<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 6, 2000
WALDEN RESIDENTIAL PROPERTIES, INC.
(Exact name of Registrant as specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Maryland 1-12592 75-2506197
(State or other jurisdiction of (Commission file number) (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
5080 Spectrum Drive, Suite 1000 E, Dallas, Texas 75248
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 788-0510
Not applicable
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On January 6, 2000, Walden Residential Properties, Inc. (the
"Company"), Oly Hightop Corporation, a Maryland corporation ("Newco"), and Oly
Hightop Parent, L.P., a Delaware limited partnership ("Parent"), entered into a
Second Amended and Restated Agreement and Plan of Merger, dated as of January
6, 2000 (the "Amended Merger Agreement"), which amends and restates the First
Amended and Restated Agreement and Plan of Merger, dated as of November 5, 1999
(the "Prior Merger Agreement"), among such parties. In addition, the Company
entered into memoranda of understanding with plaintiffs' counsel to settle
certain stockholder litigation relative to the transactions contemplated by the
merger agreement.
Under the terms of the Amended Merger Agreement and the contemplated
settlement, Newco will be merged with and into the Company, with the Company as
the surviving corporation (the "Merger"), and (i) each share of common stock,
par value $.01 per share ("Company Common Stock"), of the Company issued and
outstanding immediately prior to time of consummation of the Merger (the
"Effective Time") will be converted into the right to receive $23.14 in cash;
(ii) each share of 9.16% Series B Convertible Redeemable Preferred Stock, par
value $.01 per share, of the Company issued and outstanding immediately prior to
the Effective Time will be converted into the right to receive $26.39 in cash,
which is equivalent to $23.14 per share of Company Common Stock on an
as-converted basis; (iii) each share of 9.20% Senior Preferred Stock, par value
$.01 per share, of the Company issued and outstanding immediately prior to the
Effective Time will be converted into the right to receive $22.00 in cash; and
(iv) each share of 9.0% Redeemable Preferred Stock, par value $.01 per share, of
the Company issued and outstanding immediately prior to the Effective Time will
be converted into the right to receive $19.50 in cash. Holders of all series of
the Company's preferred stock will also receive all accrued and unpaid dividends
on such shares up to, but excluding, the closing date of the Merger.
Under the Prior Merger Agreement, each share of Company Common Stock
would be converted into the right to receive $23.25 per share, subject to
certain adjustments estimated to be approximately $5 million in the aggregate
to be allocated among all common equity interests. The full $5 million
adjustment would have reduced the per share price to $23.09 under the Prior
Merger Agreement.
The other material financial terms of the Prior Merger Agreement
remain in force, including the option for holders of common operating
partnership units to select cash in an amount of $23.14 per unit, partnership
interests in the acquiring entity or a combination of cash and partnership
interests.
A copy of the Amended Merger Agreement is filed as an exhibit to this
Form 8-K.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
2.1 Second Amended and Restated Agreement and Plan of Merger,
dated as of January 6, 2000, among Walden Residential
Properties, Inc., Oly Hightop Corporation and Oly Hightop
Parent, L.P.
99.1 Second Amended and Restated Limited Partnership Agreement of
Oly Hightop Parent, L.P., dated as of January 6, 2000
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 10, 2000
WALDEN RESIDENTIAL PROPERTIES, INC.
By: /s/ Mark S. Dillinger
------------------------------------
Mark S. Dillinger
Executive Vice President and Chief
Financial Officer
<PAGE> 5
WALDEN RESIDENTIAL PROPERTIES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- ----
<S> <C>
2.1 Second Amended and Restated Agreement and Plan of Merger,
dated September 24, 1999, among Walden Residential
Properties, Inc., Oly Hightop Corporation and Oly Hightop
Parent, L.P.
99.1 Second Amended and Restated Limited Partnership Agreement of
Oly Hightop Parent, L.P., dated as of January 6, 2000
</TABLE>
<PAGE> 1
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
WALDEN RESIDENTIAL PROPERTIES, INC.,
OLY HIGHTOP CORPORATION
AND
OLY HIGHTOP PARENT, L.P.
DATED AS OF JANUARY 6, 2000
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1
THE MERGER
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
1.1 The Merger; Effective Time of the Merger......................... 2
1.2 Closing.......................................................... 2
1.3 Effect of the Merger............................................. 2
1.4 Organizational Documents......................................... 2
1.5 Directors and Officers of the Surviving Corporation.............. 3
1.6 Approval of Stockholder of Newco................................. 3
ARTICLE 2
EFFECT OF THE MERGER ON THE STOCK OF
THE CONSTITUENT ENTITIES; EXCHANGE OF CERTIFICATES
2.1 Effect of the Merger on Stock of Constituent Entities............ 3
(a) Stock of Newco.............................................. 3
Company Common Stock, Company Convertible Preferred Stock,
Company Senior Preferred Stock and Company Redeemable
(b) Preferred Stock............................................. 3
(c) Company Warrants............................................ 4
(d) Treatment of Company Stock Options.......................... 4
(e) Treatment of Company Restricted Stock....................... 4
2.2 Payment for Securities/Exchange of Certificates.................. 4
(a) Exchange Agent.............................................. 4
(b) Exchange Procedures......................................... 5
(c) No Further Ownership Rights................................. 5
(d) Termination of Exchange Fund................................ 5
(e) No Liability................................................ 6
(f) Lost, Stolen, or Destroyed Certificates..................... 6
(g) Payment Procedures for Company Stock Options................ 6
(h) Payment Procedures for Company Warrants..................... 6
(i) Withholding of Tax.......................................... 6
2.3 Appraisal Rights................................................. 7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company.................... 7
(a) Organization, Standing and Power............................ 7
(b) Capital Structure........................................... 8
(c) Authority; No Violations; Consents and Approvals............ 10
(d) SEC Documents............................................... 11
(e) Information Supplied........................................ 12
(f) Absence of Certain Changes or Events........................ 12
(g) No Undisclosed Material Liabilities......................... 13
(h) No Default.................................................. 13
(i) Compliance with Applicable Laws............................. 13
(j) Litigation.................................................. 13
(k) Taxes....................................................... 14
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
(l) Pension and Benefit Plans; ERISA............................ 17
(m) Labor and Employment Matters................................ 17
(n) Intangible Property......................................... 18
(o) Environmental Matters....................................... 18
(p) Properties.................................................. 20
(q) Insurance................................................... 21
(r) Opinion of Financial Advisor................................ 21
(s) Vote Required............................................... 21
(t) Beneficial Ownership of Company Common Stock................ 21
(u) Brokers..................................................... 21
(v) Investment Company Act of 1940.............................. 21
(w) Amendment to Rights Agreement; State Takeover Laws.......... 22
(x) Contracts................................................... 22
(y) Stock Purchase Plan......................................... 23
(z) Deferred Compensation Plan.................................. 23
(aa) Company Options............................................. 24
(bb) Company Warrants............................................ 24
(cc) Rule 16b-3.................................................. 24
(dd) Information Systems......................................... 24
(ee) Drever Partners, Inc. Stock Purchase Agreement.............. 24
(ff) Amendment and Restatement of Prior Agreement................ 24
3.2 Representations and Warranties of Parent and Newco............... 24
(a) Organization, Standing and Power............................ 25
(b) Capital Structure........................................... 25
(c) Authority; No Violations, Consents and Approvals............ 25
(d) Information Supplied........................................ 26
(e) Litigation.................................................. 27
(f) Brokers..................................................... 27
(g) Sources of Funds............................................ 27
(h) Interim Operations of Parent and Newco...................... 27
(i) Amendment and Restatement of Prior Agreement................ 27
ARTICLE 4
COVENANTS RELATING TO CONDUCT
OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by the Company Pending the Merger............ 27
(a) Ordinary Course............................................. 27
(b) Dividends; Changes in Stock................................. 28
(c) Issuance of Securities...................................... 28
(d) Governing Documents......................................... 28
(e) No Acquisitions............................................. 28
(f) No Dispositions............................................. 29
(g) No Dissolution, Etc......................................... 29
(h) Accounting.................................................. 29
(i) Affiliate Transactions...................................... 29
(j) Insurance................................................... 29
(k) Tax Matters................................................. 29
(l) Certain Employee Matters.................................... 29
(m) Indebtedness................................................ 30
(n) WROP Merger and WDOP Merger................................. 30
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
(o) Company Rights under Rights Agreement....................... 30
(p) Contracts................................................... 30
(q) Discharge of Liabilities.................................... 30
(r) Drever Partners Stock Purchase Agreement.................... 30
(s) Agreements.................................................. 30
4.2 No Solicitation by the Company................................... 30
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement................................... 32
5.2 [INTENTIONALLY OMITTED].......................................... 32
5.3 Access to Information............................................ 32
5.4 Stockholders Meeting............................................. 32
5.5 Approvals........................................................ 32
5.6 [INTENTIONALLY OMITTED].......................................... 33
5.7 Employee Matters................................................. 33
5.8 Stock Options.................................................... 34
5.9 Company Warrants................................................. 34
5.10 Deferred Compensation Plan....................................... 34
5.11 Directors' and Officers' Indemnification and Insurance........... 34
5.12 Agreement to Defend.............................................. 35
5.13 Public Announcements............................................. 35
5.14 Other Actions.................................................... 35
5.15 Advice of Changes; SEC Filings................................... 35
5.16 Conveyance Taxes................................................. 35
5.17 WDOP Merger and WROP Merger...................................... 35
5.18 Employee Loans................................................... 36
5.19 Dividends........................................................ 36
5.20 Assistance....................................................... 36
5.21 [INTENTIONALLY OMITTED].......................................... 37
5.22 Proxy Solicitor.................................................. 37
5.23 Drever Partners Stock Purchase Agreement......................... 37
5.24 Company Properties............................................... 37
5.25 Environmental Matters............................................ 37
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger....... 37
(a) Company Stockholder Approval................................ 37
(b) Other Approvals............................................. 37
(c) No Injunctions or Restraints................................ 37
(d) HSR Act..................................................... 38
6.2 Conditions to Obligations of Newco to Effect the Merger.......... 38
(a) Representations and Warranties of the Company............... 38
(b) Performance of Obligations of the Company................... 38
(c) Consents Under Agreements................................... 38
(d) WDOP Merger and WROP Merger................................. 38
(e) Financing................................................... 38
(f) Material Adverse Change or Effect........................... 38
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
(g) Drever Partners Stock Purchase Agreement.................... 38
(h) Legal Opinion............................................... 38
(i) Closing Agreement........................................... 39
(j) Conversion of Operating Partnership Units................... 39
6.3 Conditions to Obligations of the Company to Effect the Merger.... 39
(a) Representations and Warranties of Newco and Parent.......... 39
(b) Performance of Obligations of the Company................... 39
ARTICLE 7
TERMINATION AND AMENDMENT
7.1 Termination...................................................... 39
7.2 Effect of Termination............................................ 41
7.3 Amendment........................................................ 44
7.4 Extension; Waiver................................................ 44
7.5 Procedure for Termination, Amendment, Extension or Waiver........ 44
ARTICLE 8
GENERAL PROVISIONS
8.1 Payment of Expenses.............................................. 45
8.2 Nonsurvival of Representations, Warranties and Agreements........ 45
8.3 Notices.......................................................... 45
8.4 Interpretation................................................... 46
8.5 Counterparts..................................................... 46
8.6 Entire Agreement; No Third Party Beneficiaries................... 46
8.7 Governing Law.................................................... 46
8.8 No Remedy in Certain Circumstances............................... 46
8.9 Assignment....................................................... 47
8.10 Specific Performance............................................. 47
8.11 No Affiliate Liability........................................... 47
8.12 Schedule Definitions............................................. 47
8.13 Effect of Amendment and Restatement.............................. 47
</TABLE>
<TABLE>
<S> <C>
EXHIBITS:
Exhibit A Amended and Restated WDOP Merger Agreement
Exhibit B Amended and Restated WROP Merger Agreement
Exhibit C Form of Voting Agreement
Exhibit D-1 WDOP Election and Consent Form (Class B Common Unitholders)
Exhibit D-2 WROP Election and Consent Form (Class C Common Unitholders)
Exhibit D-3 WROP Election and Consent Form (Class D Common Unitholders)
Exhibit E Drever Partners Stock Purchase Agreement
Exhibit F Form of Option Surrender Agreement, Release and Waiver
Exhibit G Form of Second Amended and Restated Limited Partnership
Agreement of WDOP
Exhibit H Form of Second Amended and Restated Limited Partnership
Agreement of WROP
Exhibit I Form of Loan Repayment Agreement
Exhibit J Form of Legal Opinion of Locke Liddell & Sapp LLP
</TABLE>
(iv)
<PAGE> 6
<TABLE>
<S> <C>
DISCLOSURE SCHEDULES:
Schedule A Stockholders with Voting Agreements
Schedule B Class B Common Unitholders with Powers of Attorney
Schedule C Class C Common Unitholders with Powers of Attorney
Schedule D Class D Common Unitholders with Powers of Attorney
Company Disclosure Schedule:
Schedule 3.1(a) Company Subsidiaries
Schedule 3.1(b) Company Capital Structure
Schedule 3.1(c) Company Conflicts/Consents
Schedule 3.1(f) Company Certain Changes or Events
Schedule 3.1(g) Company Undisclosed Liabilities
Schedule 3.1(j) Company Litigation
Schedule 3.1(k) Company Tax Information
Schedule 3.1(l) Company Pension and Benefit Plan and Related Information
Schedule 3.1(m) Company Labor Matters
Schedule 3.1(o) Company Environmental Matters
Schedule 3.1(p) Company Properties
Schedule 3.1(q) Company Insurance
Schedule 3.1(x) Company Contracts
Schedule Company Information Systems
3.1(dd)
Schedule 4.1 Company Conduct of Business
Parent/Newco Disclosure Schedule:
Schedule 3.2(g) Parent/Newco Financing Commitments
Schedule 5.5(b) Parent/Newco Transaction Consents
</TABLE>
(v)
<PAGE> 7
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
January 6, 2000 (this "Agreement"), to be effective as of September 24, 1999
(the "Prior Execution Date"), among Walden Residential Properties, Inc., a
Maryland corporation (the "Company"), Oly Hightop Corporation, a Maryland
corporation ("Newco"), and Oly Hightop Parent, L.P., a Delaware limited
partnership ("Parent");
WHEREAS, the Company, Parent and Newco previously entered into an Agreement
and Plan of Merger on September 24, 1999 (the "Initial Agreement");
WHEREAS, the Company, Parent and Newco entered into to that certain Amended
and Restated Agreement and Plan of Merger dated November 5, 1999 (the "Prior
Agreement");
WHEREAS, the Company, Parent and Newco desire to amend and restate the
Prior Agreement in its entirety as provided herein;
WHEREAS, the Board of Directors of the Company, upon the recommendation of
a duly authorized special committee of independent directors (such committee,
including any later reconstitution of such committee, the "Company Special
Committee"), and the Board of Directors of Newco have approved and declared
advisable this Agreement and the merger of Newco with and into the Company, with
the Company being the surviving corporation, upon the terms and subject to the
conditions of this Agreement (the "Merger"), and the general partner of Parent,
the sole stockholder of Newco, has approved the Merger;
WHEREAS, concurrently with the execution of this Agreement, Parent, the
Company, WDOP Merger Sub, L.P., a Delaware limited partnership ("WDOP Merger
Sub"), and Walden/Drever Operating Partnership, L.P., a Delaware limited
partnership ("WDOP"), are entering into a Second Amended and Restated Agreement
and Plan of Merger (the "WDOP Merger Agreement"), a copy of which is attached as
Exhibit A hereto, in connection with which (i) holders of WDOP Class B Common
Units (as hereinafter defined) will (A) receive cash from WDOP or (B) elect to
receive new securities of Parent or a combination of new securities of Parent
and cash from WDOP, (ii) the holders of WDOP Class B Preferred Units (as
hereinafter defined) will receive cash from WDOP, and (iii) immediately prior to
the Merger, WDOP Merger Sub will merge with and into WDOP (the "WDOP Merger"),
with WDOP as the surviving entity;
WHEREAS, concurrently with the execution of this Agreement, Parent, Walden
Operating, Inc., a Delaware corporation, WROP Merger Sub, L.P., a Delaware
limited partnership ("WROP Merger Sub"), and Walden Residential Operating
Partnership, L.P., a Delaware limited partnership ("WROP"), are entering into a
Second Amended and Restated Agreement and Plan of Merger (the "WROP Merger
Agreement"), a copy of which is attached as Exhibit B hereto, in connection with
which (i) holders of WROP Class C Common Units (as hereinafter defined) and WROP
Class D Common Units (as hereinafter defined) will (A) receive cash from WROP or
(B) elect to receive new securities of Parent or a combination of new securities
of Parent and cash from WROP, and (ii) immediately prior to the Merger, WROP
Merger Sub will merge with and into WROP (the "WROP Merger"), with WROP as the
surviving entity (the WROP Merger Agreement, WDOP Merger Agreement, WDOP
Election and Consent Form (as hereinafter defined), WROP Election and Consent
Forms (as hereinafter defined), the Second Amended and Restated Limited
Partnership Agreement of WDOP, the Second Amended and Restated Limited
Partnership Agreement of WROP and all other documents to be executed by the
Company, Parent, Newco or their respective Affiliates in connection with the
transactions contemplated thereby, shall be hereinafter referred to as the "OP
Transaction Documents," and the transactions contemplated thereby shall be
hereinafter referred to as the "OP Transactions");
WHEREAS, concurrently with the execution of this Agreement, certain holders
of the Company's stock named in Schedule A hereto are entering into agreements,
each substantially in the form of Exhibit C hereto (each, a "Voting Agreement"),
with Parent, Newco and the Company providing, among
1
<PAGE> 8
other things, that each such stockholder will vote, or cause to be voted at the
Stockholders Meeting (as hereinafter defined) contemplated hereby, all of the
shares of the Company's stock entitled to vote upon the Merger owned by each
such stockholder at such time in favor of this Agreement, the Merger and the
transactions contemplated hereby;
WHEREAS, concurrently with the execution of this Agreement, certain limited
partners of WDOP named in Schedule B hereto have executed a power of attorney
authorizing Parent to execute and deliver a WDOP Election and Consent Form (as
hereinafter defined), and certain limited partners of WROP named in Schedule C
and Schedule D hereto have executed a power of attorney authorizing Parent to
execute and deliver WROP Election and Consent Forms (as hereinafter defined), in
each case providing, among other things, that each such limited partner has
approved the WDOP Merger or the WROP Merger, as applicable, and has elected to
receive new securities of Parent or a combination of new securities of Parent
and cash from WDOP or WROP, as applicable, as of the effective time of the WDOP
Merger, in the case of such limited partners of WDOP, and as of the effective
time of the WROP Merger, in the case of such limited partners of WROP; and
WHEREAS, the Company, Newco and Parent desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and the OP Transactions and also to prescribe various conditions to the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties to this
Agreement agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger; Effective Time of the Merger. Upon the terms and subject to
the conditions of this Agreement, at the Effective Time (as hereinafter
defined), Newco shall be merged with and into the Company in accordance with the
Maryland General Corporation Law (the "MGCL"), the separate corporate existence
of Newco shall cease, and the Company shall continue as the surviving entity
(Newco and the Company are sometimes referred to herein as the "Constituent
Entities," and the Company is sometimes referred to herein as the "Surviving
Entity"). As soon as practicable at or after the closing of the Merger (the
"Closing") pursuant to Section 1.2 and Article 6, Newco and the Company shall
file articles of merger prepared and executed in accordance with the relevant
provisions of the MGCL (the "Articles of Merger") with the State Department of
Assessments and Taxation of Maryland ("SDAT"). The Merger shall become effective
upon the filing of the Articles of Merger with, and acceptance for record of the
Articles of Merger by, the SDAT, or at such later time (but not to exceed 30
days after the Articles of Merger are accepted for record by the SDAT) specified
in the Articles of Merger (the "Effective Time").
