
payment of any premiums thereon, and no notice of cancellation or termination
has been received with respect to any such policy, and (b) are sufficient for
compliance with all requirements of law and of all agreements to which Seller or
the Seller Subsidiaries are a party or otherwise bound and are valid,
outstanding, collectible, and enforceable policies, subject to any exception in
the case of either clause (a) or (b), as would not, alone or in the aggregate,
be reasonably expected to have a Seller Material Adverse Effect or prevent or
materially delay the ability of Seller to consummate the transactions
contemplated by this Agreement. Neither Seller nor any Seller Subsidiary has
received written notice within the last 12 months from any insurance company or
board of fire underwriters of any defects or inadequacies that would materially
adversely affect the insurability of, or cause any material increase in the
premiums for, insurance covering either Seller or any Seller Subsidiary or any
of their respective properties or assets that have not been cured or repaired to
the satisfaction of the party issuing the notice, except as would not have a
Seller Material Adverse Effect.
2.25 Board Recommendation. The Board of Directors of Seller, at a meeting
duly called and held on April 13, 1999, based upon the recommendations of a
special committee of the Board of Directors of the Seller consisting of four
directors unaffiliated with Parent or Buyer, unanimously adopted resolutions
adopting this Agreement and approving the transactions contemplated hereby,
including the Merger and the Alternative Merger. The Board of Directors of the
general partner of the Seller Partnership (the "Seller General Partner"), at a
meeting duly called and held on April 13, 1999, unanimously adopted resolutions
adopting the Partnership Merger Agreement and approving the transactions
contemplated thereby, including, without limitation, the Partnership Merger
(such transactions, together with the transactions contemplated by this
Agreement, including, without limitation, the Merger and the Alternative Merger,
are hereinafter collectively referred to as the "Transactions"). The Board of
Directors of the Seller recommended that Seller's stockholders adopt this
Agreement and approve the Merger and the Alternative Merger and the Board of
Directors of the Seller General Partner recommended that the Seller Unit Holders
adopt the Partnership Merger Agreement and approve the Partnership Merger. Such
recommendations shall not be withdrawn, modified or amended, other than as
expressly permitted under Section 4.1.
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2.26 Representations in Partnership Merger Agreement. The representations
and warranties of the Seller General Partner and the Seller Partnership set
forth in the Partnership Merger Agreement are true and correct.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer, jointly and severally, represent and warrant to Seller,
except as set forth in the letter of even date herewith signed by a general
partner of Parent and the sole member of Buyer and delivered to Seller prior to
the execution hereof (the "Buyer Disclosure Letter") (it being understood that
the Buyer Disclosure Letter shall be arranged in sections corresponding to the
sections contained in this Article 3, and the disclosures in any section of the
Buyer Disclosure Letter shall qualify all of the representations in the
corresponding section of this Article 3 and, in addition, other sections in this
Article 3 to the extent it is clear from a reading of the disclosure that such
disclosure is applicable to such other sections) as follows:
3.1 Organization, Standing and Power of Parent and Buyer.
(a) Parent is a limited partnership duly organized and validly
existing under the Laws of Delaware and has the requisite power and authority to
carry on its business as now being conducted. Parent is duly qualified or
licensed to do business as a foreign limited partnership and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse effect on
the ability of Parent and Buyer to consummate the transactions contemplated by
this Agreement or the Partnership Merger Agreement ("Parent Material Adverse
Effect"). Parent has delivered to Seller complete and correct copies of its
organizational documents (including the partnership agreement of Parent) as
amended or supplemented to the date of this Agreement.
(b) Buyer is a limited liability company duly organized and validly
existing under the Laws of Delaware and has the requisite power and authority to
carry on its business as now being conducted. Buyer is duly qualified or
licensed to do business as a foreign limited liability company and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualifications or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, would not have a material adverse
effect on the ability of Buyer to consummate the transactions contemplated by
this Agreement or the Partnership Merger Agreement (a "Buyer Material Adverse
Effect"). Buyer has delivered to Seller complete and correct copies of its
organizational documents as amended or supplemented to the date of this
Agreement.
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(c) Parent and Buyer are newly formed and, except for activities
incident to the acquisition of Seller, neither Parent nor Buyer has (i) engaged
in any business activities of any type or kind whatsoever or (ii) acquired any
property of any type or kind whatsoever.
3.2 [Intentionally Omitted].
3.3 Ownership of Parent and Buyer. All of Parent's partnership interests
are owned by affiliates of The Berkshire Companies Limited Partnership,
Whitehall Street Real Estate Limited Partnership XI and Blackstone Real Estate
Acquisitions III L.L.C. Buyer is a wholly owned Subsidiary of Parent.
3.4 Authority; Noncontravention; Consents.
(a) Each of Parent and Buyer has the requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated by
this Agreement to which it is a party. The execution and delivery of this
Agreement by Parent and Buyer and the consummation by Parent and Buyer of the
transactions contemplated by this Agreement to which Parent and/or Buyer is a
party have been duly authorized by all necessary partnership or limited
liability company action on the part of Parent and Buyer. This Agreement has
been duly executed and delivered by Parent and Buyer and constitutes a valid and
binding obligation of each of Parent and Buyer, enforceable against each of
Parent and Buyer in accordance with and subject to its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar Laws relating to
creditors' rights and general principles of equity.
(b) The execution and delivery of this Agreement by each of Parent
and Buyer does not, and the consummation of the transactions contemplated by
this Agreement to which Parent and/or Buyer is a party and compliance by each of
Parent and Buyer with the provisions of this Agreement will not, conflict with,
or result in any violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation or to loss of a material benefit under,
or result in the creation of any Lien upon any of the properties or assets of
Parent or any of its Subsidiaries under, (i) the organizational documents of
Parent or Buyer or the comparable certificate of incorporation or organizational
documents or partnership or similar agreement (as the case may be) of any other
Subsidiary of the Parent, each as amended or supplemented to the date of this
Agreement, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
reciprocal easement agreement, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent or any of its Subsidiaries
or their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any Laws
applicable to Parent or any of its Subsidiaries or their respective properties
or assets, other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights, loss or Liens that individually or in the
aggregate would not
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reasonably be expected to (x) have a Parent Material Adverse Effect or a Buyer
Material Adverse Effect or (y) prevent the consummation of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
by or with respect to Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Parent or Buyer or the consummation
by Parent or Buyer of any of the transactions contemplated by this Agreement,
except for (i) any filings required under the Exchange Act (including Schedule
13E-3), (ii) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, (iii) the filing of a certificate of merger with the
Secretary of State of the State of Delaware with respect to the Partnership
Merger, (iv) such filings as may be required in connection with the payment of
any Transfer Taxes (as defined in Section 5.6), (v) any filings required under
the HSR Act, (vi) the filing of a Form D with the SEC with respect to the
transaction contemplated by the Partnership Merger Agreement and (vii) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings (A) as may be required under federal, state or local environmental
Laws, (B) as may be required under the "blue sky" laws of various states, to the
extent applicable, or (C) which, if not obtained or made, would not prevent or
delay beyond December 31, 1999 the consummation of any of the transactions
contemplated by this Agreement or otherwise prevent Parent or Buyer from
performing its obligations under this Agreement in any material respect or have,
individually or in the aggregate, a Parent Material Adverse Effect.
3.5 Litigation. As of the date of this Agreement, there is no suit, action
or proceeding pending (in which service of process has been received by an
employee of Parent or any of its Subsidiaries) or, to the Knowledge of Parent
(as defined in Section 3.15), threatened in writing against or affecting Parent
or any of its Subsidiaries that, individually or in the aggregate, would
reasonably be expected to prevent or delay beyond December 31, 1999 the
consummation of any of the material transactions contemplated by this Agreement,
nor, as of the date of this Agreement, is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Parent or any of its Subsidiaries having, or which, insofar as
reasonably can be foreseen, in the future would have, any such effect.
3.6 Undisclosed Liability. Neither Parent nor Buyer has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of Parent or
Buyer or in the notes thereto and which, individually or in the aggregate, would
have a Parent Material Adverse Effect or Buyer Material Adverse Effect.
3.7 Brokers. No broker, investment banker, financial advisor or other
Person, other than Greenhill & Co., LLC, the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the Merger based upon
arrangements made by or on behalf of Parent or any of its Subsidiaries.
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3.8 Compliance With Laws. Neither Parent nor any of its Subsidiaries has
violated or failed to comply with any statute, law, ordinance, regulation, rule,
judgment, decree or order of any Governmental Entity applicable to its business,
properties or operations, except to the extent that such violation or failure
would not reasonably be expected to have a Parent Material Adverse Effect or
Buyer Material Adverse Effect.
3.9 Contracts; Debt Instruments. Neither Parent nor any of its
Subsidiaries (i) has received a written notice that Parent or any of its
Subsidiaries is in violation of or in default under any material loan or credit
agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other material contract, agreement, arrangement or
understanding, to which it is a party or by which it or any of its properties or
assets is bound, nor (ii) to the Knowledge of Buyer (as defined in Section 3.15)
does such a violation or default exist, except to the extent such violation or
default referred to in clauses (i) or (ii), individually or in the aggregate,
would not have a Parent Material Adverse Effect or a Buyer Material Adverse
Effect.
3.10 Solvency. Immediately after giving effect to the transactions
contemplated by this Agreement, the Partnership Merger Agreement and the Equity
Commitments and the closing of any financing to be obtained by the Parent, Buyer
or Buyer Operating Partnership in order to effect the transactions contemplated
by this Agreement, the Surviving Company and the Surviving Operating Partnership
shall be able to pay their respective debts as they become due and shall each
own property having a fair saleable value greater than the amounts required to
pay its debts (including a reasonable estimate of the amount of all contingent
liabilities). Immediately after giving effect to the transactions contemplated
by this Agreement, the Partnership Merger Agreement and the Equity Commitments
and the closing of any financing to be obtained by Parent, Buyer or Buyer
Operating Partnership in order to effect the transactions contemplated by this
Agreement and the Partnership Merger Agreement, the Surviving Company and the
Surviving Operating Partnership shall have adequate capital to carry on their
respective businesses. No transfer of property is being made and no obligation
is being incurred in connection with the transactions contemplated by this
Agreement and the Partnership Merger Agreement and the closing of any financing
to be obtained by Parent, Buyer or Buyer Operating Partnership in order to
effect the transactions contemplated by this Agreement and the Partnership
Merger Agreement with the intent to hinder, delay or defraud either present or
future creditors of Parent, Buyer, Buyer Operating Partnership, the Surviving
Company or the Surviving Operating Partnership.
3.11 [Intentionally Omitted].
3.12 Proxy Statement and Consent Solicitation Statement. The information
provided by Parent or Buyer with respect to Parent and its Subsidiaries for
inclusion in the Proxy Statement and the Consent Solicitation Statement will
not, as of the date of mailing of the Proxy Statement and the Consent
Solicitation Statement,
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respectively, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.13 Investment Company Act of 1940. Neither Parent nor any of its
Subsidiaries is, or at the Effective Time will be, required to be registered
under the 1940 Act.
3.14 Parent and Buyer Not Interested Stockholders. Neither Parent nor
Buyer is an "interested stockholder" of Seller within the meaning of Section 203
of the DGCL.
3.15 Definition of Knowledge. As used in this Agreement, the phrase
"Knowledge of Parent" or "Knowledge of Buyer" (or words of similar import) means
the knowledge of those individuals identified in Section 3.15 of the Buyer
Disclosure Letter.
3.16 [Intentionally Omitted].
3.17 Sufficient Funds. After giving effect to Parent's equity commitments
provided in the partnership agreement of Parent (the "Equity Commitments"), and
to borrowings under Parent's financing commitments attached as Exhibit A (the
"Financing Commitments"), the Surviving Company and the Surviving Operating
Partnership will have sufficient funds available to:
(a) refinance or repay in cash all indebtedness for borrowed money
of Seller or any Seller Subsidiary that will become due as a result of the
transactions contemplated by this Agreement or the Partnership Merger Agreement,
plus unpaid interest accrued thereon, and any prepayment, breakage or other
costs associated with the repayment or refinancing, as the case may be;
(b) pay all amounts required to be paid pursuant to this Agreement
and the Partnership Merger Agreement;
(c) pay all fees, costs and expenses incurred by Seller and the
Seller Partnership in connection with this Agreement, the Partnership Merger
Agreement and the transactions contemplated herein and therein assuming such
fees, costs and expenses (other than severance costs) are not in excess of $11
million; and
(d) pay all fees, costs and expenses incurred by Parent, Buyer and
Buyer Operating Partnership in connection with this Agreement, the Partnership
Merger Agreement and the other transactions contemplated herein and therein.
3.18 Pro Forma Capitalization Table. Attached hereto as Exhibit B is a
true and correct pro forma capitalization table of Parent and its Subsidiaries,
giving effect
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to the Equity Commitments, the Financing Commitments and consummation of the
transactions contemplated by this Agreement and the Partnership Merger
Agreement.
3.19 Representations in Partnership Merger Agreement. The representations
and warranties of Parent and the Buyer Operating Partnership set forth in the
Partnership Merger Agreement are true and correct.
ARTICLE 4
COVENANTS
4.1 Acquisition Proposals. During the period from the date hereof and
continuing through the Effective Time or the earlier termination of this
Agreement in accordance with its terms, Seller agrees that:
(a) neither it nor any of the Seller Subsidiaries shall initiate,
solicit or knowingly encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a merger,
acquisition, tender offer, exchange offer, consolidation, sale of assets or
similar transaction involving all or any significant portion of the assets or
any equity securities of, Seller or any of its Subsidiaries, other than the
transactions contemplated by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning or provide any confidential information or data to, or
have any discussions with, any Person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal;
(b) it shall direct and use its best efforts to cause its officers,
directors, employees, agents or financial advisors not to engage in any of the
activities described in Section 4.1(a);
(c) it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and will take the necessary
steps to inform the individuals or entities referred to in Section 4.1(b) of the
obligations undertaken in this Section 4.1; and
(d) it will notify Buyer promptly if Seller receives any such
inquiries or proposals, or any requests for such information, or if any such
negotiations or discussions are sought to be initiated or continued with it;
provided, however, that nothing contained in this Agreement shall prohibit the
Board of Directors of Seller (and the officers, directors, employees, agents and
financial advisors of Seller acting at the direction of the Board of Directors)
from prior to the Seller Shareholders Meeting (as defined below) furnishing
information to or entering
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into discussions or negotiations with, any Person that makes an unsolicited
Acquisition Proposal, if, and only to the extent that (A) the Board of Directors
of Seller determines in good faith that such action is required for the Board of
Directors to comply with its duties to stockholders imposed by law and such
proposal is a Superior Acquisition Proposal (as defined below), (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such Person, Seller provides written notice to Buyer to the effect that it
is furnishing information to, or entering into discussions with, such Person and
(C) subject to any confidentiality agreement with such Person, Seller keeps
Buyer informed of the status (not the terms) of any such discussions or
negotiations (Seller agreeing that it will not enter into any confidentiality
agreement with any Person subsequent to the date hereof which prohibits Seller
from providing such information to Buyer); and (ii) to the extent applicable,
taking and disclosing to the Seller stockholders a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal; provided, however, that the Board of Directors of Seller
may not approve or recommend an Acquisition Proposal, or withdraw or modify its
approval or recommendation of this Agreement and the Merger, unless such
Acquisition Proposal is a Superior Acquisition Proposal. Nothing in this Section
4.1 shall (x) permit Seller to terminate this Agreement (except as specifically
provided in Article 7 hereof), (y) permit Seller to enter into an agreement with
respect to an Acquisition Proposal during the term of this Agreement (other than
a confidentiality agreement in customary form executed as provided above) or (z)
affect any other obligation of Seller under this Agreement; provided, however,
that the Board of Directors of Seller may approve and recommend a Superior
Acquisition Proposal and, in connection therewith, withdraw or modify its
approval or recommendation of this Agreement and the Merger. As used herein,
"Superior Acquisition Proposal" means a bona fide Acquisition Proposal made by a
third party which the Board of Directors of Seller (or a duly constituted
committee thereof charged with considering Acquisition Proposals) determines in
good faith (after consultation with its financial advisor) to be more favorable
to Seller's stockholders than the Merger and which the Board of Directors of
Seller (or any such committee) determines is reasonably capable of being
consummated.
4.2 Conduct of Seller's Business Pending Merger. During the period from
the date hereof and continuing through the Effective Time, except as consented
to in writing by Buyer or as contemplated by this Agreement, specifically
including Section 1.7(b), and except as set forth on Section 4.2 of the Seller
Disclosure Letter, Seller shall, and shall cause each of the Seller Subsidiaries
to:
(a) conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore conducted and take all
action necessary to continue to qualify as a REIT;
(b) use its reasonable efforts to (i) preserve intact its business
(corporate or otherwise) organizations and goodwill; provided that Seller may
cause Seller General Partner to be converted into a Delaware limited liability
company on
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or prior to the Closing Date and take such actions to cause the conversions and
liquidations contemplated by Section 6.2(g) to occur, (ii) keep available the
services of its officers and key employees and (iii) keep intact the
relationship with its customers, tenants, suppliers and others having business
dealings with Seller and Seller's Subsidiaries;
(c) confer on a regular basis with one or more representatives of
Buyer to report operational matters of materiality and, subject to Section 4.1,
any proposals to engage in material transactions;
(d) promptly notify Buyer of any material emergency or other
material adverse change in the condition (financial or otherwise), business,
properties, assets, liabilities or the normal course of its businesses or in the
operation of its properties, or of any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated);
(e) promptly deliver to Buyer true and correct copies of any report,
statement or schedule to be filed with the SEC subsequent to the date of this
Agreement and prior to the Closing Date;
(f) maintain its books and records in accordance with GAAP
consistently applied and not change in any material manner any of its methods,
principles or practices of accounting in effect at the Seller Financial
Statement Date, except as may be required by the SEC, applicable law or GAAP;
(g) duly and timely file all material Tax Returns and other
documents required to be filed with federal, state, local and other Tax
Authorities, subject to timely extensions permitted by law, provided Seller
notifies Buyer that it is availing itself of such extensions and provided such
extensions do not adversely affect Seller's status as a qualified REIT under the
Code;
(h) not make or rescind any material express or deemed election
relative to Taxes (unless required by law or necessary to preserve Seller's
status as a REIT or the status of any Seller Subsidiary as a partnership for
federal income tax purposes or as a qualified REIT subsidiary under Section
856(i) of the Code, as the case may be);
(i) not acquire, enter into any option to acquire, or exercise an
option or contract to acquire, additional real property, incur additional
indebtedness except for working capital under its revolving lines of credit,
encumber assets or commence construction of, or enter into any agreement or
commitment to develop or construct, other real estate projects, except with
respect to the construction of the multi-family residential projects described
in the Seller SEC Documents or the Seller Disclosure Letter as being under
development in accordance with the agreements in existence on the date of this
Agreement and previously furnished to Buyer (the "Development Agreements");
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(j) not (except as contemplated by this Agreement) amend its
certificate of incorporation or By-laws, or the articles or certificate of
incorporation, bylaws, code of regulations, partnership agreement, operating
agreement or joint venture agreement or comparable charter or organization
document of any Seller Subsidiary;
(k) make no change in the number of its shares of capital stock,
membership interests or units of limited partnership interest (as the case may
be) issued and outstanding or reserved for issuance, other than pursuant to (i)
the exercise of options or other rights disclosed in Section 2.3 of the Seller
Disclosure Letter, (ii) the conversion of Seller Preferred Shares, or (iii) the
conversion or redemption of Seller OP Units pursuant to the Seller Partnership
Agreement for Seller Common Shares or cash, at Seller's option;
(l) except as set forth in Section 4.2(l) of the Seller Disclosure
Letter, grant no options or other rights or commitments relating to its shares
of capital stock, membership interests or units of limited partnership interest
or any security convertible into its shares of capital stock, membership
interests or units of limited partnership interest, or any security the value of
which is measured by shares of capital stock, or any security subordinated to
the claim of its general creditors and, except as contemplated by this
Agreement, not amend or waive any rights under any of the Seller Options;
(m) except as provided in Section 5.9 and in connection with the use
of Seller Common Shares to pay the exercise price or tax withholding in
connection with equity-based employee benefit plans by the participants therein,
not (i) authorize, declare, set aside or pay any dividend or make any other
distribution or payment with respect to any Seller Common Shares, Seller
Preferred Shares or Seller OP Units or (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of capital stock, membership interests
or units of partnership interest or any option, warrant or right to acquire, or
security convertible into, shares of capital stock, membership interests, or
units of partnership interest, except for (a) redemptions of Seller Common
Shares required under Article V of the Restated Certificate of Incorporation of
Seller in order to preserve the status of Seller as a REIT under the Code or (b)
conversions or redemptions of Seller OP Units, whether or not outstanding on the
date of this Agreement, for cash or Seller Common Shares in accordance with the
terms of the Seller Partnership Agreement;
(n) not sell, lease, mortgage, subject to any material Lien or
otherwise dispose of any of the Seller Properties;
(o) not sell, lease, mortgage, subject to any material Lien or
otherwise dispose of any of its personal property or intangible property, except
sales of equipment which are not material to Seller and its Subsidiaries taken
as a whole which are made in the ordinary course of business;
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(p) not make any loans, advances or capital contributions to, or
investments in, any other Person, other than loans, advances and capital
contributions to Seller Subsidiaries in existence on the date hereof;
(q) not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise)
which are material to Seller and its Subsidiaries taken as a whole, other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) furnished to Buyer or
incurred in the ordinary course of business consistent with past practice
(collectively, "Ordinary Course Liabilities"), nor fail to pay Ordinary Course
Liabilities as they come due consistent with past practice;
(r) except as provided in Section 4.2(i) above, not enter into any
commitment, contractual obligation or transaction (each, a "Commitment") for the
purchase of any real estate; provided that expansion or improvements made in the
ordinary course of business to existing real property shall not be considered a
purchase of real property;
(s) not guarantee the indebtedness of another Person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another Person or enter into any arrangement having the economic effect of any
of the foregoing;
(t) not enter into any contractual obligation with any officer,
director or Affiliate of Seller;
(u) not increase any compensation or enter into or amend any
employment, severance or other agreement with any of its officers, directors or
employees earning a base salary of more than $100,000 per annum, other than as
required by any contract or Employee Plan or pursuant to waivers by employees of
benefits under such agreements;
(v) not adopt any new employee benefit plan or amend, terminate or
increase any existing plans or rights, not grant any additional options,
warrants, rights to acquire stock, stock appreciation rights, phantom stock,
dividend equivalents, performance units or performance stock to any officer,
employee or director, or accelerate vesting with respect to any grant of Seller
Common Shares to employees which are subject to any risk of forfeiture, except
for changes which are required by law and changes which are not more favorable
to participants than provisions presently in effect;
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(w) not change the ownership of any of its Subsidiaries, except
changes which arise as a result of the conversion of Seller OP Units into Seller
Common Shares or cash;
(x) not accept a promissory note in payment of the exercise price
payable under any option to purchase Seller Common Shares;
(y) not enter into or amend or otherwise modify or waive any
material rights under any agreement or arrangement for the Persons that are
executive officers or directors of Seller or any Seller Subsidiary;
(z) not directly or indirectly or through a subsidiary, merge or
consolidate with, acquire all or substantially all of the assets of, or acquire
the beneficial ownership of a majority of the outstanding capital stock or a
majority of any other equity interest in, any Person;
(aa) perform all agreements required to be performed by the Seller
and its Subsidiaries (including the Seller General Partner and the Seller
Partnership) under the Partnership Merger Agreement;
(bb) not make or revoke any material tax election or settle or
compromise any material tax liability; and
(cc) not agree, commit or arrange to take any action prohibited
under this Section.
Notwithstanding anything in this Agreement to the contrary, Seller shall
have the right, in accordance (except with respect to timing) with the
applicable provisions of its Restated Certificate of Incorporation, as amended,
to submit to its stockholders a proposal to liquidate the Seller (the
"Liquidation Vote") and to make all required filings with the SEC and take all
such other necessary or appropriate actions in connection therewith.
4.3 Conduct of Parent's and Buyer's Business Pending Merger. Prior to the
Effective Time, except as (i) contemplated by this Agreement, or (ii) consented
to in writing by Seller, Parent shall, and shall cause Buyer to:
(a) use its reasonable efforts to preserve intact its business
organizations and goodwill and keep available the services of its officers and
employees;
(b) promptly notify Seller of any material emergency or other
material change in the condition (financial or otherwise), business, properties,
assets, liabilities, prospects or the normal course of its businesses or in the
operation of its properties, or of any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated);
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(c) not amend its certificate of limited partnership or limited
partnership agreement, or the articles or certificate of incorporation, bylaws,
code of regulations, partnership agreement, operating agreement or joint venture
agreement or comparable charter or organization document of any Subsidiary of
the Parent; provided, however, that any such amendment may be made (1) in
connection with the financing of Parent, Buyer and Buyer Operating Partnership
in accordance with the terms of the Equity Commitments and the Financing
Commitments, so long as any such amendment would not reasonably be expected to
materially adversely affect Seller's stockholders, the Seller Unit Holders, the
Merger or the transactions contemplated by the Partnership Merger Agreement or
(2) so long as such amendment would not, under Sections 3.7 or 11.1 of the
limited partnership agreement of Parent, require the consent of any holder of
Class A Preferred Units or Class B Units if such securities were issued and
outstanding at the time of such amendment and the holders of such securities
were then limited partners of the Partnership;
(d) not enter into any Commitment for the acquisition of any
interest in real property if the amount of such Commitment would cause the
aggregate amount of all such Commitments subsequent to the date hereof to exceed
$1,000,000 unless such Commitment has been approved by Seller;
(e) not directly or indirectly, through a subsidiary or otherwise,
merge or consolidate with, or acquire all or substantially all of the assets of,
or the beneficial ownership of a majority of the outstanding capital stock or
other equity interests in any Person whose securities are registered under the
Exchange Act unless such transaction has been approved by Seller;
(f) except as contemplated by this Agreement, not issue any Buyer or
Buyer Operating Partnership securities pursuant to a Registration Statement
filed with the SEC relating to the public offering of any Buyer or Buyer
Operating Partnership securities from the date hereof until the date of the
Proxy Statement (as defined in Section 5.1(a)) unless such issuance has been
approved by Seller;
(g) use reasonable best efforts to do all necessary things required
to close the equity funding contemplated by the Equity Commitments and the
borrowings contemplated by the Financing Commitments and to cause such equity
funding and such borrowings to be made available to Parent, Buyer and Buyer
Operating Partnership as provided therein; and
(h) not agree, commit or arrange to take any action prohibited under
this Section.
4.4 Other Actions. Each of Seller on the one hand and Parent and Buyer on
the other hand shall not knowingly take, and shall use commercially reasonable
efforts to cause their Subsidiaries not to take, any action that would result in
(i) any
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of the representations and warranties of such party (without giving effect to
any "knowledge" qualification) set forth in this Agreement that are qualified as
to materiality becoming untrue, (ii) any of such representations and warranties
(without giving effect to any "knowledge" qualification) that are not so
qualified becoming untrue in any material respect or (iii) except as
contemplated by Section 4.1, any of the conditions to the Merger set forth in
Article 6 not being satisfied.
4.5 Partnership Merger Agreement. Parent shall, and shall cause its
Subsidiaries to, perform all agreements required to be performed by the Parent
and its Subsidiaries (including the Buyer Operating Partnership) under the
Partnership Merger Agreement.
4.6 Private Placement. Parent shall take all actions necessary for Parent
to offer and sell interests in Parent to holders of Seller OP Units in the
manner contemplated by the Partnership Merger Agreement and Section 5.1 hereof
and as shall be required for the offering and sale of such units of limited
partnership interest to be exempt from the registration requirements of the
Securities Act pursuant to Rule 506 of Regulation D.
4.7 Irrevocable Letter of Credit.
(a) Parent has delivered to American Stock Transfer and Trust
Company (the "Escrow Agent") $29,500,000 (the "Cash Collateral") in cash to
secure the obligation of Parent and Buyer to pay certain fees and expenses
pursuant to Section 7.2 and to be held in accordance with the terms of an Escrow
Agreement dated as of date hereof among the Escrow Agent, Seller, Seller
Partnership and Parent (the "Escrow Agreement"). At the election of Parent and
if Seller has not given a notice to the Escrow Agent directing the Escrow Agent
to terminate Parent's right to receive any part of the Cash Collateral, Parent
may deliver to the Escrow Agent an irrevocable letter of credit in the amount of
the Cash Collateral, substantially in the form attached hereto as Exhibit C,
with such changes as shall be reasonably satisfactory to Seller and from a bank
reasonably satisfactory to Seller (the "Letter of Credit"). Upon delivery of
such Letter of Credit and if Seller has not given a notice to the Escrow Agent
directing the Escrow Agent to terminate Parent's right to receive any part of
the Cash Collateral, the full amount of the Cash Collateral then held by the
Escrow Agent shall be immediately returned to Buyer. Seller shall,
simultaneously with delivering any direction to the Escrow Agent to terminate
Parent's right to receive any part of the Cash Collateral as provided in the
Escrow Agreement or to make a draw under the Letter of Credit, deliver to Parent
and Buyer a certificate confirming that Seller is entitled to make such
direction pursuant to Section 7.2 and, if such certification is false or Seller
is not otherwise entitled to make such direction pursuant to Section 7.2, Parent
and Buyer shall be entitled to all remedies available at law or in equity
(including recovery of any amounts improperly withdrawn or drawn); provided,
however, that Parent and Buyer shall notify the Seller within 30 days after
receiving such certificate if they wish to assert that Seller is not entitled to
so direct the Escrow Agent and any failure to provide such notice
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within such 30 day period shall irrevocably prohibit Parent and Buyer from
maintaining that Seller was not so entitled.
(b) If Parent elects to extend the Closing Date as contemplated
under Section 1.2(b), then on or prior to the Additional Collateral Date (as
defined below), Parent shall increase the Cash Collateral by either delivering
an additional $25,000,000 to the Escrow Agent in cash to be held in accordance
with the terms of the Escrow Agreement or, if Parent has previously delivered a
Letter of Credit to the Escrow Agent as contemplated under Section 4.7(a), by
amending such Letter of Credit to increase the amount available thereunder by an
additional $25,000,000. As used herein, the term "Additional Collateral Date"
shall mean the first business day following the Satisfaction Date; provided,
however, that if the conditions set forth in Sections 6.1 and 6.2 (other than
Sections 6.2(g) and 6.2(i)) are satisfied (or waived by Parent and Buyer), and
if the certificates and other documents required to be delivered pursuant to
Section 6.2 are delivered, in each case as of the Satisfaction Date and at or
prior to 9:30 a.m. on such date, then the term "Additional Collateral Date"
shall mean the Satisfaction Date.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Preparation of the Proxy Statement; Seller Stockholders Meeting.
(a) The parties shall cooperate and promptly prepare and Seller
shall file with the SEC as soon as practicable a proxy statement with respect to
the meeting of the stockholders of Seller in connection with the Merger (the
"Proxy Statement"). The parties shall cooperate and promptly prepare and the
appropriate party shall file with the SEC as soon as practicable any other
filings required under the Exchange Act ("Additional Filings"), including
without limitation, a Rule 13e-3 Transaction Statement on Schedule 13E-3 with
respect to the Merger to be filed jointly by Seller, Parent and Buyer, together
with any required amendments thereto. The parties shall cooperate and promptly
prepare a Consent Solicitation/Information Statement of Seller Partnership and
Parent for use in connection with the solicitation of consents to the matters
described in the definition of Seller Partner Approval and the offering of units
of limited partnership interest in Parent (the "Consent Solicitation
Statement"). Each of Seller, Seller Partnership, Parent, Buyer and Buyer
Operating Partnership agrees that the information provided by it for inclusion
in the Proxy Statement, the Additional Filings, the Consent Solicitation
Statement and each amendment or supplement thereto, at the time of mailing
thereof and at the time of the meeting of stockholders of Seller and at the time
of the taking of consent in respect of the Seller Partner Approval, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Parent,
Buyer and Buyer Operating Partnership shall, with respect to the Seller Partner
Approval and the offering of units of limited partnership
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interest in Parent to holders of Seller OP Units, comply with Regulation D of
the Securities Act, as applicable. Seller will use its reasonable best efforts,
and Parent, Buyer and Buyer Operating Partnership will cooperate with Seller to
(i) file a preliminary Proxy Statement with the SEC and (ii) cause the Proxy
Statement to be mailed to Seller's stockholders, in each case, as promptly as
practicable (including clearing the Proxy Statement with the SEC). Seller will
use its reasonable best efforts, and Parent, Buyer and Buyer Operating
Partnership will cooperate with Seller, to cause the Consent Solicitation
Statement to be mailed to the Seller Unit Holders as promptly as practicable
after the SEC has cleared the Proxy Statement. Seller will notify Buyer promptly
of the receipt of any comments from the SEC and of any request by the SEC for
amendments or supplements to the Proxy Statement or the Additional Filings or
for additional information and will supply Buyer with copies of all
correspondence between such party or any of its representatives and the SEC,
with respect to the Proxy Statement or the Additional Filings. The parties shall
cooperate to cause the Proxy Statement, the Consent Solicitation Statement and
any Additional Filings to comply in all material respects with all applicable
requirements of law. Whenever any event occurs which is required to be set forth
in an amendment or supplement to the Proxy Statement, the Additional Filings or
the Consent Solicitation Statement, Seller on the one hand, and Parent and Buyer
on the other hand, shall promptly inform the other of such occurrence and
cooperate in filing with the SEC and/or mailing to the stockholders of Seller or
holders of Seller OP Units, as applicable, such amendment or supplement to the
Proxy Statement or the Consent Solicitation Statement.
(b) It shall be a condition to the mailing of the Proxy Statement
and the Consent Solicitation Statement that if they so request, Buyer and Buyer
Operating Partnership shall have received a "comfort" letter or an "agreed upon
procedures" letter from PricewaterhouseCoopers LLP, independent public
accountants for Seller and Seller Partnership, of the kind contemplated by the
Statement of Auditing Standards with respect to Letters to Underwriters
promulgated by the American Institute of Certified Public Accountants (the
"AICPA Statement"), dated as of the date on which the Proxy Statement is to be
mailed to the stockholders of Seller, addressed to Parent, Buyer and Buyer
Operating Partnership, in form and substance reasonably satisfactory to Buyer
and Buyer Operating Partnership, concerning the procedures undertaken by
PricewaterhouseCoopers LLP with respect to the financial statements and
information of Seller, Seller Partnership and their Subsidiaries contained in
the Proxy Statement and the other matters contemplated by the AICPA Statement
and otherwise customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement.
(c) Seller will, as soon as practicable following the date of this
Agreement duly call, give notice of, convene and hold a meeting of its
stockholders, such meeting to be held no sooner than 20 business days nor later
than 45 days following the date the Proxy Statement is mailed to the
stockholders of Seller (the "Seller Shareholders Meeting") for the purpose of
obtaining the Seller Shareholder
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Approval. Seller shall be required to hold the Seller Shareholders Meeting,
regardless of whether the Board of Directors of Seller has withdrawn, amended or
modified its recommendation that its stockholders adopt this Agreement and
approve the Merger, unless this Agreement has been terminated pursuant to the
provisions of Section 7.1. Seller will, through its Board of Directors,
recommend that its stockholders adopt this Agreement and approve the
transactions contemplated hereby, including the Merger and the Alternative
Merger; provided, that prior to the Seller Shareholders Meeting, such
recommendation may be withdrawn, modified or amended if Seller shall have
received a Superior Acquisition Proposal, but only to the extent expressly
permitted under Section 4.1.
(d) If on the date for the Seller Shareholders Meeting established
pursuant to Section 5.1(c) of this Agreement, Seller has not received duly
executed proxies which, when added to the number of votes represented in person
at the meeting by Persons who intend to vote to adopt this Agreement, will
constitute a sufficient number of votes to adopt this Agreement (but less than a
majority of the outstanding Seller Common Shares (including the Seller Preferred
Shares voting with the Seller Common Shares on an as-converted basis) have
indicated their intention to vote against, or have submitted duly executed
proxies voting against, the adoption of this Agreement), then Seller shall
recommend the adjournment of its stockholders meeting until the date ten (10)
days after the originally scheduled date of the stockholders meeting.
5.2 Access to Information: Confidentiality. Subject to the requirements of
confidentiality agreements with third parties, each of Seller, Parent and Buyer
shall, and shall cause each of its Subsidiaries to, afford to the other party
and to the officers, employees, accountants, counsel, financial advisors and
other representatives of such other party, reasonable access during normal
business hours prior to the Effective Time to all their respective properties,
books, contracts, commitments, personnel and records and, during such period,
each of Seller, Parent and Buyer shall, and shall cause each of its Subsidiaries
to, furnish promptly to the other party all other information concerning its
business, properties and personnel as such other party may reasonably request.