1.2 Closing. The Closing shall take place at 9:30 a.m., Central time, on a
date to be specified by the parties, which shall be no later than the twelfth
business day after satisfaction (or waiver in accordance with this Agreement) of
the latest to occur of the conditions set forth in Article 6 (the "Closing
Date"), at the offices of Vinson & Elkins L.L.P., 3700 Trammell Crow Center,
2001 Ross Avenue, Dallas, Texas 75201, unless another date or place is agreed to
in writing by the parties.
1.3 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and the applicable provisions of the MGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of Newco shall
vest in the Surviving Entity, and all debts, liabilities, obligations and duties
of Newco shall become the debts, liabilities, obligations and duties of the
Surviving Entity.
1.4 Organizational Documents. At the Effective Time, the charter (as
defined in Section 1-101 of the MGCL) (the "Company Charter") and the Restated
Bylaws (the "Company Bylaws") of the
2
<PAGE> 9
Company in effect immediately prior to the Effective Time shall be the charter
and bylaws of the Surviving Entity, until thereafter amended in accordance with
their respective terms and applicable law.
1.5 Directors and Officers of the Surviving Corporation. From and after the
Effective Time, the directors and officers of Newco shall be the initial
directors and officers of the Surviving Entity, and such directors and officers
shall serve until their successors have been duly elected or appointed (in the
case of officers) and qualified or until their death, resignation or removal
from office in accordance with the Surviving Entity's charter and bylaws.
1.6 Approval of Stockholder of Newco. By its execution and delivery of this
Agreement, Parent hereby consents (in its capacity as the sole stockholder of
Newco) to the Merger, this Agreement and the consummation of the transactions
contemplated hereby and agrees that Parent will not (in its capacity as the sole
stockholder of Newco) withdraw, revoke, rescind or alter such consent in any way
without the prior written consent of the Company; provided, however, that
nothing set forth in this Section 1.6 shall limit or otherwise qualify the
rights of Parent or Newco to terminate this Agreement pursuant to the terms and
subject to the conditions set forth in Article 7.
ARTICLE 2
EFFECT OF THE MERGER ON THE STOCK OF
THE CONSTITUENT ENTITIES; EXCHANGE OF CERTIFICATES
2.1 Effect of the Merger on Stock of Constituent Entities. At the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of common stock, par value $0.01 per share, of Newco ("Newco
Common Stock"), or common stock, par value $0.01 per share ("Company Common
Stock"), of the Company, 9.0% Redeemable Preferred Stock, par value $0.01 per
share ("Company Redeemable Preferred Stock"), of the Company, 9.16% Series B
Convertible Redeemable Preferred Stock, par value $0.01 per share ("Company
Convertible Preferred Stock"), of the Company or 9.20% Senior Preferred Stock,
par value $0.01 per share ("Company Senior Preferred Stock"), of the Company:
(a) Stock of Newco. Each share of Newco Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted into
one fully paid and nonassessable share of common stock, par value $0.01 per
share, of the Surviving Entity.
(b) Company Common Stock, Company Convertible Preferred Stock, Company
Senior Preferred Stock and Company Redeemable Preferred Stock. Other than
any shares of stock of the Company which are held by the Company or any of
its Subsidiaries (as hereinafter defined) or by Parent or any of its
Subsidiaries, which shares shall be canceled and no consideration shall be
received in exchange therefor, (i) each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive $23.14 in cash, (ii) each share of
Company Convertible Preferred Stock issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive an
amount in cash equal to the sum of (A) $26.39 and (B) accrued and unpaid
dividends on such share of Company Convertible Preferred Stock to but
excluding the Closing Date, (iii) each share of Company Senior Preferred
Stock issued and outstanding immediately prior to the Effective Time shall
be converted into the right to receive an amount in cash equal to the sum
of (A) $22.00 and (B) the amount of accrued and unpaid dividends on such
share of Company Senior Preferred Stock to, but excluding, the Closing
Date, and (iv) each share of Company Redeemable Preferred Stock issued and
outstanding immediately prior to the Effective Time shall be converted into
the right to receive an amount in cash equal to the sum of (A) $19.50 and
(B) the amount of accrued and unpaid dividends on such share of Company
Redeemable Preferred Stock to, but excluding, the Closing Date (the per
share consideration described in clauses (i) through (iv) is referred to
herein as the "Cash Merger Consideration"). All such shares of Company
Common Stock, Company Convertible Preferred Stock, Company Senior Preferred
Stock and Company Redeemable Preferred Stock, when so converted, shall no
longer be
3
<PAGE> 10
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except the right to
receive the Cash Merger Consideration to be paid in consideration therefor
upon the surrender of such certificates in accordance with Section 2.2,
without interest.
(c) Company Warrants. Subject to their earlier expiration in
accordance with their respective terms, each warrant to purchase Company
Common Stock then outstanding under (i) that certain Series A Warrant
Agreement (the "Series A Warrant Agreement") dated as of December 27, 1996
between the Company and The First National Bank of Boston (the "Company
Series A Warrants") and (ii) that certain Series B Warrant Agreement
(together with the Series A Warrant Agreement, the "Warrant Agreements")
dated as of October 1, 1997 between the Company and the First National Bank
of Boston (the "Company Series B Warrants" and, together with the Company
Series A Warrants, the "Company Warrants"), shall automatically be canceled
and cease to exist and shall thereafter represent the right to receive for
each share of Company Common Stock subject to such Company Warrant an
amount in cash equal to the difference between (A) the amount of Cash
Merger Consideration payable in respect of a share of Company Common Stock
and (B) the per share exercise price of such Company Warrants, as adjusted
pursuant to Section 3.1(bb), to the extent such Cash Merger Consideration
exceeds such per share exercise price (such amount in cash as described
above being hereinafter referred to as the "Warrant Consideration"). The
Warrant Consideration shall be paid pursuant to the procedures set forth in
Section 2.2(h).
(d) Treatment of Company Stock Options. Each outstanding option (each,
a "Company Stock Option") to purchase Company Common Stock that has been
granted under the Company's Amended and Restated 1994 Stock Option Plan
(the "Company 1994 Option Plan"), the Company's Long-Term Incentive Plan
(the "Company LTIP") or the Company's 1998 Non-Qualified Employee Stock
Purchase Plan (the "Company Stock Purchase Plan" and, collectively with the
Company 1994 Option Plan and the Company LTIP, the "Company Incentive
Plans"), whether or not then vested or exercisable, shall become fully
vested and exercisable as of the Effective Time and shall automatically be
canceled and cease to exist as of the Effective Time and shall be converted
into the right to receive an amount in cash, if positive, equal to the
number of shares of Company Common Stock subject to such Company Stock
Option multiplied by the excess of (i) the Cash Merger Consideration
payable in respect of a share of Company Common Stock minus (ii) the
exercise price of such Company Stock Option (such product, the "Option
Consideration"). No cash payment will be due in respect of such Company
Stock Option or its termination if the amount set forth in clause (ii)
exceeds the amount set forth in clause (i). The Option Consideration shall
be paid pursuant to the procedures set forth in Section 2.2(g).
(e) Treatment of Company Restricted Stock. The Company shall take all
actions necessary to provide that, as of the Effective Time, (i) all
restrictions upon each outstanding share of restricted stock that has been
granted under the Company LTIP shall terminate, (ii) each such share of
restricted stock shall be converted into the right to receive the Cash
Merger Consideration payable in respect of a share of Company Common Stock,
and (iii) each share of restricted stock shall be canceled.
2.2 Payment for Securities/Exchange of Certificates
(a) Exchange Agent. (i) Immediately after the Effective Time, the Surviving
Entity or Newco shall deposit with a bank or trust company designated by Newco
and reasonably acceptable to the Company (the "Exchange Agent"), for the benefit
of the holders of shares of Company Common Stock, Company Convertible Preferred
Stock, Company Senior Preferred Stock and Company Redeemable Preferred Stock, as
applicable, for payment in accordance with this Article 2, through the Exchange
Agent, cash in an amount sufficient to pay the aggregate Cash Merger
Consideration (such cash being hereinafter referred to as the "Exchange Fund")
payable pursuant to Section 2.1 in exchange for outstanding shares of Company
Common Stock, Company Convertible Preferred Stock, Company Senior Preferred
Stock and Company Redeemable Preferred Stock, as applicable.
4
<PAGE> 11
(ii) As soon as reasonably practicable after the Effective Time, the
Exchange Agent, pursuant to irrevocable instructions, shall deliver the
aggregate Cash Merger Consideration to be paid pursuant to Section 2.1 out of
the Exchange Fund. The Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. (i) As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which, immediately prior to the Effective Time
represented outstanding shares of Company Common Stock, Company Convertible
Preferred Stock, Company Senior Preferred Stock and Company Redeemable Preferred
Stock (each, a "Certificate"), which holder's shares of Company Common Stock,
Company Convertible Preferred Stock, Company Senior Preferred Stock or Company
Redeemable Preferred Stock were converted into the right to receive the Cash
Merger Consideration, in each case as set forth in Section 2.1:(1) a letter of
transmittal ("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 Exchange Agent, and shall be in such form
and have such other provisions as the Surviving Entity may reasonably specify,
and (2) instructions for use in effecting the surrender of the Certificates in
exchange for the Cash Merger Consideration.
(ii) Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with the Letter of Transmittal, duly executed, and any other
documents reasonably required by the Exchange Agent or the Surviving Entity, (A)
the holder of a Certificate formerly representing shares of Company Common
Stock, Company Convertible Preferred Stock, Company Senior Preferred Stock or
Company Redeemable Preferred Stock shall be entitled to receive in exchange
therefor the applicable amount of Cash Merger Consideration, which such holder
has the right to receive pursuant to the provisions of this Article 2; and (B)
the Certificate so surrendered shall forthwith be canceled.
(iii) In the event of a transfer of ownership of Company Common Stock,
Company Convertible Preferred Stock, Company Senior Preferred Stock or Company
Redeemable Preferred Stock, which is not registered in the transfer records of
the Company, the appropriate amount of Cash Merger Consideration may be paid to
a transferee if the Certificate representing such Company Common Stock, Company
Convertible Preferred Stock, Company Senior Preferred Stock or Company
Redeemable Preferred Stock is presented to the Exchange Agent properly endorsed
or accompanied by appropriate stock powers and otherwise in proper form for
transfer and accompanied by all documents reasonably required by the Exchange
Agent to evidence and effect such transfer and by evidence that any applicable
stock transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.2, each such Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
appropriate amount of Cash Merger Consideration.
(c) No Further Ownership Rights. All Cash Merger Consideration paid upon
the surrender for exchange of shares of Company Common Stock, Company
Convertible Preferred Stock, Company Senior Preferred Stock or Company
Redeemable Preferred Stock in accordance with the terms hereof shall be deemed
to have been paid in full satisfaction of all rights pertaining to such shares
of Company Common Stock, Company Convertible Preferred Stock, Company Senior
Preferred Stock or Company Redeemable Preferred Stock, subject, however, to the
Surviving Entity's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time that may have been
declared or made by the Company on such shares of Company Common Stock, Company
Convertible Preferred Stock, Company Senior Preferred Stock or Company
Redeemable Preferred Stock in accordance with the terms of this Agreement and
which remain unpaid at the Effective Time, and after the Effective Time there
shall be no further registration of transfers on the stock transfer books of the
Surviving Entity of the shares of Company Common Stock, Company Convertible
Preferred Stock, Company Senior Preferred Stock or Company Redeemable Preferred
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Entity for any
reason, they shall be canceled and exchanged as provided in this Article 2.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the former stockholders of the Company on the six month
anniversary of the Effective Time shall be
5
<PAGE> 12
delivered to the Surviving Entity upon demand, and any stockholders of the
Company who have not theretofore received any applicable Cash Merger
Consideration and any other dividends or distributions to which they are
entitled under this Article 2 shall thereafter look only to Surviving Entity for
payment of their claims with respect thereto and only as general creditors
thereof.