Parent and Buyer shall have the right to conduct non-intrusive environmental and
engineering inspections at the Seller Properties; provided that in no event
shall Parent or Buyer have the right to conduct so-called "Phase II"
environmental tests. Notwithstanding anything in this Section 5.2 to the
contrary, all of Parent's and Buyer's activities pursuant to this Section 5.2
must be conducted in a manner that does not unreasonably interfere with the
ongoing operations of Seller and Seller Subsidiaries.
5.3 Reasonable Best Efforts; Notification.
(a) Subject to the terms and conditions herein provided, Seller,
Parent and Buyer shall: (i) use all reasonable best efforts to cooperate with
one another in (A) determining which filings are required to be made prior to
the Effective Time with, and which consents, approvals, permits or
authorizations are
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required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions and any third parties in connection with the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby, including without limitation any required filings and
consents under the HSR Act, and (B) timely making all such filings and timely
seeking all such consents, approvals, permits and authorizations; (ii) use all
reasonable best efforts (other than the payment of money) to obtain in writing
any consents required from third parties to effectuate the Merger and avoid
defaults or acceleration of the rights of third parties under contracts with
Seller or Seller Subsidiaries as a result of the consummation of the Merger,
such consents to be in form reasonably satisfactory to Seller and Buyer; and
(iii) use all reasonable best efforts to take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement. In furtherance thereof, Seller agrees to vote in favor of the
transactions contemplated by the Partnership Merger Agreement in its capacity as
a limited partner of the Seller Partnership, and to cause the Seller General
Partner to so vote in its capacity as a general partner of the Seller
Partnership. If at any time after the Effective Time any further action is
necessary or desirable to carry out the purpose of this Agreement, Parent and
the Surviving Company shall take all such necessary action.
(b) Seller shall give prompt notice to Parent and Buyer, and Parent
and Buyer shall give prompt notice to Seller, (i) if any representation or
warranty made by it or them contained in this Agreement that is qualified as to
materiality becomes untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becomes untrue or inaccurate
in any material respect or (ii) of the failure by it or them to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
5.4 Tax Treatment. The Surviving Operating Partnership will use the
"traditional method" under Treasury Regulations Section 1.704-3(b) for purposes
of making allocations under Section 704(c) of the Code with respect to the
properties of or interests in the Seller Partnership as of the Effective Time.
The Surviving Company shall prepare and file all Tax Returns of Seller and
Seller Subsidiaries due after the Effective Time.
5.5 Public Announcements. Parent, Buyer and Seller will consult with each
other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other written public statements with respect
to the transactions contemplated by this Agreement, and shall not issue any such
press release or make any such written public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange. The parties agree that the
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initial press release to be issued with respect to the transactions contemplated
by this Agreement will be in the form agreed to by the parties hereto prior to
the execution of this Agreement.
5.6 Transfer Taxes. Buyer and Seller shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer, sales, use, transfer, value
added, stock transfer and stamp taxes, any transfer, recording, registration and
other fees and any similar taxes which become payable in connection with the
transactions contemplated by this Agreement (together with any related
interests, penalties or additions to tax, "Transfer Taxes"). From and after the
Effective Time, the Surviving Company shall, or shall cause the Surviving
Operating Partnership, as appropriate, to pay or cause to be paid, without
deduction or withholding from any amounts payable to the holders of Seller
Common Shares or Seller OP Units, all Transfer Taxes.
5.7 Benefit Plans. After the Effective Time, all employees of Seller who
are employed by the Surviving Company shall, at the option of the Surviving
Company, either continue to be eligible to participate in an "employee benefit
plan," as defined in Section 3(3) of ERISA, of Seller which is, at the option of
the Surviving Company, continued by the Surviving Company, or alternatively
shall be eligible to participate in any "employee benefit plan," as defined in
Section 3(3) of ERISA, established, sponsored or maintained by the Surviving
Company after the Effective Time. With respect to each such employee benefit
plan not formerly maintained by Seller, service with Seller or any Seller
Subsidiary (as applicable) shall be included for purposes of determining
eligibility to participate, vesting (if applicable) and entitlement to benefits
and all pre-existing condition exclusions shall be waived and expenses incurred
by any employee for deductibles and copayments in the portion of the year prior
to the date employee first becomes a participant in such employee benefit plan
shall be credited to the benefit of such employee under such employee benefit
plan for the year in which the employee's participation commences.
5.8 Indemnification.
(a) From and after the Effective Time, the Surviving Company shall
provide exculpation and indemnification for each Person who is now or has been
at any time prior to the date hereof or who becomes prior to the Effective Time,
an officer, employee or director of Seller or any Seller Subsidiary (the
"Indemnified Parties") which is the same as the exculpation and indemnification
provided to the Indemnified Parties by Seller and the Seller Subsidiaries
immediately prior to the Effective Time in their respective certificate of
incorporation and Bylaws or other organizational documents, as in effect on the
date hereof; provided, that such exculpation and indemnification covers actions
on or prior to the Effective Time, including, without limitation, all
transactions contemplated by this Agreement.
(b) In addition to the rights provided in Section 5.8(a) above, in
the event of any threatened or actual claim, action, suit, proceeding or
investigation,
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whether civil, criminal or administrative, including without limitation, any
action by or on behalf of any or all security holders of Seller, Parent or
Buyer, or any Subsidiary of the Seller or Parent, or by or in the right of
Seller, Parent or Buyer, or any Subsidiary of the Seller or Parent, or any
claim, action, suit, proceeding or investigation (collectively, "Claims") in
which any Indemnified Party is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to (i)
the fact that he is or was an officer, employee or director of Seller or any of
the Seller Subsidiaries or any action or omission or alleged action or omission
by such Person in his capacity as an officer, employee or director, or (ii) this
Agreement or the Partnership Merger Agreement or the transactions contemplated
by this Agreement or the Partnership Merger Agreement, whether in any case
asserted or arising before or after the Effective Time, Parent and the Surviving
Company (the "Indemnifying Parties") shall from and after the Effective Time
jointly and severally indemnify and hold harmless the Indemnified Parties from
and against any losses, claims, liabilities, expenses (including reasonable
attorneys' fees and expenses), judgments, fines or amounts paid in settlement
arising out of or relating to any such Claims. Parent, the Surviving Company and
the Indemnified Parties hereby agree to use their reasonable best efforts to
cooperate in the defense of such Claims. In connection with any such Claim, the
Indemnified Parties shall have the right to select and retain one counsel, at
the cost of the Indemnifying Parties, subject to the consent of the Indemnifying
Parties (which consent shall not be unreasonably withheld or delayed). In
addition, after the Effective Time, in the event of any such threatened or
actual Claim, the Indemnifying Parties shall promptly pay and advance reasonable
expenses and costs incurred by each Indemnified Person as they become due and
payable in advance of the final disposition of the Claim to the fullest extent
and in the manner permitted by law. Notwithstanding the foregoing, the
Indemnifying Parties shall not be obligated to advance any expenses or costs
prior to receipt of an undertaking by or on behalf of the Indemnified Party,
such undertaking to be accepted without regard to the creditworthiness of the
Indemnified Party, to repay any expenses advanced if it shall ultimately be
determined that the Indemnified Party is not entitled to be indemnified against
such expense. Notwithstanding anything to the contrary set forth in this
Agreement, the Indemnifying Parties (i) shall not be liable for any settlement
effected without their prior written consent (which consent shall not be
unreasonably withheld or delayed), and (ii) shall not have any obligation
hereunder to any Indemnified Party to the extent that a court of competent
jurisdiction shall determine in a final and non-appealable order that such
indemnification is prohibited by applicable law. In the event of a final and
non-appealable determination by a court that any payment of expenses is
prohibited by applicable law, the Indemnified Party shall promptly refund to the
Indemnifying Parties the amount of all such expenses theretofore advanced
pursuant hereto. Any Indemnified Party wishing to claim indemnification under
this Section 5.8, upon learning of any such Claim, shall promptly notify the
Indemnifying Parties of such Claim and the relevant facts and circumstances with
respect thereto; provided however, that the failure to provide such notice shall
not affect the obligations of the Indemnifying Parties except to the extent such
failure to notify materially prejudices the Indemnifying Parties' ability to
defend such Claim; and
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provided, further, however, that no Indemnified Party shall be obligated to
provide any notification pursuant to this Section 5.8(b) prior to the Effective
Time.
(c) At or prior to the Effective Time, Buyer shall purchase
directors' and officers' liability insurance policy coverage for Seller's and
each Seller Subsidiaries' directors and officers for a period of six years which
will provide the directors and officers with coverage on substantially similar
terms as currently provided by Seller and the Seller Subsidiaries to such
directors and officers. At or prior to the Effective Time, Seller shall have the
right to reasonably review and approve any such policy, which approval shall not
be unreasonably withheld.
(d) This Section 5.8 is intended for the irrevocable benefit of, and
to grant third party rights to, the Indemnified Parties and their successors,
assigns and heirs and shall be binding on all successors and assigns of Parent
and Buyer, including without limitation the Surviving Company. Each of the
Indemnified Parties shall be entitled to enforce the covenants contained in this
Section 5.8 and Parent and Buyer acknowledge and agree that each Indemnified
Party would suffer irreparable harm and that no adequate remedy at law exists
for a breach of such covenants and such Indemnified Party shall be entitled to
injunctive relief and specific performance in the event of any breach of any
provision in this Section 5.8.
(e) In the event that the Surviving Company or any of its respective
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, the successors
and assigns of such entity shall assume the obligations set forth in this
Section 5.8, which obligations are expressly intended to be for the irrevocable
benefit of, and shall be enforceable by, each director and officer covered
hereby.
Parent guarantees, unconditionally and absolutely, the performance of
Surviving Company's and Buyer's obligations under this Section 5.8.
5.9 Declaration of Dividends and Distributions. From and after the date of
this Agreement, Seller shall not make any dividend or distribution to its
stockholders without the prior written consent of Buyer; provided, however, the
written consent of Buyer shall not be required for the authorization and payment
of quarterly distributions (i) with respect to the Seller Common Shares, (a) for
the dividend for the second and third quarters of 1999 (i.e., $.25 per share
with a record date of May 1, 1999 and August 1, 1999) and (b) as permitted under
Section 1.2(g), and (ii) with respect to the Seller Preferred Shares for the
dividend for the second quarter of 1999 and for each quarterly dividend
thereafter in the amounts provided for in the Certificate of Designation in
respect of the Seller Preferred Shares. From and after the date of this
Agreement, Seller Partnership shall not make any distribution to the holders of
Seller OP Units except a distribution per Seller OP Unit in the same amount as a
dividend per Seller Common Share permitted pursuant to
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this Section 5.9 (including without limitation pursuant to the following
paragraph), with the same record and payment dates as such dividend on the
Seller Common Shares. The foregoing restrictions shall not apply, however, to
the extent a distribution by Seller is necessary for Seller to maintain REIT
status or to prevent Seller from having to pay federal income tax; provided that
in the event of such a distribution, the aggregate cash consideration payable to
holders of Seller Common Shares in the Merger shall be reduced by the aggregate
amount of such distribution, and the Common Merger Consideration per share shall
be reduced accordingly.
Notwithstanding the foregoing, if the Effective Time occurs on a date after
November 1, 1999, the Seller may declare or establish a record date and set
aside funds for payment of a dividend for the period commencing November 1, 1999
and ending on the date on which the Effective Time occurs (the "Partial
Period"). The amount of the dividend per Seller Common Share for such Partial
Period shall equal a fraction, (I) the numerator of which equals (a) $.25, times
(b) the number of days comprising such Partial Period, and (II) the denominator
of which is 90.
5.10 Resignations. On the Closing Date, Seller shall use its best efforts
to cause the directors and officers of Seller or any of the Seller Subsidiaries
to submit their resignations from such positions as may be requested by Buyer,
effective immediately after the Effective Time; provided, however, that by
resigning, such officers and directors will not lose the benefit of any "change
of control" provisions of any employment agreement or other instruments to which
they would otherwise be entitled.
5.11 Outside Property Management Agreements. Seller will not, and will not
permit any of its Subsidiaries to, amend the Outside Property Management
Agreements. Seller will not, and will not permit any of its Subsidiaries to,
renew any Outside Property Management Agreement except as approved by Buyer,
which approval shall not be unreasonably withheld or delayed.
5.12 Stockholder Claims. Seller shall not settle or compromise for an
amount in excess of $10,000,000 any claim relating to the Transactions brought
by any current, former or purported holder of any securities of Seller or the
Seller Partnership without the prior written consent of Buyer, which consent
will not be unreasonably withheld.
5.13 Cooperation with Proposed Financings and Asset Sales. At the request
of the Buyer, the Seller will, at the Buyer's expense, reasonably cooperate with
the Buyer in connection with the proposed financing of the Transactions by the
Parent and its Subsidiaries or proposed post-closing sales of the Seller
Properties, provided that such requested actions do not unreasonably interfere
with the ongoing operations of Seller and Seller Subsidiaries.
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ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligations of each party to effect the Merger and to consummate the other
transactions contemplated by this Agreement to occur on the Closing Date shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. This Agreement shall have been
adopted by the Seller Shareholder Approval.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger, the Partnership Merger or any of the other
transactions contemplated hereby shall be in effect.
(c) HSR. All applicable waiting periods (and any extensions thereof)
under the HSR Act shall have expired or otherwise been terminated.
6.2 Conditions to Obligations of Parent and Buyer. The obligations of
Parent and Buyer to effect the Merger and to consummate the other transactions
contemplated to occur on the Closing Date are further subject to the following
conditions, any one or more of which may be waived by Buyer:
(a) Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall be true and correct in
all material respects (except for the representations set forth in Section 2.3
or representations having a materiality or Seller Material Adverse Effect
qualification, which shall be correct in all respects) as of the date of this
Agreement and as of the Closing Date, as though made on and as of the Closing
Date, except to the extent the representation or warranty is expressly limited
by its terms to another date, in which case such representation or warranty
shall be true and correct in all material respects (except for representations
having a materiality or Seller Material Adverse Effect qualification, which
shall be correct in all respects) only as of such specific date, and Parent and
Buyer shall have received a certificate (which certificate may be qualified by
Knowledge to the same extent as the representations and warranties of Seller
contained herein are so qualified) signed on behalf of Seller by the chief
executive officer or the chief financial officer of Seller, in such capacity, to
such effect.
(b) Performance of Obligations of Seller. Seller shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Parent and Buyer
shall have received a certificate signed on behalf of Seller by the chief
executive officer or the chief operating officer of Seller, in such capacity, to
such effect.
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(c) Material Adverse Change. Since the date of this Agreement
through and including the Satisfaction Date, (i) there shall have been no Seller
Material Adverse Change and (ii) Parent and Buyer shall have received a
certificate of the chief executive officer or chief financial officer of Seller,
in such capacity, certifying to such effect. For purposes of this Section
6.2(c), it is understood and agreed that a Seller Material Adverse Change shall
be deemed to have occurred, without regard to any certificate provided pursuant
to clause (ii) of the first sentence of this Section 6.2(c), if as a result of a
"change of law" after the date hereof there shall exist at the Effective Time a
material increase in the risk that the Seller would not qualify (at or prior to
the Effective Time) as a REIT. For this purpose, the term "change in law" shall
mean any amendment to or change (including any announced prospective change
having a proposed effective date at or prior to the Effective Time) in the
federal tax laws of the United States, including any statute, regulation or
proposed regulation or any official administrative pronouncement (consisting of
the issuance or revocation of any revenue ruling, revenue procedure, notice,
private letter ruling or technical advice memorandum) or any judicial decision
interpreting such federal tax laws (whether or not such pronouncement or
decision is issued to, or in connection with, a proceeding involving the Seller
or a Seller Subsidiary or is subject to review or appeal).
(d) Tax Opinions Relating to REIT Status of Seller And Partnership
Status of Seller Partnership. Parent and Buyer shall have received an opinion of
Hale and Dorr LLP, or other counsel to Seller reasonably acceptable to Parent
and Buyer, and of Baker & Hostetler LLP, each dated as of the Effective Time, in
the form attached hereto as Exhibit D. Each of such opinions may be based on
certificates in the form of Section 6.2(d) of the Seller Disclosure Letter.
(e) Consents. All consents and waivers (including, without
limitation, waivers of rights of first refusal) from third parties necessary in
connection with the consummation of the transactions contemplated by this
Agreement (including the Merger) shall have been obtained and not subsequently
been revoked, as of the Satisfaction Date other than such consents and waivers
from third parties, which, if not obtained, would not result, individually or in
the aggregate, in a Buyer Material Adverse Effect or a Seller Material Adverse
Effect; provided, however, that the failure to obtain any consent or waiver in
connection with any instrument, obligation or matter set forth in the Seller
Disclosure Letter shall not constitute a failure of the condition set forth in
this Section 6.2(e).
(f) [Intentionally omitted].
(g) Conversion of Corporate Subsidiaries. Seller shall have, at or
prior to the Effective Time, either converted each of its direct or indirect
corporate Subsidiaries into Delaware limited liability companies or liquidated
such subsidiaries into Seller; provided that this condition shall not apply to
corporations that are Subsidiaries of Seller and that serve as general partners
of limited partnerships if the
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organizational documents of such corporations or limited partnerships would, as
of the date hereof, prevent such conversions or liquidations; provided that no
consequence of Seller's performance of this condition will be taken into account
in determining the satisfaction of any other conditions to Parent's and Buyer's
obligations to effect the Merger.
(h) Partnership Merger Conditions. All conditions set forth in
Sections 5.1(c), 5.1(d) and 5.3 of the Partnership Merger Agreement shall have
been waived or satisfied as of the Satisfaction Date in accordance with the
terms of the Partnership Merger Agreement.
(i) Partnership Merger. The Partnership Merger shall have been
consummated.
Notwithstanding anything to the contrary in this Agreement, none of the
initiation, threat or existence of any legal action of any kind with respect to
this Agreement or the Partnership Merger Agreement or any transaction
contemplated hereby or thereby, including without limitation any action
initiated, threatened or maintained by any stockholder of Seller or any partner
in the Seller Partnership, whether alleging rights with respect to Dissenting
Shares, claims under any Federal or state securities law, contract or tort
claims, claims for breach of fiduciary duty or otherwise, will constitute a
failure of the conditions set forth in Section 6.2(a), 6.2(b), 6.2(c), 6.2(e),
6.2(h), 6.3(a), 6.3(b), 6.3(c), 6.3(e) or 6.3(f) (and no such action shall cause
the chief executive officer or chief financial officer of Seller or of Parent or
Buyer to be unable to deliver a certificate attesting to compliance with such
conditions) unless that action has resulted in the granting of injunctive relief
that prevents the consummation of the Merger and the other transactions
contemplated hereby or thereby, and such injunctive relief has not been
dissolved or vacated.
6.3 Conditions to Obligations of Seller. The obligation of Seller to
effect the Merger and to consummate the other transactions contemplated to occur
on the Closing Date is further subject to the following conditions, any one or
more of which may be waived by Seller:
(a) Representations and Warranties. The representations and
warranties of Parent and Buyer set forth in this Agreement shall be true and
correct in all material respects (except for representations having a
materiality or Parent Material Adverse Effect or Buyer Material Adverse Effect
qualification, which shall be correct in all respects) as of the date of this
Agreement and as of the Closing Date, as though made on and as of the Closing
Date, except to the extent the representation or warranty is expressly limited
by its terms to another date, in which case such representation or warranty
shall be true and correct in all material respects (except for representations
having a materiality or Parent Material Adverse Effect or Buyer Material Adverse
Effect qualification, which shall be correct in all respects) only as of such
specific date, and Seller shall have received a certificate (which certificate
may be qualified by Knowledge to the same extent as the representations and
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warranties of Parent and Buyer contained herein are so qualified) signed on
behalf of Parent and Buyer by the chief executive officer or the chief financial
officer of such party, in such capacity, to such effect.
(b) Performance of Obligations of Buyer. Each of Parent and Buyer
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time, and
Seller shall have received a certificate of Parent and Buyer signed on behalf of
Buyer by the chief executive officer or the chief financial officer of Parent
and Buyer, in such capacity, to such effect.
(c) Material Adverse Change. Since the date of this Agreement, there
shall have been no change in the business, financial condition or results of
operations of Parent and its Subsidiaries, taken as a whole, or of Buyer and the
Buyer Subsidiaries, taken as a whole, that has had or would reasonably be
expected to have a material adverse effect on the ability of Parent, Buyer or
Buyer Operating Partnership to consummate the transactions contemplated by this
Agreement and the Partnership Merger Agreement, and Seller shall have received a
certificate of the chief executive officer or chief financial officer of Parent
and Buyer, in such capacity, certifying to such effect.
(d) Tax Opinion Relating to the Partnership Merger. Seller shall
have received an opinion dated the Closing Date from Paul, Weiss, Rifkind,
Wharton & Garrison, special counsel to the Buyer, based upon such certificates
and letters dated the Closing Date as are acceptable to such special counsel, to
the effect that, for federal income tax purposes, Seller Unit Holders (other
than persons that are not United States persons within the meaning of Section
7701(a)(30) of the Code) who elect to exchange all Seller OP Units held by them
for Class A Preferred Units or Class B Units in Parent pursuant to the
Partnership Merger shall recognize no income, gain or loss upon the exchange.
For purposes of such opinion, counsel may assume that each Seller Unit Holder
shall enter into a guarantee of indebtedness of Parent in accordance with
Section 4.8 of the partnership agreement of Parent in an amount equal to such
Seller Unit Holder's negative tax capital account and that such guarantee shall
be effective to cause the Seller Unit Holder to bear the "economic risk of loss"
(within the meaning of Treasury Regulation Section 1.752-2) associated with the
portion of the indebtedness so guaranteed.
(e) Consents. All consents and waivers (including, without
limitation, waivers of rights of first refusal) from third parties necessary in
connection with the consummation of the transactions contemplated hereby
(including the Merger) shall have been obtained, other than such consents and
waivers from third parties, which, if not obtained, would not result,
individually or in the aggregate, in a Parent Material Adverse Effect, a Buyer
Material Adverse Effect or a Seller Material Adverse Effect; provided, however,
that the failure to obtain any consent or waiver in connection with any
instrument, obligation or matter set forth in the Seller Disclosure Letter shall
not constitute a failure of the condition set forth in this Section 6.3(e).
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(f) Partnership Merger. All conditions set forth in Sections 5.1(c),
5.1(d) and 5.2 of the Partnership Merger Agreement shall have been waived or
satisfied in accordance with the terms of the Partnership Merger Agreement.
(g) Solvency Opinion. Seller and the Seller Partnership shall have
received an opinion, by a reputable expert firm selected by Parent and
reasonably acceptable to the Seller, in a customary form for transactions of
this type as to the solvency and adequate capitalization of the Seller and the
Seller Partnership immediately before and of the Surviving Company and the
Surviving Operating Partnership immediately after giving effect to the
Transactions, which opinion shall be reasonably satisfactory to the Seller.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the Seller Shareholder Approvals are
obtained:
(a) by mutual written consent duly authorized by Parent and the
Board of Directors of Seller;
(b) by Parent or Buyer, upon a breach of any representation,
warranty, covenant, obligation or agreement on the part of Seller set forth in
this Agreement, in any case such that the conditions set forth in Section 6.2(a)
or Section 6.2(b), as the case may be, are not satisfied or would be incapable
of being satisfied within 30 days after the giving of written notice to Seller;
(c) by Seller, upon a breach of any representation, warranty,
covenant obligation or agreement on the part of Parent or Buyer set forth in
this Agreement, in either case such that the conditions set forth in Section
6.3(a) or Section 6.3(b), as the case may be, are not satisfied or would be
incapable of being satisfied within 30 days after the giving of written notice
to Parent or Buyer;
(d) by Parent, Buyer or Seller, if any judgment, injunction, order,
decree or action by any Governmental Entity of competent authority preventing
the consummation of the Merger shall have become final and nonappealable (an
"Injunction");
(e) by Parent, Buyer or Seller, if the Merger shall not have been
consummated on or before December 31, 1999; provided, however, that a party may
not terminate pursuant to this clause (e) if the terminating party shall have
breached in any material respect its representations or warranties or its
obligations under this
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Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in this clause;
(f) by either Seller (unless Seller is in breach of its obligations
under Section 5.1) or Parent or Buyer if, upon a vote at a duly held Seller
Shareholders Meeting or any adjournment thereof, Seller Shareholder Approvals
shall not have been obtained as contemplated by Section 5.1;
(g) by Seller, prior to the Seller Shareholders Meeting, if the
Board of Directors of Seller shall have withdrawn or modified its approval or
recommendation of the Merger or this Agreement in connection with, or approved
or recommended, a Superior Acquisition Proposal; provided, however, that no
termination shall be effective pursuant to this Section 7.1(g) under
circumstances in which a Break-Up Fee (as defined in Section 7.2(a)) is payable
pursuant to Section 7.2(a)(vi), unless within 15 days after such termination,
such Break-Up Fee is paid in full by the Seller and Seller Partnership in
accordance with Section 7.2(a)(vi);
(h) by Parent or Buyer if (i) prior to the Seller Shareholders
Meeting, the Board of Directors of Seller shall have withdrawn or modified in
any manner adverse to Buyer its approval or recommendation of the Merger or this
Agreement, or approved or recommended any Acquisition Proposal; or (ii) Seller
shall have entered into a definitive agreement with respect to any Acquisition
Proposal;
(i) by Seller, if Buyer has not closed the equity funding
contemplated by the Equity Commitments and the borrowings contemplated by the
Financing Commitments (x) on or prior to the Satisfaction Date or (y) on or
prior to December 29, 1999, if (1) Parent elects to extend the Closing Date as
contemplated by Section 1.2(b), (2) the conditions set forth in Section 6.1(b)
shall have been satisfied and (3) Seller shall have delivered a written notice
to Parent and Buyer certifying its ability to satisfy the conditions set forth
in Section 6.2(g);
(j) by either Seller or Parent or Buyer, if the stockholders of
Seller adopt the Liquidation Vote; or
(k) by Parent or Buyer, if an Acquisition Proposal that is publicly
announced shall have been commenced or communicated in writing to Seller and
contains a proposal as to price and (i) Seller shall not have rejected such
proposal within ten business days after the date of the receipt thereof by
Seller or after the date of its existence first becomes publicly announced, if
sooner, or (ii) Seller shall have failed to confirm its recommendation described
in Section 2.25 within ten business days after being requested by Buyer to do
so.
7.2 Certain Fees and Expenses.
(a) If this Agreement shall be terminated:
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(i) pursuant to Section 7.1(b), and the breach by Seller was
willful, then Seller and Seller Partnership will pay Parent an aggregate amount
equal to the Break-Up Fee (defined below) plus the lesser of $10,500,000 and the
Break Up Expenses (defined below),
(ii) pursuant to Section 7.1(b), and the breach by Seller was
not willful, then Seller and Seller Partnership will pay Parent an aggregate
amount equal to the lesser of $15,000,000 and the Break-Up Expenses (provided
that, in the case of a termination by Buyer pursuant to Section 7.1(b) on the
basis of a breach of the representation in Section 2.10(b), Buyer shall not be
entitled to such amount),
(iii) pursuant to Section 7.1(c), and the breach by Parent or
Buyer was willful, then Parent and Buyer will pay Seller an aggregate amount
equal to the Break-Up Fee plus the lesser of $4,500,000 and the Break-Up
Expenses,
(iv) pursuant to Section 7.1(c), and the breach by Parent or
Buyer was not willful, then Parent and Buyer will pay Seller an aggregate amount
equal to the lesser of $4,500,000 and the Break-Up Expenses,
(v) pursuant to Section 7.1(f), then Seller and Seller
Partnership will pay Parent an aggregate amount equal to the lesser of
$15,000,000 and the Break-Up Expenses,
(vi) pursuant to Section 7.1(g), 7.1(h) or 7.1(k), then Seller
and Seller Partnership will pay Parent an aggregate amount equal to the Break-Up
Fee plus the lesser of $10,500,000 and the Break-Up Expenses,
(vii) pursuant to Section 7.1(i), then Parent and Buyer will
pay Seller an aggregate amount equal to the Break-Up Fee plus the lesser of
$4,500,000 and the Break-Up Expenses,
(viii) pursuant to Section 7.1(j), then Seller and Seller
Partnership will pay Parent an aggregate amount equal to the lesser of
$10,500,000 and the Break-Up Expenses; and
(ix) pursuant to Section 7.1(d), and the subject of the
Injunction (as defined in Section 7.1(d)) is a stockholder claim that was the
subject of a bona fide settlement proposal with respect to which Buyer withheld
its consent after Seller's request for same pursuant to Section 5.12, then
Parent and Buyer will pay Seller an aggregate amount equal to the lesser of
$4,500,000 and the Break-Up Expenses.
Notwithstanding anything in this Agreement to the contrary, the right of a
party to receive payment of the Break-Up Fee, Break-Up Expenses or other amounts
in accordance with this Section 7.2(a) shall be the exclusive remedy of such
party for the loss suffered by such party as a result of the failure of the
Merger and the
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Partnership Merger to be consummated, and no party shall have any other
liability to any other party after the payment of the Break-Up Fee, Break-Up
Expenses or other amounts (as applicable). The Break-Up Fee, Break-Up Expenses
or other amounts payable by Seller and Seller Partnership in accordance with
this Section 7.2(a) shall be paid by Seller and Seller Partnership to Buyer, in
immediately available funds within fifteen (15) days after the date the event
giving rise to the obligation to make such payment occurred. Except as provided
in Section 7.2(b), the Break-Up Fee, the Break-Up Expenses or other amounts
payable by Parent and Buyer to Seller in accordance with this Section 7.2(a)
shall be paid by Parent or Buyer to Seller, in immediately available funds
within fifteen (15) days after the day the event giving rise to the obligation
to make such payment occurred. As used in this Agreement, "Break Up Fee" shall
be an amount equal to $25,000,000; provided that if the Cash Collateral has been
increased by $25,000,000, or the Letter of Credit has been amended to increase
the amount available thereunder by $25,000,000, each as provided in Section
4.7(b), the Break-Up Fee payable to Seller shall be an amount equal to
$50,000,000. The "Break-Up Expenses" payable to Parent or Seller, as the case
may be, shall be an amount equal to the out-of-pocket expenses of such party
(and, in the case of Parent, including Buyer and Parent's general partners and
limited partners) incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, all fees and
expenses payable to financing sources or hedging counterparties, attorneys',
accountants' and investment bankers' fees and expenses). Such Break-Up Expenses
shall be reflected on invoices or other means verifying the incurrence of such
Break-Up Expenses.
(b) If this Agreement shall be terminated by Seller and, as provided
in Section 7.2(a), Parent and Buyer are required to pay to Seller a Break-Up Fee
or Break-Up Expenses, then Seller shall be entitled to direct the Escrow Agent
(i) to terminate Parent's rights to receive any part of the Cash Collateral or
(ii) if the Letter of Credit has been delivered to the Escrow Agent in
substitution for the Cash Collateral, to draw on the Letter of Credit in
accordance with the terms thereof. Except as described in the preceding
sentence, in no other circumstances shall Seller have any right to receive any
part of the Cash Collateral or to draw on the Letter of Credit. If this
Agreement is terminated in any circumstance other than as described in the first
sentence of this Section 7.2(b), Seller shall direct the Escrow Agent to return
the Cash Collateral or Letter of Credit, as applicable, to Parent within one
business day of any such termination. Notwithstanding anything in this Agreement
to the contrary, the right of Seller to receive amounts with respect to which
Parent's rights to receive any part of the Cash Collateral is terminated or
which are drawn on the Letter of Credit in accordance with this Section 7.2(b)
shall be the exclusive remedy of Seller, and its stockholders, the Seller
Partnership and the OP Unitholders for any and all losses suffered as a result
of the failure of the Merger and the Partnership Merger to be consummated and
upon payment of such amounts neither Parent nor Buyer shall have any other
liability to Seller hereunder (including under Section 7.2(a)). Any amounts
which Seller has the right to receive pursuant to this Section 7.2(b) shall be
applied as set forth in the Escrow Agreement.
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(c) Except as specifically provided in this Section 7.2, each party
shall bear its own expenses in connection with this Agreement and the
Transactions.
7.3 Effect of Termination. In the event of termination of this Agreement
by Seller, Buyer or Parent as provided in Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Parent, Buyer, or Seller, other than in accordance with Section 7.2,
this Section 7.3 and Article 8.
7.4 Amendment. This Agreement may be amended by Parent, Buyer and Seller
in writing by action of their respective Boards of Directors at any time before
or after any Seller Shareholder Approvals are obtained and prior to the
Effective Time; provided, however, that, after the Seller Shareholder Approvals
are obtained, no such amendment, modification or supplement shall be made which
by law requires the further approval of stockholders without obtaining such
further approval. The parties agree to amend this Agreement in the manner
provided in the immediately preceding sentence to the extent required to
continue the status of Seller as a REIT.
7.5 Extension: Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of any other party, (b) waive any inaccuracies in the representations
and warranties of any other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.4, waive compliance with any of the agreements or conditions of any other
party contained in this Agreement. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement confirming the representations and warranties in this
Agreement shall survive the Effective Time. This Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.
8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses
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or telecopy numbers (or at such other address or telecopy number for a party as
shall be specified by like notice):
(a) if to Parent or Buyer, to:
Berkshire Realty Holdings, L.P.
One Beacon Street
Suite 1500
Boston, Massachusetts 02108
Attention: Douglas S. Krupp
Fax: (617) 423-8916
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: James M. Dubin, Esq.
Michele R. Jenkinson, Esq.
Fax: (212) 757-3990
and
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: Anthony J. Colletta, Esq.
Fax: (212) 558-3588
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Gregory J. Ressa, Esq.
Brian M. Stadler, Esq.
Fax: (212) 455-2502
(b) if to Seller, to:
Berkshire Realty Company, Inc.
One Beacon Street
Suite 1550
Boston, Massachusetts 02108
Attention: President
Fax: (617) 646-2373
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with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention:David E. Redlick, Esq.
and Kenneth A. Hoxsie, Esq.
Fax: (617) 526-5000
and
Baker & Hostetler LLP
1900 East Ninth Street, Suite 3200
Cleveland, Ohio 44114
Attention: Robert A. Weible, Esq.
Fax: (216) 696-0740
All notices shall be deemed given only when actually received.
8.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
Interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement, the
Seller Disclosure Letter, the Buyer Disclosure Letter, the Confidentiality
Agreement dated September 16, 1998 between Greenhill & Co., LLC and Lazard on
behalf of Seller, the Partnership Merger Agreement and the other agreements
entered into in connection with the Merger (a) constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and (b)
except as provided in Section 5.8 (the "Third Party Provision") are not intended
to confer upon any Person other than the parties hereto any rights or remedies.
The Third Party Provision may be enforced by the beneficiaries thereof or on
behalf of the beneficiaries thereof by the directors of Seller who had been
members of the Board of Directors of Seller prior to the Effective Time.
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8.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
8.7 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
8.8 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed by
Seller in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Parent and Buyer shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by Seller and to enforce
specifically the terms and provisions of this Agreement in any federal court
located in Delaware or in Chancery Court in Delaware, this being in addition to
any other remedy to which they are entitled at law or in equity. The parties
acknowledge that Seller shall not be entitled to an injunction or injunctions to
prevent breaches of this Agreement by Parent or Buyer or to enforce specifically
the terms and provisions of this Agreement and that Seller's sole and exclusive
remedy with respect to any such breach shall be the remedy set forth in Section
7.2. In addition, each of the parties hereto (a) consents to submit itself
(without making such submission exclusive) to the personal jurisdiction of any
federal court located in Delaware or Chancery Court located in Delaware in the
event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement and (b) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave from
any such court.
8.9 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, Parent, Buyer and Seller have caused this Agreement to
be signed by their respective officers thereunto duly authorized all as of the
date first written above.
BERKSHIRE REALTY HOLDINGS, L.P.,
a Delaware limited partnership
By: s/ Douglas S. Krupp
-----------------------------------------
Douglas S. Krupp
Authorized Signatory
BRI ACQUISITION, LLC,
a Delaware limited liability company
By: s/ Douglas S. Krupp
-----------------------------------------
Douglas S. Krupp
Authorized Signatory
BERKSHIRE REALTY COMPANY, INC.,
a Delaware corporation
By: /s/ David F. Marshall
-----------------------------------------
Name: David F. Marshall
Title: Chief Executive Officer
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BRI OP LIMITED PARTNERSHIP,
a Delaware limited partnership
joins in this Agreement solely with
respect to Section 7.2
By: Berkshire Apartments, Inc.