(e) No Liability. None of Parent, the Surviving Entity or Newco shall be
liable to any holder of shares of Company Common Stock, Company Convertible
Preferred Stock, Company Senior Preferred Stock or Company Redeemable Preferred
Stock, as the case may be, for any part of the Cash Merger Consideration or for
dividends or distributions with respect thereto delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. Any
amounts remaining unclaimed by holders of any such shares five years after the
Effective Time or at such earlier date as is immediately prior to the time at
which such amounts would otherwise escheat to or become property of any
governmental entity, shall, to the extent permitted by applicable law, become
the property of the Surviving Entity free and clear of any claims or interest of
any such holders or their successors, assigns or personal representatives
previously entitled thereto.
(f) Lost, Stolen, or Destroyed Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Entity the posting by such person of a bond in such
reasonable amount as the Surviving Entity may direct as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed Certificate the
appropriate amount of Cash Merger Consideration.
(g) Payment Procedures for Company Stock Options. Upon the later of the
Effective Time and the surrender by the holder of a Company Stock Option by
delivery of an Option Release Agreement (as hereinafter defined), the Surviving
Entity shall pay to such holder the Option Consideration in respect thereof. No
interest shall be paid or accrued on the Option Consideration. Until settled in
accordance with the provisions of this Section 2.2, each Company Stock Option
shall be deemed at any time after the Effective Time to represent for all
purposes only the right to receive the Option Consideration. The surrender of a
Company Stock Option in exchange for the Option Consideration shall be deemed a
release of any and all rights the holder had or may have had in respect of such
Company Stock Option.
(h) Payment Procedures for Company Warrants. Pursuant to Section 5.9, the
First National Bank of Boston (or its successor), as Warrant Agent (the "Warrant
Agent"), shall deliver to the holders of Company Warrants notice of the Merger,
which notice shall specify the reduced exercise price of the Company Warrants
and the date as of which the holders of stock or other securities of the Company
may exchange their shares of stock or other securities for property upon the
Merger and shall specify that delivery shall be effected and risk of loss and
title to the Company Warrants shall pass only upon delivery of the certificates
representing the Company Warrants to the Warrant Agent. The notice shall include
instructions for surrendering such certificates in exchange for the Warrant
Consideration that such holder is entitled to receive pursuant to Section
2.1(c), which the Warrant Agent shall instruct the Company to transfer promptly
to or upon the written order of such holder. No interest shall be paid or
accrued on the Warrant Consideration. Any amount payable to a holder of Company
Warrants will be rounded up to the nearest penny.
(i) Withholding of Tax. The Surviving Entity shall be entitled to deduct
and withhold from the Cash Merger Consideration and any dividends or
distributions otherwise payable pursuant to this Agreement to any holder of a
Certificate, if any, or from any Option Consideration or Warrant Consideration
payable pursuant to this Agreement to any holder of Company Stock Options or
Company Warrants, such amount as the Surviving Entity (or any Affiliate thereof,
as such term is defined in Section 4.1(i)) or the Exchange Agent is required to
deduct and withhold with respect to the making of such payment under federal,
state, local or foreign tax law. To the extent that amounts are so withheld by
the Surviving Entity, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the former holder of a Certificate,
Company Stock Option or Company Warrant in respect of which such deduction and
withholding was made by the Surviving Entity.
6
<PAGE> 13
2.3 Appraisal Rights. The holders of shares of Company Common Stock,
Company Convertible Preferred Stock, Company Senior Preferred Stock and Company
Redeemable Preferred Stock shall not be entitled to appraisal rights.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company represents
and warrants to Parent and Newco as follows (which representations and
warranties shall be deemed to have been made on and after the Prior Execution
Date up to and including the Effective Time (except to the extent that a
representation or warranty is made on or after another date or as of a specified
date), in each case as qualified by matters reflected on the disclosure schedule
delivered by the Company to Parent on or prior to the Prior Execution Date (the
"Company Disclosure Schedule") and made a part hereof by reference):
(a) Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maryland, and each of its Subsidiaries (as defined below) is a
corporation, limited liability company or partnership duly organized,
validly existing and in good standing under the laws of its state of
incorporation or organization, and each of the Company and each of its
Subsidiaries has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
and is duly qualified and in good standing to do business in each
jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure so to qualify would not
have a Material Adverse Effect (as defined below) on the Company. The
Company has heretofore delivered to Parent complete and correct copies of
the Company Bylaws and the charter, bylaws or other organizational
documents of each of the Company's Subsidiaries. All Subsidiaries of the
Company and their respective jurisdictions of incorporation or organization
are identified on Schedule 3.1(a) of the Company Disclosure Schedule. Each
owner and the respective amount of such owner's equity interest in each
such Subsidiary is set forth on Schedule 3.1(a) of the Company Disclosure
Schedule. Schedule 3.1(a) of the Company Disclosure Schedule sets forth a
list of each jurisdiction in which the Company or a Company Subsidiary is
qualified or licensed to do business and each assumed name under which any
of them conducts business in any jurisdiction. As used in this Agreement,
"Material Adverse Change" or "Material Adverse Effect" means, when used in
connection with the Company, any change, event or effect, whether or not
foreseeable or known as of the Prior Execution Date or the date of this
Agreement, that, individually or in the aggregate with any such other
changes, events or effects, is, or could reasonably be expected to be
(whether or not such change, event or effect has, at the time in question,
manifested itself in the Company's historical financial statements),
materially adverse to the historical or near-term or long-term projected
(a) business, (b) assets, (c) liabilities, (d) financial condition or (e)
results of operations (including, but not limited to, Net Operating Income
(as defined below) and Net Cash Flow (as defined below)), in each case, of
the Company and its Subsidiaries taken as a whole. For purposes of this
Agreement, Material Adverse Change and Material Adverse Effect shall be
determined in light of Parent's initial capital structure for the Surviving
Entity, which capital structure is set forth in the letter of even date
herewith from Parent to the Company. As used in this Agreement, "Net
Operating Income" means rental and other property income minus property
management and operating expenses and general and administrative expenses,
and "Net Cash Flow" means Net Operating Income minus debt service payments
of principal and interest, capital expenditures and other non-operating
expenses. As used in this Agreement, the word "Subsidiary" means, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which: (i) such party or any other
Subsidiary of such party is a general partner; (ii) at least a majority of
the securities or other interests having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization
is, directly or indirectly, owned or controlled by such party or by any one
or more of its Subsidiaries, or by such party and any one or
7
<PAGE> 14
more of its Subsidiaries; (iii) such party and/or any other Subsidiary of
such party beneficially owns, directly or indirectly, at least 25% of the
equity interests; or (iv) such party and/or any other Subsidiary of such
party has a direct or indirect investment of $10 million or more in equity
or indebtedness.
(b) Capital Structure. As of the Prior Execution Date, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of Company
Common Stock and (ii) 10,000,000 shares of preferred stock, par value $0.01
per share, of which (A) 4,000,000 shares have been designated as Company
Senior Preferred Stock, (B) 1,800,000 shares have been designated as
Company Convertible Preferred Stock, (C) 2,000,000 shares have been
designated as Company Redeemable Preferred Stock and (D) 350,000 shares
have been designated as Series A Junior Participating Preferred Stock, par
value $.01 per share (the "Company Junior Preferred Stock"). As of the
Prior Execution Date, (1) 25,460,322 shares of Company Common Stock
(including one Company Right, as hereinafter defined, for each outstanding
share of Company Common Stock) are issued and outstanding; (2) 4,000,000
shares of Company Senior Preferred Stock are issued and outstanding; (3)
1,709,182 shares of Company Convertible Preferred Stock are issued and
outstanding; (4) 1,568,275 shares of Company Redeemable Preferred Stock are
issued and outstanding; (5) 500,000 shares of Company Common Stock are
reserved for issuance pursuant to the Company Incentive Plans, of which
112,899 shares of Company Common Stock are issued but not yet vested under
restricted stock grants; (6) 345,709 shares of Company Common Stock were
issued under the Associates Loan Program and 106,600 shares were issued
pursuant to the Company LTIP in connection with officer loans; (7)
2,983,620 shares of Company Common Stock are subject to issuance upon the
exercise of options or awards granted to officers, directors or employees
of Company and its Subsidiaries under the Company LTIP or the Company 1994
Option Plan; (8) 4,000,000 Company Series A Warrants are issued and
outstanding, and 5,233,247 Company Series B Warrants are issued and
outstanding; (9) 1,949,493 shares of Company Common Stock are reserved for
issuance upon conversion of the Company Convertible Preferred Stock; (10)
350,000 shares of Company Junior Preferred Stock are reserved for issuance
under the Company Rights Agreement (as hereinafter defined); (11)
1,333,333 1/3 shares of Company Common Stock are subject to issuance, and
are also reserved for issuance, upon exercise of the 4,000,000 Company
Series A Warrants that are issued and outstanding, and 2,222,121 shares of
Company Common Stock are subject to issuance, and are also reserved for
issuance, upon exercise of the 5,227,853 Company Series B Warrants that are
issued and outstanding and upon exercise of Company Series B Warrants that
are issuable upon conversion of WDOP Class B Preferred Units (as defined
below); (12) 3,611,483 shares of Company Common Stock are subject to
issuance, and are also reserved for issuance, upon the exchange of WDOP
Class B Common Units; (13) 429,938 shares of Company Redeemable Preferred
Stock are subject to issuance, and are also reserved for issuance, upon the
exchange of WDOP Class B Preferred Units; (14) 810,128 shares of Company
Common Stock are subject to issuance, and are also reserved for issuance,
upon the exchange of WROP Class C Common Units (as defined below); (15)
38,876 shares of Company Common Stock are subject to issuance, and are also
reserved for issuance, upon the exchange of WROP Class D Common Units (as
defined below); and (16) no Voting Debt (as defined below) is issued and
outstanding in the Company or any Subsidiary of the Company. The Company is
the sole general partner of WDOP and holds a one percent general
partnership interest in WDOP. WDN Properties, Inc., a New York corporation
and wholly owned Subsidiary of the Company ("WDN Properties"), holds a
53.95% limited partnership interest in WDOP. As of the Prior Execution
Date, Class A limited partnership interests representing a 63.6070%
interest in WDOP, 3,611,483 units of Class B common limited partnership
interest in WDOP ("WDOP Class B Common Units"), constituting an interest of
17.3086% in WDOP; Class C limited partnership interests representing a
3.5900% interest in WDOP; Class D limited partnership interests
representing a 14.4754% interest in WDOP; and 429,938 units of Class B
preferred limited partnership interest in WDOP ("WDOP Class B Preferred
Units") are validly issued and outstanding, fully paid and nonassessable
and not subject to preemptive rights. Each WDOP Class B Common Unit is
exchangeable for one share of Company Common Stock. Each
8
<PAGE> 15
WDOP Class B Preferred Unit is exchangeable for one share of Company
Redeemable Preferred Stock and 3 1/3 Company Series B Warrants. Schedule
3.1(b) of the Company Disclosure Schedule sets forth the name, number and
class of WDOP units of partnership interest and the percentage interest of
each partner in WDOP. Walden Operating, Inc., a Delaware corporation and
wholly owned Subsidiary of the Company, is the sole general partner of WROP
and holds a one percent general partnership interest in WROP. WDN
Properties holds a 77.3784% limited partnerships interest in WROP. As of
the Prior Execution Date, Class A limited partnership interests
representing an 83.2781% interest in WROP; 810,128 units of Class C limited
partnership interest in WROP ("WROP Class C Common Units"), constituting an
interest of 14.992% in WROP; and 38,876 units of Class D limited
partnership interest in WROP ("WROP Class D Common Units"), constituting an
interest of 0.7299% in WROP, are validly issued and outstanding, fully paid
and nonassessable and not subject to preemptive rights. Each WROP Class C
Common Unit and WROP Class D Common Unit is exchangeable for one share of
Company Common Stock. Schedule 3.1(b) of the Company Disclosure Schedule
sets forth the name, number and class of WROP units of partnership interest
and the percentage interest of each partner in WROP. The term "Voting Debt"
means bonds, debentures, notes or other indebtedness having the right to
vote (or convertible into securities having the right to vote) on any
matters on which holders of equity interests in the Company or any
Subsidiary of the Company or Parent and Newco, as applicable, may vote. All
outstanding shares of Company Common Stock, Company Senior Preferred Stock,
Company Convertible Preferred Stock, and Company Redeemable Preferred Stock
are validly issued, fully paid and nonassessable and are not subject to
preemptive rights. Other than as set forth in the applicable organizational
documents or under applicable securities law and except as set forth on
Schedule 3.1(b) of the Company Disclosure Schedule, all outstanding equity
interests of the Subsidiaries of the Company owned by the Company, or a
direct or indirect wholly owned Subsidiary of the Company, are free and
clear of all liens, pledges, charges, encumbrances, claims, mortgages,
deeds of trust, security interests, restrictions, rights of first refusal,
defects in title, or other burdens, options or encumbrances of any kind
("Encumbrances"). Set forth in Schedule 3.1(b) of the Company Disclosure
Schedule is a true and complete list of the following: (i) each outstanding
qualified or non-qualified option to purchase Company Common Stock granted
under the Company Incentive Plans or otherwise, the name of each holder of
each such option and the exercise price and the number of shares subject to
each such option; (ii) each grant of Company Common Stock to employees
which is subject to any risk of forfeiture, the name of each holder of such
restricted stock and the number of shares of such restricted stock held by
each holder; (iii) each outstanding Company Series A Warrant to purchase
Company Common Stock and each outstanding Company Series B Warrant to
purchase Company Common Stock and in each case, the name of each holder of
such warrants and the number of warrants held by such holder; (iv) any
obligation of the Company to issue Company Common Stock as a result of the
transactions contemplated hereby and the total thereof; and (v) each loan
made by the Company with respect to the purchase of Company Common Stock
and the recipient, amount and principal terms thereof. Except as set forth
in this Section 3.1(b) or on Schedule 3.1(b) of the Company Disclosure
Schedule, there are issued and outstanding or reserved for issuance: (x) no
shares of stock, Voting Debt or other voting securities of the Company; (y)
no securities of the Company or any Subsidiary of the Company or securities
or assets of any other entity convertible into or exchangeable for shares
of stock, Voting Debt or other voting securities of the Company or any
Subsidiary of the Company; and (z) no options, warrants, calls, rights
(including preemptive rights), commitments or agreements to which the
Company or any Subsidiary of the Company is a party or by which it is bound
in any case obligating the Company or any Subsidiary of the Company to
issue, deliver, sell, purchase, redeem or acquire, or cause to be issued,
delivered, sold, purchased, redeemed or acquired, additional shares of
stock or any Voting Debt or other voting securities of the Company or of
any Subsidiary of the Company, or obligating the Company or any Subsidiary
of the Company to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. Except for the Transaction Documents
(as hereinafter defined) and the OP Transaction Documents, there are not as
of the Prior Execution Date, and there will not be at the Effective Time,
any stockholder agreements, voting trusts or other agreements or
understandings to which the Company or any
9
<PAGE> 16
Subsidiary of the Company is a party or by which it is bound relating to
the voting of any shares of the stock of the Company or partnership
interests in WDOP or WROP that will limit in any way the solicitation of
proxies or consents from, or the casting of votes by, the stockholders of
the Company or the partners of WROP or WDOP with respect to the Merger or
the other transactions contemplated by the OP Transaction Documents. Except
as set forth in the applicable organizational documents of any Subsidiary
of the Company or as imposed and required by lenders in connection with
bankruptcy remote or special purpose entities that are Subsidiaries, there
are no restrictions on the Company's ability to vote the equity interests
of any of its Subsidiaries. Except as set forth on Schedule 3.1(b) to the
Company Disclosure Schedule, all dividends or distributions on securities
of the Company that have been declared or authorized prior to the Prior
Execution Date have been paid in full.