By: /s/ David F. Marshall
-----------------------------------------
Name: David F. Marshall
Title: President and Chief Executive Officer
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Exhibit 10
----------
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
BERKSHIRE REALTY HOLDINGS, L.P.,
BRI ACQUISITION SUB, LP,
BERKSHIRE APARTMENTS, INC.
and
BRI OP LIMITED PARTNERSHIP
------------------
April 13, 1999
------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1
THE MERGER..................................................................2
Section 1.1 The Partnership Merger.........................................2
Section 1.2 Closing; Effective Time........................................2
Section 1.3 Certificate and Agreement of Limited Partnership;
Officers.......................................................2
Section 1.4 Conversion of Seller OP Units..................................3
Section 1.5 Conversion of Units Owned by Seller General Partner............3
Section 1.6 Parent and Seller-Owned Interests..............................4
Section 1.7 Conversion of Interests in Buyer Operating Partnership.........4
Section 1.8 Cancellation and Retirement of Seller OP Units.................4
Section 1.9 Interest Elections.............................................4
Section 1.10 Payment for Seller OP Units....................................5
Section 1.11 Further Assurances.............................................6
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLER GENERAL PARTNER AND THE SELLER
PARTNERSHIP.................................................................6
Section 2.1 Organization, Standing and Power...............................6
Section 2.2 Authority; Noncontravention; Consents..........................7
Section 2.3 Information Supplied...........................................8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND BUYER OPERATING PARTNERSHIP...................................8
Section 3.1 Organization, Standing and Power...............................8
Section 3.2 Authority; Noncontravention; Consents..........................9
Section 3.3 Information Supplied..........................................10
ARTICLE 4
COVENANTS..................................................................11
Section 4.1 Reasonable Best Efforts; Additional Actions...................11
Section 4.2 Notification of Certain Matters...............................11
Section 4.3 Consent Solicitation Statement; Securities Filings............11
i
<PAGE>
Page
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ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE PARTNERSHIP
MERGER.....................................................................12
Section 5.1 Conditions to Each Party's Obligations to Effect the
Partnership Merger............................................12
Section 5.2 Conditions to Seller General Partner's and the Seller
Partnership's Obligations to Effect the Partnership Merger....13
Section 5.3 Conditions to Parent's and Buyer Operating
Partnership's Obligations to Effect the Partnership...........14
ARTICLE 6
TERMINATION................................................................15
Section 6.1 Termination...................................................15
Section 6.2 Procedure for and Effect of Termination.......................15
ARTICLE 7
MISCELLANEOUS..............................................................15
Section 7.1 Amendment and Modification....................................15
Section 7.2 Waiver of Compliance; Consents................................15
Section 7.3 Survival......................................................15
Section 7.4 Notices.......................................................15
Section 7.5 Assignment....................................................17
Section 7.6 GOVERNING LAW.................................................17
Section 7.7 Counterparts..................................................17
Section 7.8 Enforcement...................................................18
Section 7.9 Interpretation................................................18
Section 7.10 Entire Agreement..............................................18
Section 7.11 No Third Party Beneficiaries..................................18
Section 7.12 Severability..................................................18
Section 7.13 Tax Election..................................................18
EXHIBITS
Exhibit A Partnership Agreement
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 13, 1999, by and
among BERKSHIRE REALTY HOLDINGS, L.P., a Delaware limited partnership
("Parent"), BRI ACQUISITION SUB, LP, a Delaware limited partnership ("Buyer
Operating Partnership"), BERKSHIRE APARTMENTS, INC., a Delaware corporation
("Seller General Partner"), and BRI OP LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Seller Partnership").
WHEREAS, the respective Boards of Directors (or comparable body or
entity) of Parent, BRI Acquisition, LLC ("Buyer") and Berkshire Realty Company,
Inc., a Delaware corporation (the "Seller"), have approved the acquisition of
the Seller and its assets (including, without limitation, the Seller's direct
and indirect interest in the Seller Partnership) by Parent on the terms and
subject to the conditions set forth in the Agreement and Plan of Merger, dated
as of April 13, 1999 (the "Merger Agreement"), by and among Parent, Buyer and
the Seller;
WHEREAS, it is proposed that, immediately prior to the merger of the
Buyer and Seller as contemplated by the Merger Agreement (the "Merger"), Buyer
Operating Partnership will merge with and into the Seller Partnership (the
"Partnership Merger") on the terms and subject to the conditions of this
Agreement;
WHEREAS, the Board of Directors of Seller General Partner, in light
of and subject to the terms and conditions set forth herein, (i) approved this
Agreement and (ii) resolved to recommend that the holders of Seller OP Units
adopt this Agreement and approve the Partnership Merger;
WHEREAS, Parent, Buyer Operating Partnership, Seller General Partner
and the Seller Partnership desire to make certain representations, warranties,
covenants and agreements in connection with the Partnership Merger and also to
prescribe various conditions thereto; and
WHEREAS, capitalized terms used herein and not otherwise defined
have the respective meanings given them in the Merger Agreement.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
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2
ARTICLE 1
THE MERGER
Section 1.1 The Partnership Merger. Upon the terms and subject to
the conditions of this Agreement, at the Effective Time (as defined in Section
1.2) and in accordance with the Revised Uniform Limited Partnership Act of the
State of Delaware (the "DRULPA"), Buyer Operating Partnership shall be merged
with and into the Seller Partnership, with the Seller Partnership as the
surviving partnership in the Partnership Merger (the "Surviving Operating
Partnership"). At the Effective Time, the separate existence of Buyer Operating
Partnership shall cease and the other effects of the Partnership Merger shall be
as set forth in Section 17-211 of the DRULPA.
Section 1.2 Closing; Effective Time. Provided that the conditions
set forth in Article 5 have been satisfied (or waived by the appropriate party),
the closing of the Partnership Merger (the "Closing") shall take place at the
place of the closing of the Merger set forth in Section 1.2(a) of the Merger
Agreement, on the Closing Date immediately prior to the closing of the Merger,
or at such other place, at such other time or on such other date as the parties
hereto may mutually agree. At the Closing, the parties hereto shall cause a
certificate of merger (the "Certificate of Merger") to be executed and filed
with the Secretary of State of the State of Delaware in accordance with the
DRULPA. The Partnership Merger shall become effective as of the date and time of
such filing, or such other time within 24 hours after such filing as the parties
hereto shall agree to be set forth in the Certificate of Merger (the "Effective
Time"), which, in either case, shall be immediately prior to the effective time
of the Merger. If the closing date of the Merger has been extended as
contemplated under Section 1.2(b) of the Merger Agreement, then for purposes of
the conditions set forth in Section 5.3 hereof, all references in the lettered
subsections thereof to the term "Closing Date" shall be deemed to mean the
Satisfaction Date, and the certificates and other documents to be delivered by
the parties pursuant to Section 5.3 hereof shall be delivered on and as of the
Satisfaction Date. The parties hereto agree that none of the conditions set
forth in Section 5.3 shall be required to be satisfied at any time after the
Satisfaction Date.
Section 1.3 Certificate and Agreement of Limited Partnership;
Officers.
(a) At the Effective Time, and without any further action on
the part of Buyer Operating Partnership or the Seller Partnership, the agreement
of limited partnership and the certificate of limited partnership of the Seller
Partnership, as in effect immediately prior to the Effective Time, shall become,
from and after the Effective Time, the agreement of limited partnership and the
certificate of limited partnership of the Surviving Operating Partnership, until
thereafter amended as provided therein and under applicable law.
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3
(b) The officers of the Seller Partnership immediately prior
to the Effective Time shall become, from and after the Effective Time, the
officers of the Surviving Operating Partnership, until their respective
successors are duly elected or appointed and shall qualify or their earlier
resignation or removal.
Section 1.4 Conversion of Seller OP Units. The Seller OP Units
issued and outstanding immediately prior to the Effective Time (other than
Seller OP Units owned by Seller General Partner, which shall be treated as set
forth in Section 1.5, and other than Seller OP Units to be canceled in
accordance with Section 1.6) shall, at the Effective Time, be converted into the
following (the consideration set forth in clauses (a), (b) and (c) below being
collectively referred to as the "Merger Consideration"):
(a) for each Seller OP Unit with respect to which an
election to receive a Class A Preferred Unit (as defined below) has been
effectively made pursuant to Section 1.9 and not revoked or lost ("Class A
Electing Units"), the right to receive one fully paid and nonassessable
"Class A Preferred Unit" (each, a "Class A Preferred Unit") as defined in
the partnership agreement of Parent attached hereto as Exhibit A (the
"Partnership Agreement");
(b) for each Seller OP Unit with respect to which an
election to receive a Class B Unit (as defined below) has been effectively
made pursuant to Section 1.9 and not revoked or lost ("Class B Electing
Units"), the right to receive one fully paid and nonassessable "Class B
Unit" as defined in the Partnership Agreement (each, a "Class B Unit");
and
(c) for each Seller OP Unit, other than Class A Electing
Units and Class B Electing Units, the right to receive in cash, without
interest, an amount equal to the Common Merger Consideration (the "Cash
Election Price").
Notwithstanding the foregoing, if between the date of this Agreement
and the Effective Time the outstanding Seller OP Units, Class A Preferred Units
(if any) or Class B Units (if any) shall have been changed into a different
number of units or a different class by reason of any distribution, dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of Seller OP Units, Class A Preferred Units (if any) or Class B Units (if any),
the Merger Consideration shall be correspondingly adjusted to reflect such
distribution, dividend, subdivision, reclassification, recapitalization, split,
combination or exchange.
Section 1.5 Conversion of Units Owned by Seller General Partner. The
Seller OP Units that are owned by Seller General Partner immediately prior to
the Effective Time (collectively, the "Seller GP Interest") shall, at the
Effective Time, by virtue of the Partnership Merger and without any action on
the part of Seller
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4
General Partner, be converted into a 1% general partnership interest in the
Surviving Operating Partnership.
Section 1.6 Parent and Seller-Owned Interests. Each Seller OP Unit
that is owned by Parent or the Seller immediately prior to the Effective Time
shall, at the Effective Time, by virtue of the Partnership Merger and without
any action on the part of Parent or the Seller, automatically be canceled and
retired and cease to exist, and no consideration shall be delivered in exchange
therefor.
Section 1.7 Conversion of Interests in Buyer Operating Partnership.
The aggregate limited partnership interests in Buyer Operating Partnership
issued and outstanding immediately prior to the Effective Time shall, at the
Effective Time, by virtue of the Partnership Merger and without any action on
the part of Parent, be converted into a 99% limited partnership interest in the
Surviving Operating Partnership. The aggregate general partnership interests in
Buyer Operating Partnership issued and outstanding immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the Partnership Merger
and without any action on the part of Buyer, automatically be canceled and
retired and cease to exist, and no consideration shall be delivered in exchange
therefor.
Section 1.8 Cancellation and Retirement of Seller OP Units. Each
Seller OP Unit converted into the right to receive the Merger Consideration
pursuant to Section 1.4 shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a Seller OP
Unit shall cease to have any rights with respect thereto, except for the right
to receive the Merger Consideration, if any, applicable thereto.
Section 1.9 Interest Elections.
(a) Subject to Section 1.9(e), each holder of a Seller OP Unit
shall be entitled, with respect to all, but not less than all, of such holder's
Seller OP Units, to make an unconditional election, on or prior to the Election
Date (as defined in Section 1.9(b)), to receive (i) Class A Preferred Units or
Class B Units (a "Non-Cash Election") or (ii) the Cash Election Price (a "Cash
Election"), on the basis hereinafter set forth.
(b) Buyer Operating Partnership shall prepare, and the Seller
Partnership shall mail pursuant to Section 4.3(a), a form of election, which
form shall be subject to the reasonable approval of Seller General Partner (the
"Form of Election"). The Form of Election shall be used by each holder of a
Seller OP Unit to designate such holder's election to exchange all, but not less
than all, of the Seller OP Units held by such holder into either Class A
Preferred Units, Class B Units or the Cash Election Price. Any such holder's
election to receive Class A Preferred Units, Class B Units or the Cash Election
Price shall be deemed to have been properly made only if Parent shall have
received at its principal executive office,
<PAGE>
5
not later than 5:00 p.m., New York City time on the date that is five business
days before the scheduled date of the Seller Shareholders Meeting (the "Election
Date"), a Form of Election specifying whether such holder elects to receive
Class A Preferred Units, Class B Units or the Cash Election Price and otherwise
properly completed and signed. The Form of Election shall state therein the date
that constitutes the Election Date.
(c) A Form of Election may be revoked by any holder of a
Seller OP Unit only by written notice received by Parent prior to 5:00 p.m., New
York City time, on the Election Date. In addition, all Forms of Election shall
automatically be revoked if the Partnership Merger has been abandoned.
(d) The reasonable determination of Parent shall be binding as
to whether or not elections to receive Class A Preferred Units, Class B Units or
the Cash Election Price have been properly made or revoked pursuant to this
Section 1.9 and when elections and revocations were received by it. If Parent
determines that any election to receive Class A Preferred Units, Class B Units
or the Cash Election Price was not properly made, the Seller OP Units with
respect to which such election was not properly made shall be treated by Parent
as Seller OP Units for which a Cash Election was made, and such Seller OP Units
shall be converted in accordance with Section 1.4(c). Parent may, with the
agreement of Seller General Partner, make such rules as are consistent with this
Section 1.9 for the implementation of the elections provided for herein as shall
be necessary or desirable fully to effect such elections.
(e) Parent reserves the right to require any holder of Seller
OP Units, as a condition to making a Non-Cash Election with respect to such
holder's Seller OP Units, to (i) represent to Parent that such holder is an
"Accredited Investor" (as such term is defined under Rule 501 promulgated under
the Securities Act) and (ii) agree to abide by the terms of the Partnership
Agreement and to become a party thereto.
Section 1.10 Payment for Seller OP Units.
(a) Payment. Promptly after the Effective Time, Parent shall
pay the Merger Consideration to which holders of Seller OP Units shall be
entitled at the Effective Time pursuant to Section 1.4(c). Parent shall be
entitled to deduct and withhold, from the consideration otherwise payable
pursuant to Section 1.4(c) to any former holder of Seller OP Units, such amounts
as Parent is required to deduct and withhold with respect to the making of such
payment under the Code or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Parent, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the former
holder of Seller OP Units in respect of which such deduction and withholding was
made by Parent.
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6
(b) No Further Ownership Rights in Seller OP Units. The Merger
Consideration delivered in accordance with the terms of Article 1 shall be
deemed to have been issued (or paid, as applicable) in full satisfaction of all
rights pertaining to the Seller OP Units.
Section 1.11 Further Assurances If, at any time after the Effective
Time, the Surviving Operating Partnership shall determine or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Operating Partnership the right, title or interest in, to or under any
of the rights, properties or assets of the Seller Partnership acquired or to be
acquired by the Surviving Operating Partnership as a result of, or in connection
with, the Partnership Merger or otherwise to carry out this Agreement, the
Surviving Operating Partnership shall be authorized to execute and deliver, in
the name and on behalf of each of Buyer Operating Partnership and the Seller
Partnership or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of Buyer
Operating Partnership and the Seller Partnership or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Operating Partnership or otherwise to carry out this
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLER GENERAL PARTNER AND THE SELLER PARTNERSHIP
Each of Seller General Partner and the Seller Partnership represents
and warrants to Parent and Buyer Operating Partnership as follows:
Section 2.1 Organization, Standing and Power. Each of Seller General
Partner and Seller Partnership is duly organized and validly existing under the
Laws of Delaware. Each of Seller General Partner and Seller Partnership has the
requisite corporate or limited partnership power and authority to carry on its
business as now being conducted. Each of Seller General Partner and Seller
Partnership is duly qualified or licensed to do business as a foreign
corporation or limited partnership and is in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed, individually or
in the aggregate, would not have a Seller Material Adverse Effect. Each of
Seller General Partner and Seller Partnership has delivered to Parent complete
and correct copies of its Certificate of Incorporation and By-laws or similar
organizational documents, in each case, as amended to the date of this
Agreement.
<PAGE>
7
Section 2.2 Authority; Noncontravention; Consents.
(a) Each of Seller General Partner and Seller Partnership has
the requisite corporate or limited partnership power and authority to enter into
this Agreement and, subject to the Seller Partner Approval, to consummate the
transactions contemplated by this Agreement to which it is a party. The
execution and delivery of this Agreement by Seller General Partner and Seller
Partnership and the consummation by Seller General Partner and Seller
Partnership of the transactions contemplated by this Agreement to which Seller
General Partner and/or Seller Partnership is a party have been duly authorized
by all necessary corporate or limited partnership action on the part of Seller
General Partner and Seller Partnership, except for and subject to the Seller
Partner Approval. This Agreement has been duly executed and delivered by Seller
General Partner and Seller Partnership and constitutes a valid and binding
obligation of each of Seller General Partner and Seller Partnership, enforceable
against each of Seller General Partner and Seller Partnership in accordance with
and subject to its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar Laws relating to creditors' rights and general
principles of equity.
(b) The execution and delivery of this Agreement by each of
Seller General Partner and Seller Partnership does not, and the consummation of
the transactions contemplated by this Agreement to which it is a party and
compliance by it with the provisions of this Agreement will not, require any
consent, approval or notice under, or conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a benefit under, or result in the creation of any Lien upon any of
the properties or assets of Seller General Partner, Seller Partnership or any of
their Subsidiaries under, (i) the Certificate of Incorporation or the By-laws or
the comparable certificate of incorporation or organizational documents or
partnership or similar agreement (as the case may be) of Seller General Partner,
Seller Partnership or any of their Subsidiaries, each as amended or supplemented
to the date hereof, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, reciprocal easement agreement, lease, joint venture agreement,
development agreement, benefit plan or other agreement, instrument, permit,
concession, franchise or license applicable to Seller General Partner, Seller
Partnership or any of their Subsidiaries or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation (collectively, "Laws") applicable to Seller
General Partner, Seller Partnership or any of their Subsidiaries, or their
respective properties or assets, other than, in the case of clause (ii) (other
than such items relating to the incurrence of indebtedness) or (iii), any such
conflicts, violations, defaults, rights, loss or Liens that individually or in
the aggregate would not reasonably be expected to (x) have a Seller Material
Adverse Effect or (y) prevent or delay beyond December 31, 1999 the consummation
of the transactions contemplated by this Agreement. No consent, approval, order
or
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8
authorization of, or registration, declaration or filing with, any federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to Seller General
Partner, Seller Partnership or any of their Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation by Seller General
Partner or Seller Partnership of the transactions contemplated by this
Agreement, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (ii) any filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iii) the filing of a Form D with the SEC and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations and filings (A)
as are set forth in Schedule 2.5 to the Seller Disclosure Letter, (B) as may be
required under (y) federal, state or local environmental Laws or (z) the "blue
sky" laws of various states, to the extent applicable or (C) which, if not
obtained or made, would not prevent or delay beyond December 31, 1999 the
consummation of any of the transactions contemplated by this Agreement or
otherwise prevent or delay beyond December 31, 1999 Seller from performing its
obligations under this Agreement in any material respect or have, individually
or in the aggregate, a Seller Material Adverse Effect.