(c) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of the Company and the Company Special
Committee have approved and declared advisable the Merger and this
Agreement, and have directed that the Merger and this Agreement be
submitted for consideration at a special meeting of the stockholders of
the Company. The directors of the Company have advised the Company and
Parent and Newco that they intend to vote or cause to be voted all of
the shares of Company Common Stock beneficially owned by them and their
Affiliates in favor of approval of the Merger and this Agreement. The
general partner of WDOP has approved the WDOP Merger and the WDOP Merger
Agreement, and the general partner of WROP has approved the WROP Merger
and the WROP Merger Agreement. The Company has all requisite power and
authority to enter into this Agreement, the Loan Repayment Agreements
(as hereinafter defined), the Voting Agreements and all other documents
to be executed by the Company in connection with the transactions
contemplated hereby and thereby (collectively, the "Transaction
Documents") and, subject, with respect to the consummation of the
Merger, to receipt of the Merger Vote (as hereinafter defined), to
consummate the transactions contemplated hereby and thereby. Each
Subsidiary that is a party to any OP Transaction Document has all
requisite power and authority to enter into such OP Transaction Document
and to consummate the transactions contemplated thereby. The execution
and delivery of the Transaction Documents and the OP Transaction
Documents and the consummation of the transactions contemplated hereby
or thereby have been duly authorized by all necessary action on the part
of the Company and each applicable Subsidiary, subject, with respect to
the consummation of the Merger, to receipt of the Merger Vote. The
Transaction Documents and the OP Transaction Documents have been duly
executed and delivered by the Company and each applicable Subsidiary
and, subject, with respect to the consummation of the Merger, to receipt
of the Merger Vote, and assuming the Transaction Documents to which
Parent and Newco are parties constitute the valid and binding obligation
of Parent and Newco, constitute valid and binding obligations of the
Company and each applicable Subsidiary, enforceable in accordance with
their terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) Except as set forth on Schedule 3.1(c) of the Company
Disclosure Schedule or on Schedule 5.5(b) to the Parent/Newco Disclosure
Schedule, the execution and delivery of the Transaction Documents or the
OP Transaction Documents by the Company or each applicable Subsidiary do
not, and the consummation of the transactions contemplated hereby or
thereby, and compliance with the provisions hereof or thereof, 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 the loss of a material benefit under, or give rise to a right of
purchase under, result in the creation of any Encumbrance upon any of
the properties or assets of the Company or any of its Subsidiaries
under, require the consent or approval of any third party or otherwise
result in a material detriment to the Company or any of its Subsidiaries
under, any provision of (A) the Company
10
<PAGE> 17
Charter or Company Bylaws or any provision of the comparable charter or
organizational documents of any of the Company's Subsidiaries, (B) any
loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to the Company or any of its Subsidiaries or their respective
properties or assets or any guarantee by the Company or any of its
Subsidiaries of any of the foregoing, (C) any joint venture or other
ownership arrangement or (D) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in
Section 3.1(c)(iii) are duly and timely obtained or made and the
approval of the Merger by the stockholders of the Company entitled to
vote thereon has been obtained, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or any of their respective properties or assets, other
than, in the case of clauses (B), (C) and (D), any such conflicts,
violations, defaults, rights, Encumbrances or detriments that,
individually or in the aggregate, (1) have not had, and could not
reasonably be expected to have, a Material Adverse Effect on the
Company, or (2) would not, or could not reasonably be expected to,
materially impair the ability of the Company or any of its Subsidiaries
to perform its obligations hereunder or thereunder or prevent the
consummation of any of the transactions contemplated hereby or thereby.
The Required Consents (as hereinafter defined) that are listed on such
Schedule 3.1(c) are indicated by an asterisk, it being understood that
additional Required Consents are listed on Schedule 5.5(b) of the
Parent/Newco Disclosure Schedule.
(iii) Except as set forth on Schedule 3.1(c) of the Company
Disclosure Schedule or as set forth in documents evidencing the
tax-exempt bond indebtedness of the Company or any of its Subsidiaries,
which documents have previously been made available to Parent and Newco,
no consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any court, governmental,
regulatory or administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of the
Transaction Documents or OP Transaction Documents by the Company or each
of its applicable Subsidiaries or the consummation by the Company or its
applicable Subsidiaries of the transactions contemplated hereby or
thereby, except for: (A) the filing with the Securities and Exchange
Commission (the "SEC") of (1) a proxy statement in preliminary and
definitive form relating to the meeting of the stockholders of the
Company to be held in connection with the Merger (the "Proxy Statement")
and (2) such reports under Section 13(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and such other compliance with
the Exchange Act and the rules and regulations thereunder, as may be
required in connection with the Transaction Documents or the OP
Transaction Documents and the transactions contemplated hereby or
thereby; (B) the filing of the Articles of Merger with, and the
acceptance for record of the Articles of Merger by, the SDAT; (C) the
filing of certificates of merger with the Delaware Secretary of State in
connection with the WDOP Merger and the WROP Merger; (D) such filings
and approvals as may be required by any applicable state takeover laws,
or environmental laws; (E) such filings and approvals as may be required
by any foreign premerger notification, securities, corporate or other
law, rule or regulation; (F) the filing, if applicable, of a pre-merger
notification and report by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
expiration or termination of the applicable waiting period thereunder;
and (G) any such consent, approval, order, authorization, registration,
declaration, filing, or permit that the failure to obtain or make (1)
has not had, and could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company, or (2)
would not, or could not reasonably be expected to, materially impair the
ability of the Company to perform its obligations hereunder or prevent
the consummation of any of the transactions contemplated hereby.
(d) SEC Documents. The Company has made available to Parent and Newco
a true and complete copy of each report, schedule, registration statement
and definitive proxy statement filed by
11
<PAGE> 18
the Company with the SEC since January 1, 1997 and prior to or on the Prior
Execution Date (the "Company SEC Documents"), which are all the documents
(other than preliminary material) that the Company was required to file
with the SEC between January 1, 1997 and the Prior Execution Date. As of
their respective dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Documents, and none of the Company SEC Documents contained any untrue
statement of a material fact or omitted 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. The
Company has no outstanding and unresolved comments from the SEC with
respect to any of the Company SEC Documents. The financial statements of
the Company included in the Company SEC Documents complied as to form in
all material respects with the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly presented in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, none of which are material)
the consolidated financial position of the Company and its consolidated
Subsidiaries as of their respective dates and the consolidated statements
of income and the consolidated cash flows of the Company and its
consolidated Subsidiaries for the periods presented therein. Except as
disclosed in the Company SEC Documents, there are no agreements,
arrangements or understandings between the Company and any party who is at
the Prior Execution Date or was at any time prior to the Prior Execution
Date but after January 1, 1997 an Affiliate of the Company that are
required to be disclosed in the Company SEC Documents. The books of account
and other financial records of the Company are true, complete and correct
in all material respects and are accurately reflected in all material
respects in the financial statements included in the Company SEC Documents.
(e) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the
Proxy Statement will, at the date mailed to stockholders of the Company or
at the time of the meeting of such stockholders to be held in connection
with the Merger or at the Effective Time, contain any untrue statement of a
material fact or omit 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 are made, not misleading. If at any time
prior to the Effective Time any event with respect to the Company or any of
its Subsidiaries, or with respect to other information supplied by the
Company for inclusion in the Proxy Statement, shall occur which is required
to be described in an amendment of, or a supplement to, the Proxy
Statement, such event shall be so described, and the Company shall
reasonably cooperate with Parent and Newco to cause such amendment or
supplement to be promptly filed (if required to be filed) with the SEC and
disseminated to the stockholders of the Company. The Proxy Statement,
insofar as it relates to the Company or its Subsidiaries or other
information supplied by the Company for inclusion or incorporation by
reference therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder and
other applicable law.
(f) Absence of Certain Changes or Events. Except as set forth on
Schedule 3.1(f) or Schedule 4.1 of the Company Disclosure Schedule or as
disclosed in or reflected in the Company SEC Documents, and except as
contemplated by this Agreement, since the date of the most recent audited
financial statements included in the Company SEC Documents to the Prior
Execution Date, (i) nothing has occurred that would have been prohibited by
Section 4.1(a), (b), (c) (but, with respect to (c), only after June 30,
1999), (h), (i), (k), or (l)(iii) or (iv) if the terms of such subsections
had been in effect as of and after such date of such financial statements;
and (ii) there has not been: (A) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property)
with respect to any of the Company's stock; (B) any amendment of any term
of any outstanding equity security of the Company or any Subsidiary of the
Company;
12
<PAGE> 19
(C) any repurchase, redemption or other acquisition by the Company or any
Subsidiary of the Company of any outstanding shares of capital stock or
other equity securities of, or other ownership interests in, the Company or
any Subsidiary of the Company; (D) any material change in any method of
accounting or accounting practice or any tax method, practice or election
by the Company or any Subsidiary of the Company; (E) any amendment of any
employment, consulting, severance, retention or any other agreement between
the Company and any officer or director of the Company; or (F) any change,
event or effect that has had, or could reasonably be expected to have, a
Material Adverse Effect on the Company.
(g) No Undisclosed Material Liabilities. Except as set forth on
Schedule 3.1(g) of the Company Disclosure Schedule or as disclosed in the
Company SEC Documents, as of the Prior Execution Date, there are no
liabilities of the Company or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute or determined, other
than: (i) liabilities adequately provided for on the balance sheet of the
Company dated as of June 30, 1999 (including the notes thereto) contained
in the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1999; (ii) liabilities incurred in the ordinary course of business
subsequent to June 30, 1999 which have not had, individually or in the
aggregate, and could not reasonably be expected to have a Material Adverse
Effect on the Company; and (iii) liabilities under this Agreement.
(h) No Default. Neither the Company nor any of its Subsidiaries is in
default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any
term, condition or provision of (i) the Company Charter or Company Bylaws
or the comparable charter or organizational documents of any of the
Company's Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license to which the Company or any of its
Subsidiaries is now a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets is bound or
(iii) any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its Subsidiaries, except in the case of
(ii) and (iii) for defaults or violations which in the aggregate have not
had and could not reasonably be expected to have a Material Adverse Effect
on the Company.
(i) Compliance with Applicable Laws. The Company and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders, franchises and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except where the
failure so to hold has not had, and could not reasonably be expected to
have, a Material Adverse Effect on the Company. The Company and its
Subsidiaries are in compliance with the terms of the Company Permits,
except where the failure so to comply has not had, and could not reasonably
be expected to have, a Material Adverse Effect on the Company. Except as
disclosed in the Company SEC Documents, the businesses of the Company and
its Subsidiaries are not being conducted in violation of any law, ordinance
or regulation of any Governmental Entity, except for possible violations
which have not had, and could not reasonably be expected to have, a
Material Adverse Effect on the Company. As of the Prior Execution Date, no
investigation or review by any Governmental Entity with respect to the
Company or any of its Subsidiaries is pending and of which the Company has
knowledge (as hereinafter defined) or, to the knowledge of the Company as
of the Prior Execution Date, is threatened, other than those the outcome of
which has not had, and could not reasonably be expected to have, a Material
Adverse Effect on the Company. For purposes of this Agreement, "knowledge"
means the actual knowledge of the executive officers of Parent, Newco or
the Company, as applicable.
(j) Litigation. Except as disclosed in the Company SEC Documents or on
Schedule 3.1(j) or on Schedule 4.1 of the Company Disclosure Schedule and
except for Company Litigation (as hereinafter defined) that both (i) is not
covered by insurance and (ii) does not involve potential liability to the
Company or any of its Subsidiaries in excess of $50,000, as of the Prior
Execution Date there is no suit, action or proceeding pending, or, to the
knowledge of the Company, threatened against or affecting the Company or
any Subsidiary of the Company ("Company Litigation"), and, as
13
<PAGE> 20
of the Prior Execution Date, the Company and its Subsidiaries have no
knowledge of any facts that are likely to give rise to any Company
Litigation, nor as of the Prior Execution Date is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any Subsidiary of the Company ("Company
Order"). Except for Company Litigation that both (i) is not covered by
insurance and (ii) does not involve potential liability to the Company or
any of its Subsidiaries in excess of $50,000, Schedule 3.1(j) of the
Company Disclosure Schedule contains an accurate and complete list, as of
the Prior Execution Date, of all Company Litigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any of its Subsidiaries.
(k) Taxes. Except as set forth on Schedule 3.1(k) of the Company
Disclosure Schedule:
(i) Each of the Company and its Subsidiaries (A) has filed all Tax
returns and reports required to be filed by it (after giving effect to
any filing extension properly granted by a Governmental Entity having
authority to do so) and all such returns and reports are accurate and
complete in all material respects, and (B) has paid (or the Company has
paid on its behalf) all Taxes (as defined below) shown on such returns
and reports as required to be paid by it. The most recent financial
statements contained in the Company SEC Documents reflect an adequate
reserve for all material Taxes payable by the Company and its
Subsidiaries for all taxable periods and portions thereof through the
date of such financial statements. The Company and each Subsidiary of
the Company has established (and until the Closing Date shall continue
to establish and maintain) on its books and records reserves that are
adequate for the payment of all Taxes not yet due and payable. Since
June 30, 1999, the Company has incurred no liability for Taxes under
Sections 857(b), 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 the Company nor any of its
Subsidiaries has incurred any material liability for Taxes other than in
the ordinary course of business. No material deficiencies for any Taxes
have been proposed, asserted or assessed against the Company or any of
its Subsidiaries, including claims by any taxing authority in a
jurisdiction where the Company or any Subsidiary of the Company do not
file Tax returns but in which any of them is or may be subject to
taxation, and no requests for waivers of the time to assess any such
Taxes are pending. As used in this Agreement, "Taxes" includes all
federal, state, local and foreign income, property, sales, use,
franchise, employment, payroll, excise, environmental and other taxes,
tariffs or governmental charges of any nature whatsoever, together with
penalties, interest or additions to Tax with respect thereto.
(ii) The Company (A) for all taxable years commencing with the year
ended December 31, 1993 through December 31, 1998, has been subject to
taxation as a real estate investment trust within the meaning of Section
856 of the Code (a "REIT") and has satisfied all requirements to qualify
as a REIT for such years, (B) will qualify as a REIT for the taxable
year ending December 31, 1999 and the taxable year ending at the
Effective Time, and (C) to the Company's knowledge, no challenge to the
Company's status as a REIT is pending or threatened. Each Subsidiary of
the Company which is a partnership, joint venture or limited liability
company has been since its formation and continues to be treated for
federal income tax purposes as a partnership and not as a corporation.
(iii) All Taxes which the Company or the Company's Subsidiaries are
required by law to withhold or collect, including Taxes required to have
been withheld in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party and
sales, gross receipts and use taxes, have been duly withheld or
collected and, to the extent required, have been paid over to the proper
Governmental Entities or are held in separate bank accounts for such
purpose. There are no liens for Taxes upon the assets of the Company or
the Company's Subsidiaries except for statutory liens for Taxes not yet
due.
(iv) The Tax returns of the Company and the Company's Subsidiaries
are not being and have not been examined or audited by any taxing
authority for any past year or periods.
14
<PAGE> 21
(v) Neither the Company nor the Company's Subsidiaries (A) have
filed a consent under Section 341(f) of the Code concerning collapsible
corporations, or (B) are a party to any Tax allocation or sharing
agreement.
(vi) The Company does not have any liability for the Taxes of any
person other than the Company and the Company's Subsidiaries and the
Company's Subsidiaries do not have any liability for the Taxes of any
person other than the Company and the Company's Subsidiaries (A) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), (B) as a transferee or successor, (C) by
contract, or (D) otherwise.
(vii) Neither the Company nor the Company's Subsidiaries have made
any payments, are obligated to make any payments, or are parties to an
agreement that could obligate them to make any payments that will not be
deductible under Section 280G of the Code. The Company and the Company's
Subsidiaries have disclosed to the IRS all positions taken on its
federal income Tax returns which could give rise to a substantial
understatement of Tax under Section 6662 of the Code.
(viii) Neither the Company nor any of its Subsidiaries has entered
into or is subject, directly or indirectly, to any "Tax Protection
Agreements," except as disclosed in Schedule 3.1(k), true and correct
copies of which have been made available to Parent and Newco. 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 or entity to take
the position that such person or entity could defer federal taxable
income that otherwise might have been recognized upon a transfer of
property to any Subsidiary of the Company 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 the Company
or any of its Subsidiaries (including, without limitation, requiring the
Company or any of its Subsidiaries to indemnify any person for any tax
liabilities resulting from any such disposition), (ii) requires that the
Company or any of its Subsidiaries maintain, or put in place, or
replace, indebtedness, whether or not secured by one or more of the
Company Properties (as hereinafter defined), or (iii) requires that the
Company or any of its Subsidiaries offer to any person or entity 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 the Company or any of its
Subsidiaries.
(l) Pension and Benefit Plans; ERISA. Except as set forth on Schedule
3.1(l) of the Company Disclosure Schedule or in the Company SEC Documents:
(i) All "employee pension benefit plans," as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained by the Company or any of its Subsidiaries or any
trade or business (whether or not incorporated) which is under common
control, or which is treated as a single employer, with the Company
under Section 414(b), (c), (m) or (o) of the Code ("Company ERISA
Affiliate") or to which the Company or any of its Subsidiaries or any
Company ERISA Affiliate contributed or is obligated to contribute
thereunder within six years prior to the Effective Time (the "Company
Pension Plans") intended to qualify under Section 401 of the Code so
qualify and have been determined by the IRS to be qualified under
Section 401 of the Code and, to the knowledge of the Company as of the
Prior Execution Date, nothing has occurred with respect to the operation
of the Company Pension Plans that could reasonably be expected to cause
the loss of such qualification or the imposition of any material
liability, penalty or tax under ERISA or the Code.
(ii) No Company Pension Plan is subject to Title IV of ERISA.
(iii) There is no material violation of ERISA with respect to (A)
the filing of applicable reports, documents, and notices with the
Secretary of Labor and the Secretary of the Treasury regarding all
"employee benefit plans," as defined in Section 3(3) of ERISA, the
Company Pension Plans and all other material employee compensation and
benefit arrangements or payroll
15
<PAGE> 22
practices, including, without limitation, severance pay, sick leave,
vacation pay, salary continuation for disability, consulting or other
compensation agreements, retirement, deferred compensation, bonus
(including, without limitation, any retention bonus plan), long-term
incentive, stock option, stock purchase, hospitalization, medical
insurance, life insurance and scholarship programs maintained by the
Company or any of its Subsidiaries or with respect to which the Company
or any of its Subsidiaries has any liability (all such plans, other than
the Company Pension Plans, being hereinafter referred to as the "Company
Employee Benefit Plans") or (B) the furnishing of such documents to the
participants or beneficiaries of the Company Employee Benefit Plans or
Company Pension Plans.
(iv) Each Company Employee Benefit Plan and Company Pension Plan,
related trust (or other funding or financing arrangement) and all
amendments thereto are listed on Schedule 3.1(l), true and complete
copies of which have been made available to Parent, as have the most
recent summary plan descriptions, administrative service agreements,
Form 5500s and, with respect to any Company Pension Plan intended to be
qualified pursuant to Section 401 of the Code, a current determination
letter.
(v) The Company Employee Benefit Plans and Company Pension Plans
have been maintained, in all material respects, in accordance with their
terms and with all provisions of ERISA (including rules and regulations
thereunder) and other applicable Federal and state law, there is no
material liability for breaches of fiduciary duty in connection with the
Company Employee Benefit Plans and Company Pension Plans, and neither
the Company nor any of its Subsidiaries or any "party in interest" or
"disqualified person" with respect to the Company Employee Benefit Plans
and the Company Pension Plans has engaged in a material "prohibited
transaction" within the meaning of Section 4975 of the Code or Section
406 of ERISA.
(vi) As of the Prior Execution Date, there are no material actions,
suits or claims pending (other than routine claims for benefits) or, to
the knowledge of the Company, threatened against, or with respect to,
the Company Employee Benefit Plans or the Company Pension Plans or their
assets.
(vii) Except as described on Schedule 3.1(l) of the Company
Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will (A) result in any payment (including any retention bonuses or
noncompetition payments) becoming due to any employee or group of
employees of the Company or any of its Subsidiaries; (B) increase any
benefits otherwise payable under any Company Employee Benefit Plan or
Company Pension Plan; or (C) result in the acceleration of the time of
payment or vesting of any such benefits. Except as described on Schedule
3.1(l) of the Company Disclosure Schedule, there are no severance
agreements, noncompetition agreements or employment agreements between
the Company or any of its Subsidiaries and any employee of the Company
or such Subsidiary. True and complete copies of all severance agreements
and employment agreements described on Schedule 3.1(l) of the Company
Disclosure Schedule have been provided to Parent and Newco.
(viii) Neither the Company nor any of its Subsidiaries has any
consulting agreement or arrangement with any person involving
compensation in excess of $100,000 except as are terminable upon one
month's notice or less.
(ix) Neither the Company nor any of its Subsidiaries nor any
Company ERISA Affiliate contributes to, or has an obligation to
contribute to, and has not within six years prior to the Effective Time
contributed to, or had an obligation to contribute to, a multiemployer
plan within the meaning of Section 3(37) of ERISA.
(x) No stock or other security issued by the Company or any of its
Subsidiaries forms or has formed a material part of the assets of any
Company Employee Benefit Plan or Company Pension Plan.
16
<PAGE> 23
(xi) The Company and its ERISA Affiliates have materially complied
with the requirements of Section 4980B of the Code and Parts 6 and 7 of
Subtitle B of Title I of ERISA regarding health care coverage under the
Company Employee Benefit Plans.
(xii) No amount has been paid by the Company or any of its ERISA
Affiliates, and no amount is expected to be paid by the Company or any
of its ERISA Affiliates, which would be subject to the provisions of
162(m) of the Code such that all or a part of such payments would not be
deductible by the payor.
(xiii) As to any Company Pension Plan intended to be qualified
pursuant to Section 401(a) of the Code there has been no termination or
partial termination of the plan within the meaning of Section 411(d)(3)
of the Code.
(xiv) No act, omission or transaction has occurred which would
result in the imposition on the Company or any Subsidiary of the Company
of breach of fiduciary duty liability damages pursuant to Section 409 of
ERISA, a civil penalty pursuant to Section 502 of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code.
(xv) To the knowledge of the Company or any Subsidiary of the
Company, there is no matter pending with respect to any Company Pension
Plan or Company Employee Benefit Plan before the Internal Revenue
Service, the Department of Labor or the Pension Benefit Guaranty
Corporation.
(xvi) Each Company Employee Benefit Plan may be unilaterally
amended or terminated in its entirety by the Company without liability
except as to benefits accrued thereunder prior to amendment or
termination.
(m) Labor and Employment Matters. Except as set forth on Schedule
3.1(m) of the Company Disclosure Schedule or in the Company SEC Documents:
(i) Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or other current labor agreement
with any labor union or organization, and there is no current union
representation question involving employees of the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries know of
any activity or proceeding of any labor organization (or representative
thereof) or employee group (or representative thereof) to organize any
such employees.
(ii) As of the Prior Execution Date, there is no unfair labor
practice charge or grievance arising out of a collective bargaining
agreement or other grievance procedure pending, or, to the knowledge of
the Company or any of its Subsidiaries, threatened against the Company
or any of its Subsidiaries.
(iii) As of the Prior Execution Date, there is no complaint,
lawsuit or proceeding in any forum by or on behalf of any present or
former employee, any applicant for employment or any classes of the
foregoing alleging breach of any express or implied contract of
employment, any law or regulation governing employment or the
termination thereof or other discriminatory, wrongful or tortious
conduct in connection with the employment relationship pending, or, to
the knowledge of the Company or any of its Subsidiaries, threatened
against the Company or any of its Subsidiaries.
(iv) There is no strike, slowdown, work stoppage or lockout
pending, or, to the knowledge of the Company or any of its Subsidiaries,
threatened, against or involving the Company or any of its Subsidiaries.
(v) Employees of the Company and its Subsidiaries are lawfully
authorized to work in the United States according to federal immigration
laws, except for such lack of authorization that does not have, and
could not reasonably be expected to have, a Material Adverse Effect on
the Company.
17
<PAGE> 24
(vi) The Company and each of its Subsidiaries are in compliance
with all applicable laws respecting employment and employment practices,
terms and conditions of employment, wages, hours of work and
occupational safety and health, except for non-compliance that does not
have, and could not reasonably be expected to have, a Material Adverse
Effect on the Company.
(vii) As of the Prior Execution Date, there is no proceeding,
claim, suit, action or governmental investigation pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened, with
respect to which any current or former director, officer, employee or
agent of the Company or any of its Subsidiaries is or may be entitled to
claim indemnification from the Company or any of its Subsidiaries
pursuant to the Company Charter or Company Bylaws or any provision of
the comparable charter or organizational documents of any of the
Company's Subsidiaries, as provided in any indemnification agreement to
which the Company or any Subsidiary of the Company is a party or
pursuant to applicable law.
(n) Intangible Property. The Company and its Subsidiaries own, possess
or have adequate rights to use all material trademarks, trade names,
patents, service marks, brand marks, brand names, computer programs,
databases, industrial designs and copyrights necessary for the operation of
the businesses of each of the Company and its Subsidiaries (collectively,
the "Company Intangible Property"), except where the failure to possess or
have adequate rights to use such properties has not had, and could not
reasonably be expected to have, a Material Adverse Effect on the Company.
All of the Company Intangible Property is owned or licensed by the Company
or its Subsidiaries free and clear of any and all liens, claims or
encumbrances, except those that have not had, and could not reasonably be
expected to have, a Material Adverse Effect on the Company, and neither the
Company nor any such Subsidiary has forfeited or otherwise relinquished any
Company Intangible Property which forfeiture has resulted, or could
reasonably be expected to result, in a Material Adverse Effect on the
Company. To the knowledge of the Company, the use of the Company Intangible
Property by the Company or its Subsidiaries does not, in any material
respect, conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, trademark,
trade name, patent, service mark, brand mark, brand name, computer program,
database, industrial design, copyright or any pending application therefor,
of any other person, and there have been no claims made, and neither the
Company nor any of its Subsidiaries has received any notice of any claim or
otherwise knows that any of the Company Intangible Property is invalid or
conflicts with the asserted rights of any other person or has not been used
or enforced or has failed to have been used or enforced in a manner that
would result in the abandonment, cancellation or unenforceability of any of
the Company Intangible Property, except for any such conflict,
infringement, violation, interference, claim, invalidity, abandonment,
cancellation or unenforceability that has not had and could not reasonably
be expected to have a Material Adverse Effect on the Company.
(o) Environmental Matters. For purposes of this Agreement:
"Environmental Laws" means all federal, state and local laws
(including common laws), rules, regulations, ordinances, orders and
decrees of any Governmental Entity or other legal requirements, whether
now in existence or hereafter enacted and in effect at the time of
Closing, relating to pollution or the protection of human health or the
environment or natural resources of any jurisdiction in which the
applicable party hereto owns or operates assets or conducts business or
owned or operated assets or conducted business (whether or not through a
predecessor entity) (including, without limitation, ambient air, surface
water, groundwater, land surface, subsurface strata, natural resources
or wildlife), including, without limitation, laws and regulations
relating to Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of solid waste or
Hazardous Materials, and any similar laws, rules, regulations,
ordinances, orders and decrees of any foreign jurisdiction in which the
applicable party hereto owns or operates assets or conducts business;
18
<PAGE> 25
"Hazardous Materials" means (i) any petroleum or petroleum
products, radioactive materials (including naturally occurring
radioactive materials), asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, polychlorinated biphenyls or
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls, (ii) any chemicals, materials or substances
which are now defined as or included in the definition of "solid
wastes," "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous substances," "restricted hazardous
wastes," "toxic substances" or "toxic pollutants," or words of similar
import, under any Environmental Law and (iii) any other chemical,
material, substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law in a jurisdiction in
which the Company or any of its Subsidiaries operates);
"Release" means any spill, effluent, emission, leaking, pumping,
pouring, emptying, escaping, dumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment, or into or out of any property owned, operated or leased by
the applicable party or its Subsidiaries; and
"Remedial Action" means all actions, including, without limitation,
any capital expenditures, required by a Governmental Entity or required
under any Environmental Law, or voluntarily undertaken to (i) clean up,
remove, treat, or in any other way ameliorate or address any Hazardous
Materials or other substance in the indoor or outdoor environment; (ii)
prevent the Release or threat of Release, or minimize the further
Release of any Hazardous Material so it does not endanger or threaten to
endanger the public or employee health or welfare of the indoor or
outdoor environment; (iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (iv) bring the applicable party into
compliance with any Environmental Law.
Except as disclosed on Schedule 3.1(o) of the Company Disclosure
Schedule:
(i) The operations of the Company and its Subsidiaries have been
conducted, are and, as of the Closing Date, will be, in compliance with
all Environmental Laws, in all material respects;
(ii) The Company and its Subsidiaries have obtained and, until the
Closing Date, will maintain all material permits, licenses and
registrations, or applications relating thereto, and have made and,
until the Closing Date, will make all material filings, reports and
notices required under applicable Environmental Laws for the continued
operations of their respective businesses;
(iii) The Company and its Subsidiaries are not subject to any
outstanding material written orders issued by, or material contracts
with, any Governmental Entity or other person respecting (A)
Environmental Laws, (B) Remedial Action, (C) any Release or threatened
Release of a Hazardous Material or (D) an assumption of responsibility
for environmental liabilities of another person;
(iv) As of the Prior Execution Date, the Company and its
Subsidiaries have not received any written communication alleging, with
respect to any such party, the violation of or liability under any
Environmental Law;
(v) Neither the Company nor any of its Subsidiaries has any
material contingent liability in connection with the Release of any
Hazardous Material into the indoor or outdoor environment (whether
on-site or off-site) or employee or third party exposure to Hazardous
Materials;
(vi) The operations of the Company and its Subsidiaries involving
the generation, transportation, treatment, storage or disposal of
hazardous or solid waste, as defined and regulated under 40 C.F.R. Parts
260-270 (in effect as of the Prior Execution Date) or any applicable
state equivalent, are in material compliance with applicable
Environmental Laws;
(vii) As of the Prior Execution Date, there is not on or in any
property of the Company or its Subsidiaries or any property for which
the Company or its Subsidiaries are potentially liable
19
<PAGE> 26
any of the following: (A) any underground storage tanks or surface
impoundments or (B) any on-site disposal of Hazardous Material;
(viii) No Company Property (as hereinafter defined) is included or,
to the knowledge of the Company, proposed for inclusion on the National
Priorities List issued pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"),
by the United States Environmental Protection Agency (the "EPA") or on
the Comprehensive Environmental Response, Compensation, and Liability
Information System database maintained by the EPA, and the Company has
no knowledge that any Company Property has otherwise been identified in
a published writing by the EPA as a potential CERCLA removal, remedial
or response site or, to the knowledge of the Company, proposed for
inclusion on any similar list of potentially contaminated sites pursuant
to any other Environmental Law; and
(ix) The existence of possible environmental problems on sites
adjacent to Trinity Oaks Apartments (Dallas, Texas), Riverwalk
Apartments (Conroe, Texas), Reflections of Highpoint (Dallas, Texas) and
Casa Verde (Phoenix, Arizona) has not had, and could not reasonably be
expected to have, a material adverse impact on such Company Properties.
The Company shall use its commercially reasonable efforts to comply with
the recommendations set forth in Schedule 3.1(o) to manage or remedy
environmental concerns described therein.
(p) Properties.