Section 2.3 Information Supplied. None of the information supplied
by Seller General Partner or the Seller Partnership for inclusion or
incorporation by reference in the Consent Solicitation Statement (as defined in
Section 4.3) or the other Solicitation Documents (as defined Section 4.3) shall,
at the time the Solicitation Documents are mailed to the holders of Seller OP
Units and at the Closing Date, contain any untrue statement of material fact or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND BUYER OPERATING PARTNERSHIP
Each of Parent and Buyer Operating Partnership represents and
warrants to Seller General Partner and the Seller Partnership as follows:
Section 3.1 Organization, Standing and Power.
(a) Parent is a limited partnership duly organized and validly
existing under the Laws of Delaware and has the requisite power and authority to
carry on its business as now being conducted. Parent is duly qualified or
licensed to do business as a foreign limited partnership and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its
<PAGE>
9
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed, individually or
in the aggregate, would not have a material adverse effect on the ability of
Parent to consummate the transactions contemplated by this Agreement. Parent has
delivered to Seller complete and correct copies of its organizational documents
as amended or supplemented to the date of this Agreement. Attached hereto as
Exhibit A is a complete and correct copy of the Partnership Agreement. The
Partnership Agreement has not been amended subsequent to the date hereof, except
for such amendments as are permitted under Section 4.3(c) of the Merger
Agreement.
(b) Buyer Operating Partnership is a limited partnership duly
organized and validly existing under the Laws of Delaware and has the requisite
power and authority to carry on its business as now being conducted. Buyer
Operating Partnership is duly qualified or licensed to do business as a foreign
limited partnership and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualifications or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed, individually or in the aggregate,
would not have a material adverse effect on the ability of Buyer Operating
Partnership to consummate the transactions contemplated by this Agreement. Buyer
Operating Partnership has delivered to Seller complete and correct copies of its
organizational documents as amended or supplemented to the date of this
Agreement.
(c) Parent and Buyer Operating Partnership are newly formed
and, except for activities incident to the acquisition of Seller Partnership,
neither Parent nor Buyer Operating Partnership has (i) engaged in any business
activities of any type or kind whatsoever or (ii) acquired any property of any
type or kind whatsoever.
Section 3.2 Authority; Noncontravention; Consents.
(a) Each of Parent and Buyer Operating Partnership has the
requisite power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement to which it is a party. The
execution and delivery of this Agreement by Parent and Buyer Operating
Partnership and the consummation by Parent and Buyer Operating Partnership of
the transactions contemplated by this Agreement to which Parent and/or Buyer
Operating Partnership is a party have been duly authorized by all necessary
partnership action on the part of Parent and Buyer Operating Partnership
(including, without limitation, the issuance of the Class A Preferred Units and
the Class B Units in the Partnership Merger). This Agreement has been duly
executed and delivered by Parent and Buyer Operating Partnership and constitutes
a valid and binding obligation of each of Parent and Buyer Operating
Partnership, enforceable against each of Parent and Buyer Operating Partnership
in accordance with and subject to its terms, subject to applicable
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10
bankruptcy, insolvency, moratorium or other similar Laws relating to creditors'
rights and general principles of equity.
(b) The execution and delivery of this Agreement by each of
Parent and Buyer Operating Partnership does not, and the consummation of the
transactions contemplated by this Agreement to which Parent and/or Buyer is a
party and compliance by each of Parent and Buyer Operating Partnership with the
provisions of this Agreement will not, conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any material
obligation or to loss of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of Parent or any of its
Subsidiaries under, (i) the organizational documents of Parent (including the
Partnership Agreement) or Buyer Operating Partnership or the comparable
certificate of incorporation or organizational documents or partnership or
similar agreement (as the case may be) of any other Subsidiary of the Parent,
each as amended or supplemented to the date of this Agreement, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any Laws applicable to Parent or
any of its Subsidiaries or their respective properties or assets, other than, in
the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights, loss or Liens that individually or in the aggregate would not reasonably
be expected to (x) have a Parent Material Adverse Effect or (y) prevent the
consummation of the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Parent or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by Parent or Buyer Operating Partnership or the consummation by Parent or Buyer
Operating Partnership of any of the transactions contemplated by this Agreement,
except for (i) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, (ii) such filings as may be required in
connection with the payment of any Transfer Taxes, (iii) any filings required
under the HSR Act, (iv) the filing of a Form D with the SEC and (v) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings (A) as may be required under federal, state or local environmental Laws,
(B) the "blue sky" laws of various states, to the extent applicable, or (C)
which, if not obtained or made, would not prevent or delay beyond December 31,
1999 the consummation of any of the transactions contemplated by this Agreement
or otherwise prevent Parent or Buyer Operating Partnership from performing its
obligations under this Agreement in any material respect or have, individually
or in the aggregate, a Parent Material Adverse Effect.
Section 3.3 Information Supplied. None of the information supplied
by Parent or Buyer Operating Partnership for inclusion or incorporation by
reference in the Consent Solicitation Statement or the other Solicitation
Documents shall, at the
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11
time the Solicitation Documents are mailed to the holders of Seller OP Units and
at the Closing Date, contain any untrue statement of material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE 4
COVENANTS
Section 4.1 Reasonable Best Efforts; Additional Actions. Upon the
terms and subject to the conditions of this Agreement, each of the parties
hereto shall use all reasonable best efforts to take, or cause to be taken, all
actions, and to do or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by,
and in connection with, this Agreement. In connection with and without limiting
the foregoing, Seller General Partner shall take all necessary action to obtain
the requisite consent of the holders of Seller OP Units to adopt this Agreement
and approve the Partnership Merger prior to the closing of the Merger.
Section 4.2 Notification of Certain Matters. Each of Seller General
Partner and the Seller Partnership shall give notice to Parent and Buyer
Operating Partnership, and each of Parent and Buyer Operating Partnership shall
give notice to Seller General Partner and the Seller Partnership, promptly upon
becoming aware of (a) any occurrence, or failure to occur, of any event, which
occurrence or failure to occur has caused or would reasonably be expected to
cause any representation or warranty that is qualified as to materiality in this
Agreement to be untrue or inaccurate or any representation or warranty that is
not so qualified to be untrue or inaccurate in any material respect at any time
after the date hereof and prior to the Closing Date and (b) any material failure
on its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided that the delivery of any
notice pursuant to this Section 4.2 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 4.3 Consent Solicitation Statement; Securities Filings.
(a) Seller Partnership and Parent shall jointly and promptly
prepare a Consent Solicitation Statement soliciting the written consent of the
holders of Seller OP Units to the adoption of this Agreement and the approval of
the Partnership Merger (the "Consent Solicitation Statement"), which Consent
Solicitation Statement shall contain a description of the terms of the Class A
Preferred Units and the Class B Units and the recommendation of Seller General
Partner's Board of Directors that the holders of Seller OP Units consent to the
adoption of this Agreement and the approval of the Partnership Merger. The
Consent Solicitation
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Statement shall comply as to form in all material respects with the requirements
of the Securities Act and the rules and regulations thereunder applicable to an
offering of securities exempt from registration under the Securities Act
pursuant to Rule 506 thereunder. As soon as practicable following the mailing of
the Proxy Statement in connection with the Merger, Seller Partnership shall mail
the Consent Solicitation Statement, together with a form of written consent, a
Form of Election and any other documents relating thereto (collectively, the
"Solicitation Documents"), to the holders of Seller OP Units. Seller Partnership
and Parent shall consult and cooperate with each other in the preparation of the
Solicitation Documents. All mailings to the holders of Seller OP Units in
connection with the Partnership Merger, including the Solicitation Documents,
shall be subject to the prior review, comment and approval of Parent (such
approval not to be unreasonably withheld or delayed). Parent shall take all
actions required to be taken under any applicable federal and state securities
laws in connection with the issuance of the Class A Preferred Units and the
Class B Units in the Partnership Merger pursuant to this Agreement, including
but not limited to the filing with the SEC of a "Notice of Sale of Securities
Pursuant to Regulation D" on Form D.
(b) Parent, on the one hand, and Seller Partnership, on the
other hand, shall each advise the other promptly if, prior to the Closing Date,
it obtains knowledge of any facts that would make it necessary to amend any of
the Solicitation Documents in order to render the statements therein not false
or misleading or to comply with applicable law. Seller Partnership and Parent
shall promptly amend or supplement any information in such documents if and to
the extent that such information has become false or misleading, and Seller
Partnership shall take all steps necessary to disseminate the amended documents
or supplements to the holders of Seller OP Units, in each case, as and to the
extent required by applicable law.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE PARTNERSHIP MERGER
Section 5.1 Conditions to Each Party's Obligations to Effect the
Partnership Merger. The respective obligations of each party hereto to effect
the Partnership Merger is subject to the satisfaction on or prior to the Closing
Date of each of the following conditions, any and all of which may be waived in
whole or in part by the parties hereto with respect to such party's conditions,
to the extent permitted by applicable law:
(a) Conditions to the Merger. All of the conditions to the
closing of the Merger shall have been satisfied or waived in accordance with the
terms of the Merger Agreement (other than those set forth in Section 6.2(h),
6.2(i) or 6.3(f) of the Merger Agreement).
<PAGE>
13
(b) Unitholders' Consent. The requisite consent of the holders
of the Seller OP Units to adopt this Agreement and approve the Partnership
Merger shall have been obtained; and
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Partnership Merger or any of the other transactions
contemplated hereby shall be in effect.
(d) HSR Act. All applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or otherwise been
terminated.
Section 5.2 Conditions to Seller General Partner's and the Seller
Partnership's Obligations to Effect the Partnership Merger. The obligation of
Seller General Partner and the Seller Partnership to effect the Partnership
Merger is also subject to the satisfaction (or waiver by Seller General Partner
and the Seller Partnership) on or prior to the Closing Date of each of the
following additional conditions:
(a) Accuracy of Representations and Warranties. All
representations and warranties made by each of Parent and Buyer Operating
Partnership herein shall be true and correct in all material respects (except
for representations having a materiality, Parent Material Adverse Effect or
Buyer Material Adverse Effect qualification, which shall be true and correct in
all respects) as of the date of the Agreement and as of the Closing Date with
the same force and effect as though such representations and warranties had been
made on and as of the Closing Date, except for representations and warranties
that are made as of a specified date or time, which shall be true and correct in
all material respects (except for representations having a materiality, Parent
Material Adverse Effect or Buyer Material Adverse Effect qualification, which
shall be true and correct in all respects) only as of such specific date or
time.
(b) Compliance with Covenants. Each of Parent and Buyer
Operating Partnership shall have performed in all material respects all
obligations and agreements, and complied in all material respects with
covenants, contained in this Agreement to be performed or complied with by it
prior to or as of the Closing Date.
(c) Officer's Certificate. Seller General Partner and the
Seller Partnership shall have received a certificate of Parent, dated as of the
Closing Date, signed by an executive officer of Parent to evidence satisfaction
of the conditions set forth in Sections 5.2(a) and (b).
<PAGE>
14
Section 5.3 Conditions to Parent's and Buyer Operating Partnership's
Obligations to Effect the Partnership. The obligation of Parent and Buyer
Operating Partnership to effect the Partnership Merger is also subject to the
satisfaction (or waiver by Parent and Buyer Operating Partnership) at or prior
to the Closing Date of each of the following additional conditions:
(a) Accuracy of Representations and Warranties. All
representations and warranties made by each of Seller General Partner and the
Seller Partnership herein shall be true and correct in all material respects
(except for representations having a materiality or Seller Material Adverse
Effect qualification, all of which shall be true and correct in all respects) as
of the date of this Agreement and as of the Closing Date, with the same force
and effect as though such representations and warranties had been made on and as
of the Closing Date, except for representations and warranties that are made as
of a specified date or time, which shall be true and correct in all material
respects (except for representations having a materiality or Seller Material
Adverse Effect qualification, which shall be correct in all respects) only as of
such specific date or time.
(b) Compliance with Covenants. Each of Seller General Partner
and the Seller Partnership shall have performed in all material respects all
obligations and agreements, and complied in all material respects with
covenants, contained in this Agreement to be performed or complied with by it
prior to or as of the Closing Date.
(c) Officer's Certificate. Parent and Buyer Operating
Partnership shall have received a certificate of Seller General Partner, dated
as of the Closing Date, signed by an executive officer of Seller General Partner
to evidence satisfaction of the conditions set forth in Sections 5.3(a) and (b).
Notwithstanding anything to the contrary in this Agreement,
none of the initiation, threat or existence of any legal action of any kind with
respect to this Agreement or the Merger Agreement or any transaction
contemplated hereby or thereby, including without limitation any action
initiated, threatened or maintained by any stockholder of the Seller or any
holders of Seller OP Units, whether alleging rights with respect to Dissenting
Shares, claims under any Federal or state securities law, contract or tort
claims, for breach of fiduciary duty or otherwise, will constitute a failure of
the conditions set forth in Sections 5.2(a), 5.2(b), 5.3(a) or 5.3(b) (and no
such action shall cause an executive officer of Seller General Partner or of
Parent to be unable to deliver a certificate attesting to compliance with such
conditions) unless that action has resulted in the granting of injunctive relief
that prevents the consummation of the Partnership Merger and the other
transaction contemplated hereby or thereby, and such injunctive relief has not
been dissolved or vacated.
<PAGE>
15
ARTICLE 6
TERMINATION
Section 6.1 Termination. This Agreement shall terminate, without any
further action on the part of the parties hereto, upon the termination of the
Merger Agreement in accordance with its terms. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time prior to
the Closing Date by the mutual written consent of the parties hereto.
Section 6.2 Procedure for and Effect of Termination. If this
Agreement is terminated as provided herein, no party hereto shall have any
liability or further obligation to any other party under the terms of this
Agreement.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified or supplemented only by a written
agreement signed by each of the parties hereto at any time prior to the Closing
Date with respect to any of the terms contained herein; provided, however, that
after this Agreement is adopted by the holders of Seller OP Units, no such
amendment shall be made which requires the approval of such holders.
Section 7.2 Waiver of Compliance; Consents. Any failure of Parent or
Buyer Operating Partnership, on the one hand, or Seller General Partner or the
Seller Partnership, on the other hand, to comply with any obligation, covenant,
agreement or condition herein may, subject to Section 7.1, be waived by Parent
and Buyer Operating Partnership or Seller General Partner and the Seller
Partnership, respectively, only by a written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
7.2 and in Section 7.1.
Section 7.3 Survival. The respective representations and warranties
of Parent and Buyer Operating Partnership and Seller General Partner and the
Seller Partnership contained herein shall not survive the Closing hereunder.
Section 7.4 Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
delivered
<PAGE>
16
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
(a) if to Parent or Buyer Operating Partnership, to:
Berkshire Realty Holdings, L.P.
One Beacon Street
Suite 1500
Boston, Massachusetts 02108
Attention: Douglas S. Krupp
Telecopier: (617) 423-8916
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: James M. Dubin, Esq.
Michele R. Jenkinson, Esq.
Telecopier: (212) 757-3990
and
Sullivan & Cromwell
125 Broad Street
New York, NY 10004-2498
Attention: Anthony J. Colletta, Esq.
Telecopier: (212) 558-3588
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Gregory J. Ressa, Esq.
Brian M. Stadler, Esq.
Telecopier: (212) 455-2502
<PAGE>
17
(b) if to Seller General Partner or the Seller Partnership,
to:
Berkshire Realty Company, Inc.
One Beacon Street
Suite 1550
Boston, Massachusetts 02108
Attention: President
Telecopier: (617) 646-2373
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
Kenneth A. Hoxsie, Esq.
Telecopier: (617) 526-5000
and
Baker & Hostetler LLP
1900 East Ninth Street, Suite 3200
Cleveland, Ohio 44114
Attention: Robert A. Weible, Esq.
Telecopier: (216) 696-0740
All notices shall be deemed given only when actually received.
Section 7.5 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties.
Section 7.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF
LAWS THEREOF.
Section 7.7 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
18
Section 7.8 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed by Seller General Partner and Seller Partnership in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
Parent and Buyer Operating Partnership shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by Seller General Partner and
Seller Partnership and to enforce specifically the terms and provisions of this
Agreement in any federal court located in Delaware or in Chancery Court in
Delaware, this being in addition to any other remedy to which they are entitled
at law or in equity. The parties acknowledge that Seller General Partner and
Seller Partnership shall not be entitled to an injunction or injunctions to
prevent breaches of this Agreement by Parent or Buyer Operating Partnership or
to enforce specifically the terms and provisions of this Agreement and that
Seller General Partner's and Seller Partnership's sole and exclusive remedy with
respect to any such breach shall be the remedy set forth in Section 7.2 of the
Merger Agreement. In addition, each of the parties hereto (a) consents to submit
itself (without making such submission exclusive) to the personal jurisdiction
of any federal court located in Delaware or Chancery Court located in Delaware
in the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement and (b) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave from
any such court.
Section 7.9 Interpretation. The article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
Section 7.10 Entire Agreement. The Merger Agreement (including the
schedules, exhibits, documents or instruments referred to herein) and this
Agreement together embody the entire agreement and understanding of the parties
hereto in respect of the subject matter hereof and thereof and supersede all
prior agreements and understandings, both written and oral, among the parties,
or between any of them, with respect to the subject matter hereof and thereof.
Section 7.11 No Third Party Beneficiaries. This Agreement is not
intended to, and does not, create any rights or benefits of any party other than
the parties hereto.
Section 7.12 Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.
Section 7.13 Tax Election. The parties hereby agree that an election
pursuant to Section 754 of the Internal Revenue Code shall be made for the
Seller
<PAGE>
19
Partnership and each partnership which is a subsidiary of the Seller Partnership
(or shall be in effect) with respect to any transfers of interests in the Seller
Partnership pursuant to the Merger and the Partnership Merger.
[Signatures appear on next page]
<PAGE>
IN WITNESS WHEREOF, the Parent, Buyer Operating Partnership, Seller
General Partner and the Seller Partnership have caused this Agreement and Plan
of Merger to be signed by a person duly authorized to do so as of the date first
above written.
BERKSHIRE REALTY HOLDINGS, L.P.