(i) The Company or one of the Company's Subsidiaries owns fee
simple title (or where indicated, leasehold estate) to each of the real
properties identified in Schedule 3.1(p) to the Company Disclosure
Schedule (the "Company Properties"), which are all of the real estate
properties owned or leased by them, in each case (except as provided
below) free and clear of Encumbrances. The Company Properties are not
subject to any rights of way, written agreements, laws, ordinances and
regulations affecting building or land use, occupancy, or development
(collectively, "Property Restrictions"), except for (A) Encumbrances and
Property Restrictions relating to tax-exempt bond financing set forth on
Schedule 3.1(p) to the Company Disclosure Schedule, (B) Property
Restrictions imposed or promulgated by law or any governmental body or
authority with respect to real property, including zoning regulations,
provided that they do not materially adversely affect the currently
intended use of any Company Property, (C) Encumbrances and Property
Restrictions disclosed on existing title reports or existing surveys (in
either case copies of which title reports or surveys have been delivered
or made available to Parent), and (D) mechanics', carriers', workmen's,
repairmen's and materialmen's liens and other Encumbrances, Property
Restrictions and other limitations of any kind, if any, which,
individually or in the aggregate, do not materially detract from the
value of or materially interfere with the present use of any of the
Company Properties subject thereto or affected thereby, and do not, or
could not reasonably be expected to, otherwise have a Material Adverse
Effect on the Company. Except as provided on Schedule 3.1(p) to the
Company Disclosure Schedule, valid policies of title insurance have been
issued, insuring the Company's or its applicable Subsidiary's fee simple
title or leasehold estate to the Company Properties in amounts at least
equal to the value of such Company Properties at the time of the
issuance of such policy, subject only to the matters disclosed above and
on the Company Disclosure Schedule, and such policies are, at the Prior
Execution Date, in full force and effect and no material claim has been
made against any such policy. An on-the-ground survey of each of the
Company Properties made prior to the Effective Time and prepared in
accordance with ALTA/ACSM (or Texas equivalent) standards would not
disclose any Encumbrance, Property Restriction or other matter affecting
title which is not currently shown on an existing survey of such Company
Property and which could materially adversely affect the value or
operation of such Company Property or the ability to obtain mortgage
financing on such Company Property.
20
<PAGE> 27
(ii) Each Company Property (A) complies with the Property
Restrictions or, to the extent that such Company Property does not
comply, a written waiver therefor exists and may be relied upon by
Parent, (B) each improvement on each Company Property lies outside of
any flood plain or, if any such improvement lies within a flood plain,
adequate insurance therefor is in full force and effect, and (C) each
Company Property has access to and from a dedicated public right-of-
way.
(iii) All properties currently under development or construction by
the Company or the Company's Subsidiaries and all properties currently
proposed for acquisition, development or commencement of construction
prior to the Effective Time by the Company and the Company's
Subsidiaries are listed as such on Schedule 3.1(p) to the Company
Disclosure Schedule. All executory agreements entered into by the
Company or any of its Subsidiaries relating to the development or
construction of multifamily residential or other real estate properties
(other than agreements for architectural, engineering, planning,
accounting, legal or other professional services or agreements for
material or labor) are listed on Schedule 3.1(p) to the Company
Disclosure Schedule. Copies of such agreements, all of which have
previously been delivered or made available to Parent and Newco, are
listed on the Company Disclosure Schedule and are true and correct.
(q) Insurance. Schedule 3.1(q) of the Company Disclosure Schedule sets
forth an insurance schedule of the Company's and each of its Subsidiaries'
directors' and officers' liability insurance. The Company and each of its
Subsidiaries maintains insurance with financially responsible insurers in
such amounts and covering such risks as are in accordance with normal
industry practice for companies engaged in businesses similar to those of
the Company and each of its Subsidiaries (taking into account the cost and
availability of such insurance). Except as set forth on Schedule 3.1(q),
neither the Company nor any of its Subsidiaries has received any notice of
cancellation or termination with respect to any existing material insurance
policy of the Company or any of its Subsidiaries.
(r) Opinion of Financial Advisor. The Company has received the written
opinion of J.P. Morgan Securities Inc. to the effect that, as of the Prior
Execution Date, on the basis of and subject to the assumptions set forth
therein, (i) the cash consideration to be paid to the holders of the
Company Common Stock, and (ii) the cash consideration to be offered to the
holders of common limited partnership interests in WDOP and WROP in the
transactions contemplated hereby is fair from a financial point of view to
such holders. In addition, the Company has received a valuation letter from
J.P. Morgan establishing a range of values for the Company Senior Preferred
Stock and the Company Redeemable Preferred Stock. Copies of the letters
described above have been delivered to Parent.
(s) Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of Company Common Stock entitled to vote thereon
is the only vote of the holders of any class or series of the Company's
stock necessary to approve the Merger (the "Merger Vote").
(t) Beneficial Ownership of Company Common Stock. Neither the Company
nor its Subsidiaries "beneficially own" (as defined in Rule 13d-3 under the
Exchange Act) any of the outstanding Company Common Stock or any of the
Company's outstanding debt securities.
(u) Brokers. Except for the fees and expenses payable to J.P. Morgan
Securities Inc., which fees are reflected in such firm's engagement letter
with the Company (a copy of which has been delivered to Parent), no broker,
investment banker, or other person is entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions
contemplated by the Transaction Documents or the OP Transaction Documents
based upon arrangements made by or on behalf of the Company.
(v) Investment Company Act of 1940. Neither the Company nor any of its
Subsidiaries is, or at the Effective Time will be, required to be
registered as an investment company under the Investment Company Act of
1940, as amended (the "Investment Company Act").
21
<PAGE> 28
(w) Amendment to Rights Agreement; State Takeover Laws.
(i) The Board of Directors of the Company has adopted a resolution
approving an amendment to the Rights Agreement dated as of March 26,
1998 between the Company and BankBoston, N.A. (the "Company Rights
Agreement") to provide that none of the execution and delivery of this
Agreement, the conversion of shares of Company Common Stock or Company
Convertible Preferred Stock into the right to receive the Cash Merger
Consideration in accordance with Article 2 of this Agreement, the
consummation of the Merger or any other transaction contemplated by the
Transaction Documents or the OP Transaction Documents will cause (A) the
rights to purchase Company Junior Preferred Stock under the Company
Rights Agreement (the "Company Rights") to be exercisable under the
Company Rights Agreement, (B) Parent, Newco or any of their respective
Subsidiaries or any of their respective stockholders or holders of
partnership interests to be deemed an "Acquiring Person" (as defined in
the Company Rights Agreement), or (C) any such event to be deemed a
"Distribution Date" (as defined in the Company Rights Agreement).
(ii) The Company (A) has taken all action necessary to exempt the
transactions contemplated by the Transaction Documents and the OP
Transaction Documents from (x) the operation of any "fair price,"
"moratorium," "control share acquisition," "business combination," or
any other anti-takeover statute or similar statute enacted under the
state or federal laws of the United States or similar statute or
regulation (a "Takeover Statute") and (y) any ownership restrictions or
limitations set forth in the Company Charter or Company Bylaws or the
organizational documents of any Subsidiary of the Company and (B) has
delivered to Parent true and complete copies of all resolutions of the
Board of Directors of the Company, any amendments to the Company Bylaws
and any other documents necessary to exempt such transactions pursuant
to clause (A) above.
(x) Contracts.
(i) Except as disclosed in the Company SEC Documents or on Schedule
3.1(x) to the Company Disclosure Schedule, there is no contract or
agreement that purports to limit in any material respect the names or
the geographic location in which the Company or any Company Subsidiary
may conduct its business.
(ii) Schedule 3.1(x) sets forth each interest rate cap, interest
rate collar, interest rate swap, currency hedging transaction, and any
other agreement relating to a similar transaction to which the Company
or any Company Subsidiary is a party or an obligor with respect thereto.
(iii) Except as set forth on Schedule 3.1(x), neither the Company
nor any of the Company's 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 Company
Properties.
(iv) Neither the Company nor any of the Company's Subsidiaries is a
party to any agreement relating to the management of any of the Company
Properties which is not terminable by the Company or such Subsidiary
without penalty on less than 30 days notice except the agreements
described on Schedule 3.1(x).
(v) Schedule 3.1(x) lists all agreements entered into by the
Company or any of the Company's Subsidiaries providing for the sale of,
or option to sell, any Company Properties or the purchase of, or option
to purchase, any real estate which are currently in effect.
(vi) Except as set forth on Schedule 3.1(x), neither the Company
nor any of its Subsidiaries has any continuing contractual liability (A)
for indemnification or otherwise under any agreement relating to the
sale of real estate previously owned (other than non-material
indemnification obligations relating to brokerage commissions, ordinary
and customary title
22
<PAGE> 29
warranties, post-closing adjustments and customary contractual
indemnification for pre-closing events upon sales of properties by the
Company or any of its Subsidiaries), (B) to pay any additional purchase
price for any of the Company Properties, or (C) to make any prorations
or adjustments to prorations involving an amount in excess of $50,000
(other than real estate taxes) that may previously have been made with
respect to any property currently or formerly owned by the Company.
(vii) Except as set forth on Schedule 3.1(x), there are no material
outstanding contractual obligations of the Company or any of its Company
Subsidiaries to provide any funds to, or make any investment (in the
form of an advance, loan, extension of credit, capital contribution or
otherwise) in, or which provide for the direct or indirect guarantee by
the Company or any of its Subsidiaries (including by means of a
take-or-pay or keepwell agreement) of the indebtedness, liabilities,
obligations or financial condition of, any of the Company's Subsidiaries
or any other person.
(viii) Except as set forth on Schedule 3.1(x), there are no
indemnification agreements entered into by and between the Company and
any director or officer of the Company or any of its Subsidiaries.
(ix) Except as set forth on Schedule 3.1(x), there are no
contracts, agreements, commitments or arrangements that (A) create a
material partnership, joint venture or similar arrangement, (B) require
payments to be made in excess of $100,000 per year for goods and
services or with respect to any licenses granted to or by the Company or
any of its Subsidiaries, (C) grant any Encumbrance upon any material
asset of the Company or any of its Subsidiaries or (D) were not made in
the ordinary course of business and are material to the Company and its
Subsidiaries, taken as a whole, in each of the cases set forth in
clauses (A), (B), (C) and (D) which are not subject to termination
within 30 days after the date of the execution and delivery thereof
without penalty or payment by the Company (all such contracts,
arrangements or agreements listed on Schedule 3.1(x) pursuant to clauses
(i) through (ix), the "Material Contracts").
(y) Stock Purchase Plan. The Company has taken all action necessary,
including (without limitation) causing its Board of Directors (or a
committee thereof) to adopt resolutions, to provide that (i) the Company
Stock Purchase Plan shall be suspended effective as of the last day of the
Purchase Period (as defined in the Company Stock Purchase Plan) that
commenced before the Prior Execution Date and ended on or after the Prior
Execution Date, which Purchase Period begins on the first day of a calendar
quarter and ends on the last day of such calendar quarter, so as to
terminate temporarily the Company Stock Purchase Plan during all Purchase
Periods, if any, occurring after such date until the Effective Time; (ii)
the Company Stock Purchase Plan shall terminate permanently as of the
Effective Time, at which time the number of whole shares of Company Common
Stock which such participant would otherwise be entitled to purchase under
the Company Stock Purchase Plan shall be converted into the right to
receive the Option Consideration to which such participant is entitled
pursuant to Section 2.1(d), and cash in the amount of any remaining account
balance; and (iii) if the last day of a Purchase Period does not occur
prior to the Closing Date, the Closing Date shall be deemed to be the last
day of such Purchase Period for purposes of determining the purchase price
of the Company Common Stock with respect to such Purchase Period.
(z) Deferred Compensation Plan. The Company has taken all actions
necessary, including (without limitation) causing its Board of Directors
(or a committee thereof) to adopt resolutions, to provide that the
Company's Non-Qualified Deferred Compensation Plan (the "Company Deferred
Compensation Plan") shall terminate, effective as of the Effective Time,
and all vested and unvested account balances shall be distributed to such
participants in accordance with the terms of such plan and the
corresponding Trust Agreement dated as of October 1, 1998 between the
Company and Delaware Charter and Guarantee Trust Company.
23
<PAGE> 30
(aa) Company Options. The Company has taken all actions necessary,
including (without limitation) causing its Board of Directors (or a
committee thereof) to adopt resolutions, to provide that the Company Stock
Options shall be automatically canceled as of the Effective Time and shall
thereafter represent the right to receive the Option Consideration as set
forth in Section 2.1 and to ensure that, following the Effective Time, no
participant in the Company Incentive Plans or any other plans, programs or
arrangements shall have any right thereunder to acquire or otherwise
receive any capital stock of, or other equity or similar interests in, the
Company, the Surviving Entity or any Affiliate thereof.
(bb) Company Warrants. The Company has taken all necessary action,
including (without limitation) causing its Board of Directors (or a
committee thereof) to adopt resolutions, to reduce the exercise price of
the Company Warrants to an exercise price per share equal to $0.01 below
the Cash Merger Consideration payable with respect to a share of Company
Common Stock, effective immediately prior to the Effective Time.
(cc) Rule 16b-3. The Company has taken all necessary action, including
(without limitation) causing its Board of Directors to adopt resolutions
authorizing and approving the Merger, this Agreement and the transactions
contemplated hereby, to exempt such transactions under Rule 16b-3 of the
Exchange Act from the provisions of Section 16(b) of the Exchange Act.
(dd) Information Systems. The Company has formulated a plan in order
to address the ability of the Company's information systems to process date
and time data from, into and beyond the year 2000 ("Year 2000 Data"), and
the ability of such systems to interact with third parties' systems and
with or through electrical power, telecommunications and other utilities
and services. Schedule 3.1(dd) of the Company Disclosure Schedule
identifies the Company's and its Subsidiary's information systems that are
material to the operations of the Company and its Subsidiaries (the
"Information Systems") and identifies for each such Information System (i)
whether such Information System has been identified by the Company as being
able to accurately process such Year 2000 Data, and (ii) if such
Information System has not been identified by the Company as being able to
accurately process Year 2000 Data, the plan and target date for replacing,
updating or upgrading such Information System in order to be able to
accurately process such data. Such plans are proceeding as scheduled and
are being implemented at costs which do not exceed the costs expected by
the Company and its Subsidiaries to be incurred with respect to their
management information systems to enable them to function in the ordinary
course of business. The Company is not aware of any facts or circumstances
that create a reasonable basis for the Company to believe that, if the
scheduled replacements, updates or upgrades continue to be made in
accordance with the plans identified on Schedule 3.1(dd), the Company's
Information Systems will be unable to accurately process such Year 2000
Data as of and after December 31, 1999. No client, customer, supplier or
vendor, and no electric, telecommunications or other utility with whom the
Company's or any Subsidiary's Information Systems interact, has notified
the Company or such Subsidiary that the Information Systems, when used in
combination with any information system of such person, will be unable to
accurately process such Year 2000 Data.
(ee) Drever Partners, Inc. Stock Purchase Agreement. Concurrently with
the execution of the Initial Agreement, WDOP, Marshall B. Edwards, Mark S.
Dillinger, Michael E. Masterson and Drever Partners, Inc. have executed and
delivered that certain Stock Purchase Agreement dated September 24, 1999, a
copy of which is attached hereto as Exhibit E (the "Drever Partners Stock
Purchase Agreement").
(ff) Amendment and Restatement of Prior Agreement. As of the date
hereof, in accordance with Section 7.5 of the Prior Agreement, the Board of
Directors of the Company and the Company Special Committee have taken all
actions necessary to effect the amendment and restatement of the Prior
Agreement pursuant to this Agreement.
3.2 Representations and Warranties of Parent and Newco. Parent and Newco
represent and warrant, jointly and severally, to the Company as follows (which
representations and warranties shall be
24
<PAGE> 31
deemed to have been made on and after the Prior Execution Date up to and
including the Effective Time (except to the extent that a representation or
warranty is made on or after another date or as of a specified date), in each
case as qualified by matters reflected on the disclosure schedule delivered by
Parent and Newco to the Company on or prior to the Prior Execution Date (the
"Parent/Newco Disclosure Schedule") and made a part hereof by reference):
(a) Organization, Standing and Power. Newco is a corporation duly
formed and validly existing under the MGCL and is in good standing with the
State Department of Assessments and Taxation of Maryland, and Parent is a
limited partnership duly formed and validly existing under the Delaware
Revised Uniform Limited Partnership Act and is in good standing with the
Delaware Secretary of State. As of the date hereof and as of the Closing
Date, neither Newco nor Parent has any Subsidiaries, except that Newco is a
wholly owned Subsidiary of Parent, and WROP Merger Sub and WDOP Merger Sub
are Subsidiaries of Parent, and except for any newly created subsidiaries
pursuant to Section 5.20. Newco has heretofore delivered to the Company
complete and correct copies of its charter and Bylaws, and Parent has
delivered to the Company complete and correct copies of its Certificate of
Limited Partnership and the Parent Partnership Agreement, the Agreement of
Limited Partnership of WROP Merger Sub and the Agreement of Limited
Partnership of WDOP Merger Sub.