By /s/ Douglas S. Krupp
--------------------------------------------
Name: Douglas S. Krupp
Title: Authorized Signatory
BRI ACQUISITION SUB, LP
By /s/ Douglas S. Krupp
--------------------------------------------
Name: Douglas S. Krupp
Title: Authorized Signatory
BERKSHIRE APARTMENTS, INC.
By /s/ David Marshall
--------------------------------------------
Name: David Marshall
Title: President and Chief Executive Officer
BRI OP LIMITED PARTNERSHIP
By: BERKSHIRE APARTMENTS, INC., its
general partner
By /s/ David Marshall
-------------------------------------
Name: David Marshall
Title: President and Chief Executive Officer
Exhibit 11
----------
ESCROW AGREEMENT
This Escrow Agreement is made and entered into as of April 13, 1999, by
and among BRI OP Limited Partnership, a Delaware limited partnership (the
"Partnership"), Berkshire Realty Company, Inc., a Delaware corporation ("BRI"),
Berkshire Realty Holdings, L.P., a Delaware limited partnership ("Parent"), and
American Stock Transfer and Trust Company, a New York corporation, as escrow
agent (the "Escrow Agent"). BRI, the Partnership, Parent and the Escrow Agent
are referred to individually herein as a "Party" and are referred to together
herein as the "Parties."
WITNESSETH:
WHEREAS, BRI, BRI Acquisition, L.L.C., a Delaware limited liability
company (the "Buyer") whose sole member is Parent, and Parent have entered into
an Agreement and Plan of Merger dated of even date herewith (the "Merger
Agreement"); and
WHEREAS, the Partnership, Parent and BRI Acquisition Sub, LP have
entered into an Agreement and Plan of Merger of even date herewith (the
"Partnership Merger Agreement"); and
WHEREAS, pursuant to the Merger Agreement, Buyer will be merged with
BRI; and
WHEREAS, pursuant to the Partnership Merger Agreement, BRI Acquisition
Sub, LP, a Delaware limited partnership, will be merged with the Partnership;
and
WHEREAS, Section 4.7 of the Merger Agreement requires the Buyer to
provide cash in the amount of $29,500,000, which amount may be increased to
$54,500,000 as provided in said Section 4.7 (the "Cash Collateral") for the
benefit of the Escrow Agent on behalf of the Partnership, the holders of common
stock of BRI ("Common Stock") and the holders of units of limited partnership in
the Partnership other than BRI (the "Units") (the Partnership, the holders of
Common Stock and such holders of Units, collectively being sometimes referred to
as the "Beneficiaries"); and
WHEREAS, Section 4.7 of the Merger Agreement provides that the Buyer,
at its election, may provide a letter of credit substantially in the form of
Attachment A, which letter of credit may be amended as provided in said Section
4.7 to increase the
<PAGE>
2
amount available thereunder to $54,500,000 (the "Letter of Credit"), with such
changes as shall be reasonably satisfactory to Seller and from a bank
satisfactory to Seller, in substitution of the Cash Collateral; and
WHEREAS, BRI conducts substantially all of its operations through the
Partnership; and
WHEREAS, Section 7.2(b) of the Merger Agreement provides for the
payment of a Break-Up Fee and/or Break-Up Expenses as liquidated damages in
certain circumstances, which obligation is secured by the Cash Collateral or
Letter of Credit, as applicable; and
WHEREAS, Parent, BRI and the Partnership wish to appoint the Escrow
Agent as escrow agent for such escrow account and to hold and draw upon the
Letter of Credit, and the Escrow Agent wishes to accept such appointment, upon
the terms and conditions set forth below.
NOW, THEREFORE, the Parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Merger Agreement.
2. Cash Collateral. The Cash Collateral shall be held by the Escrow
Agent in a segregated trust account designated as the "BRI Cash Collateral
Account" or in an account having a similar designation. The Cash Collateral
shall be invested in accordance with Section 6 hereof pursuant to the written
instruction of BRI on behalf of the Beneficiaries. The Escrow Agent agrees to
accept delivery of the Cash Collateral and to hold such Cash Collateral subject
to the terms and conditions of this Agreement.
3. Escrow Fund. Promptly upon receipt from BRI of a certificate (the
"Draw Certificate") certifying that a payment of the Break-Up Fee and/or the
Break-Up Expenses is owing pursuant to Section 7.2(b) of the Merger Agreement
and the amount thereof, the Escrow Agent shall (i) if the Letter of Credit has
been substituted for the Cash Collateral, draw the amount of the Letter of
Credit specified by BRI in the Draw Certificate, and at the direction and
expense of BRI, take all actions necessary to collect such amount, employing
such counsel in connection therewith as BRI may direct; or (ii) if the Letter of
Credit has not been substituted for the Cash Collateral, segregate a portion of
the Cash Collateral equal to the amount specified by BRI in the Draw Certificate
(with any balance of the Cash Collateral being subject to Section 5(a) hereof),
which segregation
<PAGE>
3
shall terminate any right of Parent to the return of such portion of the Cash
Collateral. The portion of the Cash Collateral so segregated and/or any amounts
drawn under the Letter of Credit, are referred to herein as the "Escrow Fund"
and shall be held by the Escrow Agent in a segregated trust account designated
as "BRI Escrow Account" or in an account having such other similar designation.
The Escrow Fund shall be invested in accordance with Section 6 hereof pursuant
to the written instructions of BRI on behalf of the Beneficiaries. The Escrow
Agent agrees to accept delivery of the Escrow Fund and to hold such Escrow Fund
in escrow subject to the terms and conditions of this Agreement.
4. Release of Escrow Fund . With respect to each taxable year of BRI
(for federal income tax purposes) in which the undistributed Escrow Fund is a
positive number, all or a portion of the undistributed Escrow Fund shall be
distributable to the Beneficiaries in accordance with Sections 4(a) and (b),
below. The amounts to be distributed to each Beneficiary with respect to any
taxable year shall be calculated by BRI (after consultation with BRI's
independent accountants (the "Accountants")) as soon as practicable after the
end of BRI's taxable year (or such later time as BRI shall determine in its sole
discretion if litigation with regard to the Beneficiaries' right to liquidated
damages pursuant to the Merger Agreement has commenced or been threatened) based
upon the facts in existence as of the end of such taxable year. Following such
calculations, BRI shall promptly notify the Escrow Agent by delivery of a
certificate (the "Disbursement Certificate") of the amounts, if any, to be
distributed to each Beneficiary together with the full name and address of the
Beneficiary. Promptly after receipt of a Disbursement Certificate for a taxable
year of BRI, the Escrow Agent shall distribute all or a portion of the
undistributed Escrow Fund in the amounts and to the recipients specified in the
Disbursement Certificate. Any Disbursement Certificate shall direct the Escrow
Agent to disburse the undistributed Escrow Fund only as follows:
(a) First, to the Partnership in an amount equal to the sum of (i)
any portion of the undistributed Escrow Fund that is determined pursuant to a
Break-Up Fee Tax Opinion (as defined below) or a Ruling (as defined below)to be
either (A) income described in Section 856(c)(2) of the Internal Revenue Code of
1986, as amended ("Qualifying Income") or (B) income of a nature that it is not
includable in BRI's gross income for purposes of determining whether BRI meets
the requirement of Section 856(c)(2) (the "REIT Requirement") for such year and
(ii) the quotient of (A) the excess of (I) 4.95% of BRI's federal gross income
for such taxable year over (II) the amount of gross income of BRI for the
taxable year from all other sources to the extent such income is not Qualifying
Income and (B) BRI's percentage share of the capital of the Partnership
(determined in accordance with Treasury Regulation Section 1.856-3(g) or any
applicable successor provision) for such year. As used herein, "Break-Up Fee Tax
Opinion" means
<PAGE>
4
an opinion letter from BRI's outside counsel, and "Ruling" means a private
letter ruling from the Internal Revenue Service. In the event that the foregoing
does not permit the distribution to the Partnership of the entire undistributed
Escrow Fund for any taxable year of BRI, the Escrow Agent shall retain the
unpaid amount in escrow for distribution pursuant to (x) this Section 4(a) in
subsequent taxable years of BRI, (y) Section 4(b) or (z) Section 4(c), as
applicable.
(b) Second, if the amount of any undistributed Escrow Fund is
greater than zero and outside counsel to BRI informs BRI in writing that such
counsel believes that BRI is unlikely to receive a Break-Up Fee Tax Opinion or
Ruling with respect to the distribution to the Partnership of the undistributed
Escrow Fund, then the undistributed Escrow Fund shall be distributed to holders
of Common Stock and Units, in equal amounts per share of Common Stock and per
Unit; provided, however, that amounts shall only be so distributed to the
holders of Common Stock and Units if, and to the extent, BRI receives a Break-Up
Fee Tax Opinion or a Ruling with respect to such distributions.
(c) Third, any amounts remaining in escrow at the end of the ten
(10) year period commencing on the date the Draw Certificate is delivered shall
be paid to a charity chosen by Parent that qualifies as a charity under Section
501(c)(3) of the Code.
5. Substitution or Return of Collateral. (a) At the direction of BRI
and following the delivery to the Escrow Agent of the Letter of Credit, the
Escrow Agent shall disburse the Cash Collateral (other than any portion thereof
that has become part of the Escrow Fund) to Parent, together with all interest
thereon. BRI agrees that it shall provide the foregoing direction to the Escrow
Agent promptly upon notice from the Escrow Agent that it has received the Letter
of Credit.
(b) The Escrow Agent shall return the Letter of Credit to Parent
when and as BRI may direct. BRI shall so direct the Escrow Agent within five
business days of Parent's becoming entitled to such return in accordance with
Section 7.2(b) of the Merger Agreement.
6. Investment of Escrow Fund. (a) Any monies held as Cash Collateral or
in the Escrow Fund shall be invested by the Escrow Agent, to the extent
permitted by law and as directed in writing by BRI on behalf of the
Beneficiaries, in (i) obligations having a maturity date of 30 days or less
issued or guaranteed by the United States of America or any agency or
instrumentality thereof, (ii) obligations having a maturity date
<PAGE>
5
of 30 days or less (including certificates of deposit and bankers' acceptances)
of banks which at the date of their last public reporting had total assets in
excess of $500 million, (iii) commercial paper having a maturity date of 30 days
or less rated at least A-1 or P-1 or, if not rated, issued by companies having
outstanding debt rated at least AA or Aa and (iv) money market mutual funds
invested primarily in the securities described in the foregoing clauses (i),
(ii) and (iii).
(b) Any interest earned on the Cash Collateral shall be for the
account of Parent. Any interest earned on the Escrow Fund shall be for the
account of the Beneficiaries and shall be included in the amounts distributed
pursuant to Section 4 hereof.
7. Fees and Expenses. BRI and the Partnership shall be jointly and
severally liable for the fees of the Escrow Agent, including, but not limited
to, reasonable legal fees and expenses for the services rendered by the Escrow
Agent hereunder and for its attorney's fees and expenses incurred in connection
with the preparation of this Agreement. In furtherance of the foregoing, BRI and
the Partnership agree to pay or reimburse the Escrow Agent for the Escrow
Agent's reasonable compensation for its normal services hereunder and the
preparation of this Agreement in accordance with the fee schedule attached
hereto as Attachment B. The Escrow Agent shall be entitled to reimbursement on
demand for all expenses incurred in connection with the administration of the
escrow created hereby that are in excess of its compensation for normal services
hereunder, including, without limitation, payment of any legal fees and expenses
incurred by the Escrow Agent in connection with the resolution of any claim by
any Party hereunder.
8. Limitation of Escrow Agent's Liability.
(a) Neither the Escrow Agent nor any of its directors, officers or
employees shall incur liability with respect to any action taken or suffered by
it in reliance upon any notice, direction, instruction, consent, statement or
other documents believed by it to be genuine and duly authorized, nor for other
action or inaction except its own willful misconduct or gross negligence;
provided, that with respect to the custody of the Cash Collateral and Escrow
Fund, the Escrow Agent shall use the standard care of customarily used by
custodians of funds. The Escrow Agent shall not be responsible for the validity
or sufficiency of this Agreement and shall not be responsible for any of the
agreements referred to herein, including the Merger Agreement and the
Partnership Merger Agreement, but shall be obligated only for the performance of
such duties as are specifically set forth in this Escrow Agreement. Without
limiting the foregoing, the Escrow Agent (i) shall not be obligated to inquire
as to the accuracy of any calculations
<PAGE>
6
used in preparing the Disbursement Certificate and (ii) shall have no obligation
to inquire whether the Partnership has the right to liquidated damages pursuant
to the Merger Agreement. In all questions arising under this Agreement, the
Escrow Agent may rely on the advice of counsel, including in-house counsel, and
for anything done, omitted or suffered in good faith by the Escrow Agent based
on such advice the Escrow Agent shall not be liable to anyone. The Escrow Agent
shall not be required to take any action hereunder involving any expense unless
the payment of such expense is made or provided for in a manner reasonably
satisfactory to it. The Escrow Agent shall not be liable for any losses
resulting from the investments made in accordance with this Agreement. In no
event shall the Escrow Agent be liable for indirect, punitive, special or
consequential damages.
(b) BRI and the Partnership shall jointly and severally indemnify
the Escrow Agent for, and hold it harmless against, any loss, liability or
expense (including reasonable attorneys' fees and expenses) incurred without
gross negligence or willful misconduct on the part of the Escrow Agent, arising
out of or in connection with its carrying out of its duties hereunder, including
without limitation drawing on the Letter of Credit.
(c) BRI and the Partnership jointly and severally hereby agree to
assume any and all obligations imposed now or hereafter by any applicable tax
law with respect to the payment of Escrow Funds under this Agreement, and to
indemnify and hold the Escrow Agent harmless from and against any taxes,
additions for late payment, interest, penalties and other expenses, that may be
assessed against the Escrow Agent in any such payment or other activities under
this Agreement (other than taxes on the net income of the Escrow Agent
attributable to the payment of fees hereunder). BRI and the Partnership
undertake to instruct the Escrow Agent in writing with respect to the Escrow
Agent's responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting in connection
with its acting as Escrow Agent under this Agreement. BRI and the Partnership
jointly and severally hereby agree to indemnify and hold the Escrow Agent
harmless from any liability on account of taxes, assessments or other
governmental charges, including without limitation the withholding or deduction
or the failure to withhold or deduct the same, and any liability for failure to
obtain proper certifications or to properly report to governmental authorities,
to which the Escrow Agent may be or become subject in connection with or which
arises out of this Agreement, including costs and expenses (including reasonable
legal fees and expenses), interest and penalties.
<PAGE>
7
9. Termination. This Agreement shall terminate upon the earliest of (i)
notice from BRI to the Escrow Agent that the transactions contemplated by the
Merger Agreement have been consummated, (ii) notice from BRI to the Escrow Agent
that the Merger Agreement has been terminated without giving rise to the right
to realize on the Cash Collateral or draw on the Letter of Credit, or (iii) the
disbursement by the Escrow Agent of all of the Escrow Funds (except in
accordance with Section 5(a)) in accordance with this Agreement; provided,
however, that the provisions of Sections 7 and 8 shall survive such termination.
10. Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered four business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid; or one business day after it is
sent via a reputable nationwide overnight courier service.
If to BRI or the Partnership: Berkshire Realty Company, Inc.
One Beacon Street
Suite 1550
Boston, MA 02108
Attention: Chief Executive Officer
Copies to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: David E. Redlick, Esq.
and Kenneth A. Hoxsie, Esq.
Fax: (617) 526-5000
Baker & Hostetler LLP
3200 National City Center
1900 East 9th Street
Cleveland, OH 44114
Attention: Robert A. Weible, Esq.
<PAGE>
8
If to Parent: Berkshire Realty Holdings, L.P.
- ------------
One Beacon Street
Suite 1500
Boston, MA 02108
Attention: Douglas S. Krupp
Fax: (617) 423-8916
with a copy to:
Paul, Weiss, Rifkind, Wharton &
Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: James M. Dubin, Esq.
and Michele R. Jenkinson, Esq.
Fax: (212) 757-3990
and
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: Anthony J. Colletta
Fax: (212) 558-3588
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Gregory J. Ressa
Fax: (212) 455-2502
If to the Escrow Agent: American Stock Transfer and Trust
Company
40 Wall Street
New York, NY 10005
<PAGE>
9
Any Party may give any notice, instruction or communication in connection with
this Agreement using any other means (including personal delivery, telecopy or
ordinary mail), but no such notice, instruction or communication shall be deemed
to have been delivered unless and until it is actually received by the Party to
whom it was sent. Any Party may change the address to which notices,
instructions or communications are to be delivered by giving the other Parties
to this Agreement notice thereof in the manner set forth in this Section 10.
11. Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity hereunder, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by
delivering a resignation to the Parties to this Escrow Agreement, not less than
60 days' prior to the date when such resignation shall take effect. BRI may
appoint a successor Escrow Agent so long as such successor is a bank with assets
of at least $500 million. If, within such notice period, BRI provides to the
Escrow Agent written instructions with respect to the appointment of a successor
Escrow Agent and directions for the transfer of the Letter of Credit, the Cash
Collateral or any Escrow Fund then held by the Escrow Agent to such successor,
the Escrow Agent shall act in accordance with such instructions and promptly
transfer the Letter of Credit, the Cash Collateral and such Escrow Fund to such
designated successor. If no successor escrow agent is named by BRI within such
notice period, the Escrow Agent may apply to a court of competent jurisdiction
for appointment of a successor escrow agent.
12. General.
(a) Governing Law. This Agreement shall be governed by, enforced
under and construed in accordance with the laws of the Commonwealth of
Massachusetts without regard to conflict-of-law principles.
(b) Counterparts. This Agreement may be executed in two or more
counterparts (which need not each be signed by all of the Parties hereto), each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(c) Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the Parties with respect to the subject matter
hereof and supersedes all prior agreements or understandings, written or oral,
between the Parties with respect to the subject matter hereof.
<PAGE>
10
(d) Waivers. No waiver by any Party hereto of any condition or of
any breach of any provision of this Escrow Agreement shall be effective unless
in writing. No waiver by any Party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(e) Amendment. This Agreement may be amended only by a written
instrument signed by the Parties hereto.
(f) Consent to Jurisdiction and Service. BRI and the Partnership
hereby absolutely and irrevocably consent and submit to the jurisdiction of the
courts in the Commonwealth of Massachusetts and of any federal court located in
the Commonwealth of Massachusetts in connection with any actions or proceedings
brought against BRI and the Partnership by the Escrow Agent arising out of or
relating to this Escrow Agreement. In any such action or proceeding, BRI and the
Partnership hereby absolutely and irrevocably waive personal service of any
summons, complaint, declaration or other process and hereby absolutely and
irrevocably agree that the service thereof may be made in accordance with the
notice provisions of Section 10 hereof, directed to BRI and the Partnership, as
the case may be, at their respective addresses set forth in Section 10 hereof.