(b) Capital Structure. As of the date hereof, Oly Hightop Holding,
L.P., a Delaware limited partnership ("Holding"), is the sole limited
partner of Parent, and Oly Hightop Parent GP, LLC, a Delaware limited
liability company and wholly owned subsidiary of Holding, is the sole
general partner of Parent. As of the date hereof, the partnership interests
of Parent consist of a .01% general partner interest held by Oly Hightop
Parent GP, LLC and a 99.99% limited partnership interest held by Holding.
As of the date hereof, Parent has designated a class of partnership
interests as Common Limited Partner Interests of Parent ("Parent Common
Limited Partner Interests"). As of the date hereof, Holding is the only
holder of a Parent Common Limited Partner Interest. As of the date hereof,
the authorized stock of Newco consists of 1,000 shares of Newco Common
Stock. As of the date hereof, (A) 100 shares of Newco Common Stock are
issued and outstanding; and (B) no Voting Debt is issued and outstanding.
Except as set forth in this Section 3.2(b), there are outstanding: (1) no
equity interests, Voting Debt or other voting securities of Parent or
Newco; (2) no securities of Parent, Newco or any Subsidiary of Parent or
Newco or securities or assets of any other entity convertible into or
exchangeable for equity interests, capital stock, Voting Debt or other
voting securities of Parent or Newco or any Subsidiary of Parent or Newco;
and (3) other than the subscription agreements set forth on Schedule 3.2(g)
of the Parent/Newco Disclosure Schedule, no options, warrants, calls,
rights (including preemptive rights), commitments or agreements to which
Parent or Newco or any Subsidiary of Parent or Newco is a party or by which
it is bound in any case obligating Parent or Newco or any Subsidiary of
Parent or Newco to issue, deliver, sell, purchase, redeem or acquire, or
cause to be issued, delivered, sold, purchased, redeemed or acquired,
additional equity interests, capital stock or any Voting Debt or other
voting securities of Parent or Newco or of any Subsidiary of Parent or
Newco, or obligating Parent or Newco or any Subsidiary of Parent or Newco
to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement.
(c) Authority; No Violations, Consents and Approvals.
(i) Each of Parent, Newco, WDOP Merger Sub and WROP Merger Sub has
all requisite power and authority to enter into the Transaction
Documents and the OP Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby or thereby. The
execution and delivery of the Transaction Documents and the OP
Transaction Documents and the consummation of the transactions
contemplated hereby or thereby have been duly authorized by all
necessary action on the part of Parent, Newco, WDOP Merger Sub and WROP
Merger Sub. The Transaction Documents to which Parent, Newco, WDOP
Merger Sub or WROP Merger Sub is a party have been duly executed and
delivered by each of Parent, Newco, WDOP Merger Sub and WROP Merger Sub
as the case may be, and assuming the Transaction Documents to which the
Company or any of its Subsidiaries is a party constitute the
25
<PAGE> 32
valid and binding obligation of the Company or its Subsidiary, as the
case may be, constitute a valid and binding obligation of each of
Parent, Newco, WDOP Merger Sub or WROP Merger Sub enforceable in
accordance with its terms, subject as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) The execution and delivery of the Transaction Documents to
which it is a party do not, and the consummation of the transactions
contemplated hereby or thereby, and compliance with the provisions
hereof or thereof, 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 the loss of a material benefit under, or
give rise to a right of purchase under, result in the creation of any
Encumbrance upon any of the properties or assets of Parent or Newco or
any of their Subsidiaries under, require the consent or approval of any
third party lender or otherwise result in a material detriment to Parent
or Newco or any of their Subsidiaries under, any provision of (A) the
Parent Partnership Agreement, the Articles of Incorporation or Bylaws of
Newco or any provision of the comparable charter or organizational
documents of any of their Subsidiaries, (B) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to
Parent or Newco or any of their Subsidiaries or their respective
properties or assets or any guarantee by Parent or Newco or any of their
Subsidiaries of the foregoing, (C) any joint venture or other ownership
arrangement or (D) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in Section 3.2(c)(iii)
are duly and timely obtained or made, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or
Newco or any of their Subsidiaries or any of their respective properties
or assets, other than, in the case of clauses (B), (C) and (D), any such
conflicts, violations, defaults, rights, Encumbrances or detriments
that, individually or in the aggregate, would not, or could not
reasonably be expected to, materially impair the ability of Parent or
Newco to perform its obligations hereunder or thereunder or prevent the
consummation of any of the transactions contemplated hereby or thereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any
Governmental Entity is required by or with respect to Parent or Newco or
any of their Subsidiaries in connection with the execution and delivery
by Parent or Newco of the Transaction Documents to which Parent or Newco
is a party or the consummation by Parent or Newco of the transactions
contemplated hereby or thereby, except for: (A) the filing with the SEC
of such reports under Section 13(a) of the Exchange Act and such other
compliance with the Securities Act and the Exchange Act and the rules
and regulations thereunder as may be required in connection with this
Agreement and the transactions contemplated hereby; (B) the filing of
the Articles of Merger with, and acceptance for record of the Articles
of Merger by, the SDAT; (C) such filings and approvals as may be
required by any applicable state takeover laws or environmental laws;
(D) filings under the HSR Act, if applicable; and (E) any such consent,
approval, order, authorization, registration, declaration, filing, or
permit that the failure to obtain or make would not, or could not
reasonably be expected to, materially impair the ability of Parent or
Newco to perform its obligations hereunder or prevent the consummation
of any of the transactions contemplated hereby.
(d) Information Supplied. None of the information supplied or to be
supplied by Parent or Newco for inclusion or incorporation by reference in
the Proxy Statement will, at the date mailed to stockholders of the
Company, at the time of the meeting of such stockholders to be held in
connection with the Merger, or at the Effective Time, contain any untrue
statement of a material fact or omit 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 are made, not misleading. If at
any time prior to the Effective Time any event with respect to Parent or
Newco or any of their
26
<PAGE> 33
Subsidiaries, or with respect to other information supplied by Parent or
Newco for inclusion in the Proxy Statement, shall occur which is required
to be described in an amendment of, or a supplement to, the Proxy
Statement, such event shall be so described, and such amendment or
supplement shall be promptly filed (if required to be filed) with the SEC.
The Proxy Statement, insofar as it relates to Parent or Newco or other
Subsidiaries of Parent or Newco or other information supplied by Parent or
Newco for inclusion or incorporation by reference therein, will comply as
to form in all material respects with the provisions of the Exchange Act
and the rules and regulations thereunder.
(e) Litigation. As of the Prior Execution Date, there is no suit,
action or proceeding pending, or, to the knowledge of Parent or Newco,
threatened against or affecting Parent or Newco or any Subsidiary of Parent
or Newco ("Parent/Newco Litigation") and, as of the Prior Execution Date,
none of Parent, Newco or their Subsidiaries have knowledge of any facts
that are likely to give rise to any Parent/Newco Litigation, nor as of the
Prior Execution Date is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against Parent,
Newco or any Subsidiary of Parent or Newco ("Parent/Newco Order").
(f) Brokers. Except for fees and expenses incurred in connection with
the financing arrangements, fees and expenses payable to BancBoston
Robertson Stephens, which fees are reflected in its engagement letter with
Oly Hightop, LLC (a copy of which has been delivered to the Company), and
the agreement regarding fee and expense sharing agreement between Oly
Hightop, LLC, Westdale Asset Management, Ltd. and Westdale Properties
America I, Ltd., which fees will be paid by Newco, no broker, investment
banker or other person is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated
by the Transaction Documents based upon arrangements made by or on behalf
of Parent or Newco.
(g) Sources of Funds. Newco and Parent have obtained the equity
financing commitments and expressions of interest and Parent and its
Affiliates have obtained the debt financing commitments and expressions of
interest (collectively, including any such commitment the expiration date
of which is extended, the "Financing Commitments"), all as described on
Schedule 3.2(g) of the Parent/Newco Disclosure Schedule.
(h) Interim Operations of Parent and Newco. Each of Parent, Newco,
WDOP Merger Sub and WROP Merger Sub was formed by Holding solely for the
purpose of engaging in the transactions contemplated hereby and, as of the
Prior Execution Date and as of the Effective Time, except for obligations
or liabilities incurred in connection with its incorporation or
organization and the transactions, agreements and arrangements contemplated
by this Agreement, has engaged in no other business or activities, has
incurred no other obligations or liabilities, has no assets and has
conducted its operations only as contemplated hereby.
(i) Amendment and Restatement of Prior Agreement. As of the date
hereof, in accordance with Section 7.5 of the Prior Agreement, the Board of
Directors of Newco and the general partner of Parent have taken all actions
necessary to effect the amendment and restatement of the Prior Agreement
pursuant to this Agreement.
ARTICLE 4
COVENANTS RELATING TO CONDUCT
OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by the Company Pending the Merger. From the Prior
Execution Date until the Effective Time, the Company agrees as to itself and its
Subsidiaries that (except as described on Schedule 4.1 to the Company Disclosure
Schedule or as expressly contemplated or permitted by this Agreement, or to the
extent that Parent and Newco shall otherwise consent in writing):
(a) Ordinary Course. The Company and each of its Subsidiaries shall
carry on its businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and
27
<PAGE> 34
shall use all commercially reasonable efforts to preserve intact its
present business organization, keep available the services of its current
officers and employees and endeavor to preserve its relationships with
customers, suppliers and others having business dealings with it to the end
that its goodwill and ongoing business shall not be impaired in any
material respect at the Effective Time. The Company will promptly notify
Parent of any Material Adverse Change or of any litigation having potential
liability to the Company or any of its Subsidiaries in excess of $50,000 or
any governmental complaints, investigations or hearings involving the
Company.
(b) Dividends; Changes in Stock. Except as contemplated by this
Agreement and for transactions solely among the Company and its direct or
indirect or wholly owned Subsidiaries, the Company shall not and it shall
not permit any of its Subsidiaries to: (i) authorize, declare or pay any
dividends on or make other distributions in respect of any of its equity
interests, capital stock or partnership interests, except for (A) the
authorization, declaration and payment of (1) regular quarterly cash
dividends on Company Common Stock for the third quarter of the Company's
1999 fiscal year not to exceed $0.4825 per share (which dividend is payable
in the fourth quarter), with usual record and payment dates, and (2) any
regular quarterly dividend thereafter, but only in the minimum amount
necessary to avoid (x) jeopardizing the Company's status as a REIT under
the Code and (y) having positive real estate investment trust taxable
income for the taxable year ending at the Effective Time, in either case,
after notice to and consultation with Parent, (B) the payment of regular
quarterly cash dividends on the Company Convertible Preferred Stock, the
Company Senior Preferred Stock and the Company Redeemable Preferred Stock
in accordance with their respective terms, with usual record and payment
dates, (C) the payment of any distributions to the partners of any limited
partnerships that are Subsidiaries of the Company made in accordance with
the requirements of the existing organizational documents of such
Subsidiary limited partnerships and (D) the payment of regular quarterly
cash dividends to stockholders of any corporations that are preferred stock
Subsidiaries of the Company, with usual record and payment dates; (ii)
split, combine or reclassify any of its equity interests or shares of
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for the Company's
or a Subsidiary's equity interests or capital stock; or (iii) repurchase,
redeem or otherwise acquire, or permit any of its Subsidiaries to purchase,
redeem or otherwise acquire, any equity interests or capital stock.
(c) Issuance of Securities. The Company shall not, and it shall not
permit any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose to issue, deliver or sell, any of its equity interests or capital
stock of any class, any Voting Debt or other voting securities or any
securities convertible into, or any rights, warrants or options to acquire,
any such shares, Voting Debt, other voting securities or convertible
securities, other than: (i) the issuance of Company Common Stock upon the
exercise of (A) stock options that were outstanding on the Prior Execution
Date under the Company Incentive Plans, (B) Company Warrants that were
outstanding on the Prior Execution Date and (C) Company Series B Warrants
issued pursuant to clause (ii), and (ii) issuances of Company Common Stock,
Company Redeemable Preferred Stock and/or Company Series B Warrants by the
Company to partners of limited partnership Subsidiaries of the Company in
accordance with the requirements of the existing organizational documents
of such Subsidiaries, (iii) issuances by a wholly owned Subsidiary of the
Company of such Subsidiary's capital stock or equity interests to its
parent, and (iv) the issuance of Company Common Stock upon the conversion
of shares of Company Convertible Preferred Stock in accordance with its
terms.
(d) Governing Documents. Except as contemplated hereby or in
connection herewith, the Company shall not amend or propose to amend the
Company Charter or Company Bylaws and, except in connection with the OP
Transactions, the Company shall cause its Subsidiaries not to amend or
propose to amend any partnership agreement or other organizational
documents of such Subsidiaries.
(e) No Acquisitions. Other than as described on Schedule 4.1 of the
Company Disclosure Schedule or as requested pursuant to Section 5.20, the
Company shall not, and it shall not permit any
28
<PAGE> 35
of its Subsidiaries to, acquire (or agree to acquire by merging or
consolidating with, or by purchasing any equity interests in or any of the
assets of, or by any other manner) any business, corporation, partnership,
association or other business organization or division thereof, or any
assets, in each case having a purchase price or consideration payable in
excess of $50,000; provided, however, that the aggregate purchase price or
consideration payable with respect to such acquisitions shall not exceed
$500,000, in the aggregate.
(f) No Dispositions. Other than as described on Schedule 4.1 of the
Company Disclosure Schedule or as requested pursuant to Section 5.20, the
Company shall not, and it shall not permit any of its Subsidiaries to, sell
or otherwise dispose of, or agree to sell or otherwise dispose of, any
Company Properties or any of its material assets.
(g) No Dissolution, Etc. Except as otherwise permitted or contemplated
by this Agreement, including as requested pursuant to Section 5.20, the
Company shall not authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the
Company or any of its Subsidiaries.
(h) Accounting. The Company shall not, nor shall the Company permit
any of its Subsidiaries to, make any changes in its accounting methods
which would be required to be disclosed under the rules and regulations of
the SEC, except as required by law, rule, regulation or GAAP.
(i) Affiliate Transactions. Except for any transaction contemplated by
the Transaction Documents or the OP Transaction Documents, the Company
shall not, nor shall the Company permit any of its Subsidiaries to, enter
into any agreement or arrangement with any of their respective Affiliates
(as such term is defined in Rule 405 under the Securities Act, an
"Affiliate"), other than with wholly owned Subsidiaries of the Company.
(j) Insurance. The Company shall, and shall cause its Subsidiaries to,
use all commercially reasonable efforts to maintain with financially
responsible insurance companies insurance in such amounts and against such
risks and losses as are customary for companies engaged in their respective
businesses.
(k) Tax Matters. The Company shall not (i) make or rescind any
material express or deemed election relating to Taxes (except as required
by law or necessary to preserve the Company's status as a REIT or the
status of any of the Company's Subsidiaries as a partnership for federal
income tax purposes or as a qualified REIT subsidiary under Section 856(i)
of the Code) unless it is reasonably expected that such action will not
materially and adversely affect the Company, including elections for any
and all joint ventures, partnerships, limited liability companies or other
investments where the Company has the capacity to make such binding
election, (ii) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, except where such settlement or compromise will not
materially and adversely affect the Company and except any settlement or
compromise relating to contests or protests relating to property tax
valuations undertaken by the Company in the ordinary course of business, or
(iii) change in any material respect any of its methods of reporting income
or deductions for federal income tax purposes from those employed in the
preparation of its federal income Tax Returns that have been filed for
prior taxable years, except as may be required by applicable law or except
for changes that are reasonably expected not to materially and adversely
affect the Company.