(g) Force Majeure. Neither BRI, the Partnership nor the Escrow
Agent shall be responsible for delays or failures in performance resulting from
acts beyond its, his or her control. Such acts shall include but not be limited
to acts of God, strikes, lockouts, riots, acts of wars, epidemics, governmental
regulations superimposed after the fact, fire, communication line failures,
computer viruses, power failures, earthquakes or other disasters.
(h) Binding Effect, Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective Parties hereto and their heirs,
executors, successors and assigns.
(i) Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The Parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
<PAGE>
11
existence and whether or not such reproduction was made by a Party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the day and year first above written.
BERKSHIRE REALTY COMPANY, INC.
By: /s/ David F. Marshall
--------------------------------
Name: David F. Marshall
-------------------------
Title: Chief Executive Officer
------------------------
BRI OP LIMITED PARTNERSHIP
By: BERKSHIRE APARTMENTS, INC.
By: /s/ David F. Marshall
--------------------------------
Name: David F. Marshall
-------------------------
Title: President and Chief
Executive Officer
------------------------
<PAGE>
12
AMERICAN STOCK TRANSFER AND
TRUST COMPANY, as Escrow Agent
By: /s/ Herbert J. Lemmer
--------------------------------
Name: Herbert J. Lemmer
-------------------------
Title: Vice President
------------------------
Berkshire Realty Holdings, L.P.
joins in this Agreement solely with
respect to Section 4(c).
BERKSHIRE REALTY HOLDINGS, L.P.
By: /s/ Douglas S. Krupp
--------------------------------
Douglas S. Krupp,
Authorized Signatory
[Signature Page to Escrow Agreement]
Exhibit 12
----------
The Chase Manhattan Bank ISSUE DATE: April 13, 1999
Global Trade Services Group L/C NO.: U-287508
P.O. Box 44, Church Street Station
New York, N.Y. 10008
- --------------------------------------- ------------------------------------
Advising Bank APPLICANT:
DIRECT BERKSHIRE REALTY HOLDINGS, L.P.
345 PARK AVENUE
NEW YORK, N.Y. 10154
- --------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------
Beneficiary AMOUNT: USD 29,500,000.00
AMERICAN STOCK TRANSFER AND (TWENTY NINE MILLION FIVE HUNDRED
TRUST COMPANY, AS ESCROW AGENT THOUSAND AND 00/100 UNITED STATES
40 WALL STREET DOLLARS)
NEW YORK, NY 10005
- --------------------------------------- ------------------------------------
IRREVOCABLE LETTER OF CREDIT NUMBER U-287508
LADIES AND GENTLEMEN:
FOR THE ACCOUNT OF BERKSHIRE REALTY HOLDINGS, L.P., A DELAWARE LIMITED
PARTNERSHIP, WE HEREBY AUTHORIZE AMERICAN STOCK TRANSFER AND TRUST COMPANY, AS
ESCROW AGENT (THE "BENEFICIARY"), TO DRAW ON US UP TO AN AGGREGATE AMOUNT OF
TWENTY-NINE MILLION FIVE HUNDRED THOUSAND UNITED STATES DOLLARS
(US$29,500,000.00) (THE "CREDIT AMOUNT") AVAILABLE BY PRESENTATION TO US AT OUR
COUNTERS LOCATED AT 4 CHASE METROTECH CENTER, 8TH FLOOR, BROOKLYN, NEW YORK
11245, ATTENTION: STANDBY LETTER OF CREDIT DEPARTMENT OF THE BENEFICIARY'S DRAFT
AT SIGHT ON US ACCOMPANIED BY A WRITTEN STATEMENT PURPORTEDLY SIGNED BY AN
AUTHORIZED OFFICER OF THE BENEFICIARY IN THE FORM OF EXHIBIT A ATTACHED HERETO
(THE "CERTIFICATE TO ACCOMPANY DRAFT").
ANY DRAFT SO DRAWN MUST BE MARKED: "DRAWN UNDER THE CHASE MANHATTAN
BANK LETTER OF CREDIT NO. U-287508." WE ENGAGE WITH YOU THAT ALL DRAFTS DRAWN BY
YOU UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT WILL BE DULY
HONORED BY US ON DELIVERY OF DOCUMENTS AS SPECIFIED IF PRESENTED AT THIS OFFICE
ON OR BEFORE JANUARY 31, 2000 (THE "EXPIRATION DATE"). THERE SHALL BE NO
CONDITIONS TO DRAWINGS OTHER THAN AS STATED ABOVE.
-CONTINUED-
/s/ [Authorized Signatory]
--------------------------------
Authorized Signature
<PAGE>
WE HEREBY AGREE TO HONOR A DRAWING MADE HEREUNDER IN COMPLIANCE WITH
THIS LETTER OF CREDIT BY TRANSFERRING IN IMMEDIATELY AVAILABLE FUNDS THE AMOUNT
SPECIFIED IN THE DRAFT, IN ACCORDANCE WITH THE PAYMENT INSTRUCTIONS CONTAINED IN
THE CERTIFICATE TO ACCOMPANY DRAFT.
THIS LETTER OF CREDIT MAY NOT BE TRANSFERRED BY BENEFICIARY.
THIS LETTER OF CREDIT SET FORTH IN FULL THE TERMS OF OUR UNDERTAKING
AND SUCH UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED, AMENDED OR AMPLIFIED BY
REFERENCE TO ANY DOCUMENT, INSTRUMENT OR AGREEMENT REFERRED TO HEREIN OR IN
WHICH THIS LETTER OF CREDIT IS REFERRED TO OR TO WHICH THIS LETTER OF CREDIT
RELATES, AND ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY
REFERENCE ANY DOCUMENT, INSTRUMENT OR AGREEMENT.
THIS LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES
("ISP 98"), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 590 (THE "ISP"),
THIS LETTER OF CREDIT, AS TO MATTERS NOT GOVERNED BY THE ISP, SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING THE UNIFORM COMMERCIAL CODE AS
IN EFFECT IN THE STATE OF NEW YORK.
/s/ [Authorized Signatory]
--------------------------------
Authorized Signature
Exhibit 13
----------
April 13, 1999
Reference is hereby made to (i) that certain Agreement of Limited
Partnership of Berkshire Realty Holdings, L.P. dated as of the date hereof (as
it may be amended, modified or supplemented from time to time, the "Partnership
Agreement") and (ii) that certain commitment letter dated as of the date hereof
(the "Bridge Loan Commitment Letter") issued by Whitehall Street Real Estate
Limited Partnership XI and Blackstone Real Estate Acquisitions III L.L.C. All
capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Partnership Agreement.
Each General Partner hereby acknowledges and agrees that any election
or decision to be made by the Partnership with respect to the Bridge Loan
Commitment Letter, including, without limitation, the election by the
Partnership to borrow the Bridge Loan thereunder, shall require the approval of
both the Blackstone GP and WHGP, each of which approvals may be withheld in
their sole discretion. BGP and Berkshire acknowledge that in the event the
Blackstone GP and WHGP elect not to authorize a borrowing under the Bridge Loan
Commitment Letter, the Partnership may be unable to satisfy its obligations
under the Merger Agreements and as a result, the Cash Collateral (as defined in
the Merger Agreement)(or its substitute) may be forfeited thereunder. Failure of
the Blackstone GP or WHGP to approve the Partnership's borrowing of the Bridge
Loan, whether or not such failure leads to a loss of the Cash Collateral or
other assets of the Partnership, shall not (i) constitute a default by such
Partner under the Partnership Agreement, including under Section 12.21 of the
Partnership Agreement, (ii) otherwise constitute a breach of any obligations,
express or implied, at law or in equity, which otherwise may be owed by the
Blackstone GP or WHGP to the Partnership or (iii) excuse Berkshire or BGP from
any of its obligations under Section 12.21 of the Partnership Agreement.
The Partners acknowledge that, on the date hereof, the Partnership will
deliver a letter of credit issued by The Chase Manhattan Bank ("Chase") in the
amount of $29,500,000 (the "LC") to American Stock Transfer Trust Company, as
escrowee, pursuant to the terms of the Merger Agreement. In connection with the
issuance of the LC, each of the Investor Group Partners have entered into
reimbursement obligations with Chase with respect to the LC as follows: (i) the
members of the Blackstone Group have jointly agreed to reimburse Chase for up to
40% of amounts due with respect to the LC; (ii) the members of the Whitehall
Group have jointly agreed to reimburse Chase for up to 40% of amounts due with
respect to the LC; and (iii) the members of the Berkshire Group have jointly
agreed to reimburse Chase for up to 20% of amounts due with respect to the LC.
The foregoing obligations of the members of the Blackstone Group shall be
several from the foregoing obligations of the members of the Whitehall Group and
the Berkshire Group; the foregoing obligations of the members of the Whitehall
Group shall be several from the foregoing obligations of the members of the
Blackstone Group and the Berkshire Group; and the foregoing obligations of the
members of the Berkshire
<PAGE>
Group shall be several from the foregoing obligations of the members of the
Whitehall Group and the Blackstone Group. The Partners further acknowledge and
agree that for the purposes of Section 12.21 of the Partnership Agreement, the
amount any Partner shall be responsible for in connection with its reimbursement
obligations with respect to the LC shall be deemed to be such Partner's Capital
Contributions made to the Partnership which will be reimbursed by a defaulting
Partner in accordance with the provisions of Section 12.21.
The Partners acknowledge and agree that as promptly as practicable
after the full execution and delivery of the BRI Merger Agreement and BRI OP
Merger Agreement (and in any event within seven (7) days after the date hereof),
the General Partners shall cause the Partnership to purchase an interest rate
hedge agreement having the following characteristics (such agreement, the
"Hedge"): (i) the Hedge will be a European style put option with a strike rate
equal to 50 basis points (0.50%) above the yield on the five year U.S. Treasury
security on the date of purchase; (ii) the expiration date of the Hedge will be
August 4, 1999 (or as soon thereafter as is available); and (iii) the notional
amount of the Hedge will be approximately $593,000,000. Any two General Partners
shall have the authority to execute on behalf of the Partnership any and all
documentation required to implement the Hedge and all of the Partners agree to
take any steps reasonably required to implement the Hedge. Each of the Investor
Group Partners shall fund its pro rata share of the cost of the Hedge, based on
its Partnership Percentage Interest.
By its execution below, each of The Berkshire Companies Limited
Partnership and Douglas Krupp, jointly and severally, hereby guarantees to the
Partnership and the Partners the full payment and performance of all of the
obligations of BGP and Berkshire under Section 12.21 of the Agreement.
By its execution below, Blackstone Real Estate Acquisitions III L.L.C.
hereby guarantees to the Partnership and the Partners the full payment and
performance of all of the obligations of the Blackstone GP and the Blackstone LP
under Section 12.21 of the Agreement.
By its execution below, Whitehall Street Real Estate Limited
Partnership XI hereby guarantees to the Partnership and the Partners the full
payment and performance of all of the obligations of WHGP, Whitehall,
StoneStreet, BridgeStreet and StoneCorp under Section 12.21 of the Agreement.
The Partnership Agreement, as modified hereby, is and remains in full
force and effect and is hereby ratified and confirmed.
This terms of this letter shall be binding upon, and inure to the
benefit of, each of the parties hereto and their respective successors and
assigns.
This letter shall be governed by and construed in accordance with the
laws of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this letter as of
the date written above.
GENERAL PARTNERS:
WXI/BRH GEN-PAR LLC
By: /s/ STEVEN FELDMAN
---------------------------
Name: Steve Feldman
Title: Vice President
BRE/BERKSHIRE GP L.L.C.
By: /s/ KENNETH C. WHITNEY
---------------------------
Name: Kenneth C. Whitney
Title: Vice President
APTCO GEN-PAR, L.L.C.
By: /s/ DOUGLAS KRUPP
---------------------------
Name: Douglas Krupp
Title: Authorized Signatory
<PAGE>
LIMITED PARTNERS:
WHITEHALL STREET REAL ESTATE LIMITED
PARTNERSHIP XI
By: WH Advisors, L.L.C. XI, its general
partner
By: /s/ STEVEN FELDMAN
-----------------------------
Name: Steve Feldman
Title: Vice President
STONE STREET REAL ESTATE FUND 1998 L.P.
By: Stone Street Advantage Realty
Corp., its general partner
By: /s/ ALAN KAVA
---------------------------
Name: Alan Kava
Title: Vice President
BRIDGE STREET REAL ESTATE FUND 1998 L.P.
By: Stone Street Advantage Realty
Corp., its general partner
By: /s/ ALAN KAVA
---------------------------
Name: Alan Kava
Title: Vice President
STONE STREET WXI/BRH CORP.
By: /s/ ALAN KAVA
---------------------------
Name: Alan Kava
Title: Vice President
BRE/BERKSHIRE LP L.L.C.
By: /s/ KENNETH C. WHITNEY
---------------------------
Name: Kenneth C. Whitney
Title: Vice President
APTCO HOLDINGS, L.L.C.
By: /s/ DOUGLAS KRUPP
---------------------------
Name: Douglas Krupp
Title: Authorized Signatory
<PAGE>
GUARANTORS:
THE BERKSHIRE COMPANIES LIMITED
PARTNERSHIP
By: /s/ DOUGLAS KRUPP
-----------------------------
Name: Douglas Krupp
Title: Authorized Signatory
/s/ DOUGLAS KRUPP
-------------------------------------
DOUGLAS KRUPP
BLACKSTONE REAL ESTATE ACQUISITIONS III
L.L.C.
By: /s/ KENNETH C. WHITNEY
--------------------------------
Name: Kenneth C. Whitney
Title: Vice President
WHITEHALL STREET REAL ESTATE LIMITED
PARTNERSHIP XI
By: WH Advisors, L.L.C. XI,its general
partner
By: /s/ STEVEN FELDMAN
--------------------------------
Name: Steven Feldman
Title: Vice President
Exhibit 14
----------
VOTING AGREEMENT
This Agreement is made as of April 13, 1999 by and among Douglas S.
Krupp ("Krupp"), Berkshire Realty Company, Inc., a Delaware corporation (the
"Company") and BRI OP Limited Partnership, a Delaware limited partnership (the
"Partnership").
WHEREAS, the Company, Berkshire Realty Holdings, L.P. ("Parent") and
BRI Acquisition, LLC (the "Buyer") have entered into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement") providing for the
merger of the Buyer with and into the Company as the surviving entity; and
WHEREAS, the Partnership, Parent and BRI Acquisition Sub, LP have
entered into an Agreement and Plan of Merger dated as of the date hereof (the
"Partnership Merger Agreement") providing for the merger of BRI Acquisition Sub,
LP with and into the Partnership, with the Partnership as the surviving entity;
and
WHEREAS, Krupp and persons or entities affiliated with Krupp
(collectively, the "Krupp Entities") own shares of common stock, $.01 par value
per share, of the Company ("Common Stock") and units of limited partnership
interest in the Partnership ("OP Units"); and
WHEREAS, in order to induce the Company and the Partnership to enter
into the Merger Agreement and the Partnership Merger Agreement, respectively,
Krupp is making the covenants set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Krupp agrees to cause each of the Krupp Entities (i) to vote the
Common Stock they own (including any Common Stock issued after the date hereof)
in favor of adoption of the Merger Agreement and approval of the transactions
contemplated thereby and (ii) to vote the OP Units they own (including any OP
Units issued after the date hereof) in favor of adoption of the Partnership
Merger Agreement and approval of the transactions contemplated thereby.
2. Krupp agrees, on behalf of the Krupp Entities that own Common Stock
or subsequently are issued Common Stock, that no such Krupp Entity shall demand
appraisal rights pursuant to Section 262 of the Delaware General Corporation Law
of the State of Delaware with respect to such shares of Common Stock in
connection with the transactions contemplated by the Merger Agreement.
3. Krupp shall be relieved from his obligations hereunder if the Board
of Directors of the Company withdraws its recommendation that stockholders of
the Company vote to adopt the Merger Agreement and approve the transactions
contemplated thereby or if the Board of
<PAGE>
Directors of the Company fails to confirm its recommendation with respect to the
Merger Agreement within ten days of being requested to do so by the Buyer.
4. This Agreement constitutes the entire agreement among the parties
hereto and supersedes any prior understandings, agreements or representations by
or between the parties, written or oral, that may have related in any way to the
subject matter hereof.
5. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware (without regard to any
conflicts-of-law principles that would result in the application of the law of
any other jurisdiction).
6. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by Krupp and the Company.
7. Krupp acknowledges and agrees that the Company would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, Krupp agrees that the Company shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter, in addition to any other remedy to
which the Company may be entitled, at law or in equity.
8. This Agreement shall terminate upon the termination of the Merger
Agreement, provided that Krupp shall remain liable for any breaches of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/s/ Douglas S. Krupp
---------------------------------------
Douglas S. Krupp
BERKSHIRE REALTY COMPANY, INC.
By: /s/ David F. Marshall
---------------------------------------
Name: David F. Marshall
Title: Chief Executive Officer
BRIOP Limited Partnership
By: Berkshire Apartments, Inc., its
general partner
By: /s/ David F. Marshall
---------------------------------------
Name: David F. Marshall
Title: President and Chief Executive
Officer
Exhibit 15
----------
JOINT FILING AGREEMENT
Each of the Reporting Persons hereby agrees to make this joint filing
pursuant to Rule 13d-1(k) of the Exchange Act of 1934.
Dated: April 14, 1999
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP XI
By: WH Advisors, L.L.C. XI,
its general partner
By:/s/ Ralph F. Rosenberg
---------------------------------
Name: Ralph F. Rosenberg
Title: Manager and Vice President
WXI/BRH GEN-PAR, L.L.C.
By: /s/ Ralph F. Rosenberg
---------------------------------
Name: Ralph F. Rosenberg
Title: Manager and Vice President
WH ADVISORS, L.L.C. XI
By: /s/ Ralph F. Rosenberg
---------------------------------
Name: Ralph F. Rosenberg
Title: Manager and Vice President
THE GOLDMAN SACHS GROUP, L.P.
By: /s/ Hans L. Reich
---------------------------------
Name: Hans L. Reich
Title: Attorney-in-Fact
GOLDMAN, SACHS & CO.
By: /s/ Hans L. Reich
---------------------------------
Name: Hans L. Reich
Title: Attorney-in-Fact