(l) Certain Employee Matters. The Company shall not and it shall not
permit any of its Subsidiaries to: (i) hire or terminate any employee or
consultant if the aggregate annual compensation of such employee or
consultant exceeds $75,000; (ii) grant any increases in the compensation
of, or pay any bonuses or noncompetition payments to, any of its directors,
trustees, officers or employees; (iii) pay or agree to pay to any director,
officer or employee, whether past or present, any pension, retirement or
other employee benefit not required or contemplated by any of the existing
Company Employee Benefit Plans or Company Pension Plans, as applicable, in
each case as in effect on the Prior Execution Date; (iv) enter into any
new, or amend any existing, employment or
29
<PAGE> 36
severance or termination agreement with any director, officer or employee;
or (v) become obligated under any new Company Employee Benefit Plan or
Company Pension Plan, which was not in existence or approved by the Board
of Directors of the Company prior to the Prior Execution Date, or amend any
such plan or arrangement in existence on the Prior Execution Date if such
amendment would have the effect of materially enhancing any benefits
thereunder; provided, however, that nothing in this Section 4.1(l) shall
prohibit the Company from making the severance payments contemplated by the
employment and consulting agreements set forth in Schedule 3.1(l) of the
Company Disclosure Schedule and paying up to an aggregate amount of Two
Million Dollars ($2,000,000) in retention bonuses to nonexecutive
employees.
(m) Indebtedness. The Company shall not, nor shall it permit any of
its Subsidiaries to, (i) incur any indebtedness for borrowed money (except
regular borrowings under credit facilities made in the ordinary course of
the Company's cash management practices), forgive any indebtedness, or
guarantee any indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt securities of the Company or any of its
Subsidiaries or guarantee any debt securities of others or (ii) except in
connection with the acquisitions listed on Schedule 4.1, create any
mortgages, liens, security interests or similar other encumbrances on the
property of the Company or any of its Subsidiaries in connection with any
indebtedness thereof.
(n) WROP Merger and WDOP Merger. The Company shall not, nor shall it
permit any of its Subsidiaries to, agree to amend, waive, modify or
terminate any provision of the WDOP Merger Agreement or the WROP Merger
Agreement or any other OP Transaction Document.
(o) Company Rights under Rights Agreement. The Company shall not
redeem any of the Company Rights prior to the Effective Time unless
required to do so by a court of competent jurisdiction.
(p) Contracts. The Company shall not, nor shall it permit any of its
Subsidiaries to, materially amend or terminate, or waive compliance with
the terms of or breaches under, any Material Contract, including (without
limitation) the Company Rights Agreement, and shall not, nor shall it
permit any of its Subsidiaries to, enter into a new contract, agreement or
arrangement that, if entered into prior to the date of this Agreement,
would have been required to be listed on Schedule 3.1(x).
(q) Discharge of Liabilities. The Company shall not, nor shall it
permit any of its Subsidiaries to, pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent
with past practice or in accordance with their terms, of claims,
liabilities or obligations recognized or disclosed in the most recent
financial statements of the Company included in the Company SEC Documents.
(r) Drever Partners Stock Purchase Agreement. The Company shall not,
nor shall it permit any of its Subsidiaries to, agree to amend, waive,
modify or terminate any provision of the Drever Partners Stock Purchase
Agreement.
(s) Agreements. The Company shall not, nor shall it permit any of its
Subsidiaries to, agree in writing or otherwise to take any action
inconsistent with any of the foregoing.
4.2 No Solicitation by the Company.
(a) From and after the Prior Execution Date and prior to the Effective
Time, the Company agrees that:
(i) neither it nor any of its Subsidiaries shall initiate, solicit or
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, or any purchase of, 10% or more of the
assets or any equity securities of the Company or any of the Company's
Subsidiaries, other than the transactions contemplated by this Agreement
(any such inquiry, proposal or offer being
30
<PAGE> 37
hereinafter referred to as a "Company 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 a Company
Acquisition Proposal, or terminate or waive any provision of any
confidentiality agreement with any person or otherwise take any action
designed or reasonably likely to facilitate any effort or attempt to make
or implement a Company Acquisition Proposal;
(ii) it will direct and cause its officers, directors, employees,
agents, attorneys, accountants, financial advisors or other representatives
not to engage in any of the activities in Section 4.2(a)(i), except to the
extent expressly permitted in Section 4.2(b)(i);
(iii) 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
4.2(a)(ii) of the obligations undertaken in this Section 4.2; and
(iv) it will notify Parent promptly if the Company 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.
(b) Notwithstanding the foregoing, nothing contained in Section 4.2(a)
shall prohibit the Board of Directors of the Company from the following actions:
(i) furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited Company
Acquisition Proposal if, and only to the extent that, (A) the Board of
Directors of the Company determines in good faith, following consultation
with and after considering the advice of its legal and financial advisors,
that such action could reasonably be expected to result in a Company
Superior Proposal (as hereinafter defined), (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such
person or entity, the Company provides both oral and written notice to
Parent to the effect that it is furnishing information to, or entering into
discussions with, such person or entity, the material terms and conditions
of such Company Acquisition Proposal and the identity of the person making
such Company Acquisition Proposal and (C) upon any material change in the
details (including amendments or proposed amendments) of any such Company
Acquisition Proposal, the Company immediately informs Parent of such change
orally and in writing, and
(ii) to the extent applicable, taking and disclosing to its
stockholders a position as contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders with regard to a Company Acquisition Proposal if, in
the good faith judgment of the Company's Board of Directors, after
consultation with outside counsel, failure so to disclose would be
inconsistent with applicable law;
provided, however, that, from and after the Prior Execution Date, neither
the Board of Directors of the Company nor the Company Special Committee
shall, except as specifically permitted pursuant to this Section 4.2,
withdraw or modify, or propose to withdraw or modify, its position with
respect to the Merger or this Agreement or approve or recommend, or propose
to approve or recommend, a Company Acquisition Proposal. Nothing in this
Section 4.2 shall (x) permit the Company to enter into an agreement with
respect to a Company Acquisition Proposal during the term of this Agreement
(it being agreed that during the term of this Agreement, the Company shall
not enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement with any person that provides for, or
in any way facilitates, a Company Acquisition Proposal) or (y) affect any
other obligation of the Company under this Agreement; provided, however,
that the Board of Directors of the Company may approve and recommend a
Company Superior Proposal and, in connection therewith, withdraw or modify
its approval or recommendation of this Agreement and the Merger. As used
herein, a "Company Superior Proposal" means an unsolicited bona fide
Company Acquisition Proposal made by a third party which a majority of the
members of the Board of Directors of the Company (or a duly constituted
committee thereof charged with considering Company Acquisition
31
<PAGE> 38
Proposals) determines in good faith to be more favorable to the Company's
stockholders from a financial point of view than the Merger (based on
advice from the Company's independent financial advisor of nationally
recognized reputation that the value of the consideration provided for in
such proposal is superior to the value of the consideration provided for in
the Merger), for which any required financing is then committed or which,
in the good faith reasonable judgment of the Board of Directors of the
Company (or any such committee), based on advice from the Company's
independent financial advisor, is reasonably capable of being financed by
such third party (if financing is required), and which the Board of
Directors of the Company determines, in its good faith reasonable judgment,
is reasonably capable of being consummated without undue delay.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement. The Company shall promptly prepare and
file with the SEC the Proxy Statement in form and substance reasonably
satisfactory to each of the Company, Parent and Newco. Each of the Company,
Parent and Newco shall use its commercially reasonable efforts to have the Proxy
Statement approved for mailing to the stockholders of the Company as promptly as
practicable after such filing. The Company shall agree to date the Proxy
Statement as of the approximate date of mailing to its stockholders and shall
use its commercially reasonable efforts to cause the Proxy Statement to be
mailed to its stockholders at the earliest practicable date.
5.2 [INTENTIONALLY OMITTED]
5.3 Access to Information. Upon reasonable notice, the Company shall (and
shall cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financing sources and other representatives of Parent or
Newco, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and
records, as well as to its officers and employees and, during such period, the
Company shall (and shall cause its Subsidiaries to) furnish promptly to Parent
and Newco all other information concerning its business, properties and
personnel as Parent or Newco may reasonably request. Each of Parent and Newco
agrees that it will not, and will cause its respective representatives not to,
use any information obtained pursuant to this Section 5.3 for any purpose
unrelated to the consummation of the transactions contemplated by the
Transaction Documents or the OP Transaction Documents. The Confidentiality
Agreement for Representatives dated July 2, 1999 between the Company and Olympus
Real Estate Corporation (the "Confidentiality Agreement") relating to the
Confidentiality Agreement dated June 9, 1999 by Westdale Properties America I,
Ltd. shall apply with respect to information furnished thereunder or hereunder
and any other activities contemplated thereby.
5.4 Stockholders Meeting. The Company shall call a meeting of its
stockholders (the "Stockholders Meeting") to be held as promptly as practicable
after the date hereof, but no sooner than 20 business days following the date
that the Proxy Statement is mailed to stockholders of the Company, for the
purpose of voting upon the Merger. Subject to the provisions of Section 4.2(b),
the Company Special Committee and the Board of Directors of the Company shall
recommend to the Company's stockholders entitled to vote thereon the approval of
the Merger and this Agreement and not rescind such recommendation, and the
Company shall use all commercially reasonable efforts to obtain approval of the
Merger and this Agreement by its stockholders entitled to vote thereon. The
Company shall use all commercially reasonable efforts to hold such meeting as
soon as practicable, but no sooner than 20 business days following the date that
the Proxy Statement is mailed to stockholders of the Company.
5.5 Approvals.
(a) Each party hereto shall cooperate and use all commercially reasonable
efforts to promptly prepare and file all necessary documentation to effect all
necessary applications, notices, petitions, filings and other documents, and use
all commercially reasonable efforts to obtain (and will cooperate with each
other in obtaining) any consent, acquiescence, authorization, order or approval
of, or any exemption or
32
<PAGE> 39
nonopposition by, any Governmental Entity required to be obtained or made by the
Company or by Parent or Newco, or any of their respective Subsidiaries, in
connection with the Merger, the WDOP Merger and the WROP Merger or the taking of
any other action contemplated by the Transaction Documents or the OP Transaction
Documents.
(b) For purposes of this Agreement, (i) all consents indicated by an
asterisk on Schedule 3.1(c) of the Company Disclosure Schedule, (ii) all
consents set forth on Schedule 5.5(b) of the Parent/Newco Disclosure Schedule,
(iii) any other consent that is required by any lender to consummate the
transactions contemplated by the Transaction Documents, the OP Transaction
Documents and the Financing Commitments and to which such lender is legally
entitled and (iv) any other consent required by any third party (including
credit enhancers, bond issuers, insurers, servicers or trustees) in connection
with the financing, refinancing or assumption of indebtedness and changes in
ownership or control contemplated in the Transaction Documents, the OP
Transaction Documents and the Financing Commitments, are collectively referred
to herein as the "Required Consents." Subject to the terms and conditions herein
provided, each of the Company, Parent and Newco shall: (A) cooperate with one
another in (1) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions and any third parties in connection with the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby and (2) timely making all such filings and timely seeking
all such consents (including, without limitation, the Required Consents),
approvals, permits and authorizations, (B) use all commercially reasonable
efforts to obtain in writing any consents (including, without limitation, the
Required Consents) or waivers required from third parties to effectuate the
transactions contemplated by the Transaction Documents and the OP Transaction
Documents, such consents or waivers to be in form reasonably satisfactory to
Parent and the Company, and to (C) 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 the
Transaction Documents and the OP Transaction Documents, including the WROP
Merger and the WDOP Merger; provided, however, that in connection with obtaining
any consents, the Company will consult with Parent throughout the process of
seeking such third party consent, including (without limitation), consulting
Parent with respect to any payment that may be required to obtain such consent.
If, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purpose of this Agreement, the proper officers and
directors of the Company, Parent or Newco shall take all such necessary action
that is commercially reasonable. Notwithstanding the foregoing, neither Parent
nor Newco shall be required to make any payment or grant any concession to
extend the term of any Financing Commitment beyond the expiration date set forth
in such Financing Commitment.
5.6 [INTENTIONALLY OMITTED].
5.7 Employee Matters. (a) The Company, Parent and Newco agree that all
employees of the Company immediately prior to the Effective Time shall be
employed by either Parent or Newco immediately after the Effective Time, it
being understood that neither Parent nor Newco, as the case may be, shall have
any obligations to continue employing such employees for any length of time
thereafter.
(b) For a period of three months after the Effective Time, Newco or Parent
(or any of their Affiliates), as the case may be, shall provide those employees
of the Company and its Subsidiaries covered by the Company Employee Benefit
Plans with benefits that are comparable, in the aggregate, to the benefits
provided to such employees by the Company during the year prior to the Closing
Date (excluding equity compensation plans and arrangements). Parent and Newco
further agree that any present employees of the Company shall be credited for
their service with the Company for purposes of eligibility, entitlement to
benefits, and vesting in any plans provided by Parent, Newco (or any of their
Affiliates), as the case may be, and all pre-existing conditions and exclusions
shall be waived and expenses incurred by any employee for deductibles and
co-payments in the portion of the year prior to the date an employee first
became a participant in such plan shall be credited to the benefit of such
employee under such plan in the year in which such employee's participation
commenced.
33
<PAGE> 40
(c) At the Effective Time, the Surviving Entity shall assume and perform
each of the severance obligations described on Schedule 3.1(l) to the Company
Disclosure Schedule.
5.8 Stock Options. The Company shall use all commercially reasonable
efforts to obtain, prior to the Effective Time, an executed Option Surrender
Agreement, Release and Waiver from all holders of outstanding Company Stock
Options in substantially the form attached as Exhibit F hereto.
5.9 Company Warrants. The Company (a) shall deliver to the Warrant Agent, a
certificate of a firm of independent public accountants describing the reduction
in the exercise price of the Company Warrants set forth in Section 3.1(bb) and
(b) at the earliest practicable time but not less than 30 days before the
Closing Date, shall deliver to the Warrant Agent notice of the Merger, in each
case in accordance with the provisions of the Warrant Agreements. The Company
shall cause the Warrant Agent to promptly deliver notice of such adjustment in
the exercise price of the Company Warrants and notice of the Merger to each
holder of Company Warrants in accordance with the provisions of the Warrant
Agreements at the earliest practicable time but not less than 20 days before the
Closing Date.
5.10 Deferred Compensation Plan. After the Effective Time, Parent or Newco
shall use its commercially reasonable efforts to cause all vested account
balances of participants in the Company Deferred Compensation Plan to be
distributed to such participants in accordance with the terms of the plan and
the corresponding Trust Agreement dated as of October 1, 1998 between the
Company and Delaware Charter and Guarantee Trust Company.
5.11 Directors' and Officers' Indemnification and Insurance.
(a) From and after the Effective Time, Parent 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 or director
of the Company or any Subsidiary of the Company (the "Company Officers or
Directors") that is the same as the exculpation and indemnification provided to
the Company Officers or Directors by the Company (including advancement of
expenses, if so provided) immediately prior to the Effective Time in the Company
Charter or Company Bylaws, in any separate indemnification agreements between
the Company and its directors or officers or in any other Company Employee
Benefit Plan or Company Pension Plan as in effect on the Prior Execution Date;
provided, that such exculpation and indemnification covers actions or omissions
on or prior to the Effective Time, including, without limitation, all
transactions contemplated by this Agreement. Parent shall obtain and maintain in
effect at the Effective Time and continuing until the sixth anniversary thereof
"run-off" directors and officers liability insurance with a coverage amount and
other terms and conditions no less favorable in the aggregate to the Company
Officers or Directors than under the Company's current directors and officers
liability insurance policy covering the directors and officers of the Company
with respect to their service as such prior to the Effective Time; provided,
however, that in no event shall Parent be required to pay a premium for such
insurance in excess of 150% of the last annual premium paid by the Company prior
to the Prior Execution Date, but if the premium required to obtain such coverage
would exceed such maximum amount, Parent shall purchase as much coverage as
possible for such maximum amount.
(b) The provisions of this Section 5.11 are intended to be for the benefit
of, and shall be enforceable by, each Company Officer or Director, his or her
heirs and his or her personal representatives and shall be binding on all
successors and assigns of Parent and the Company. Parent agrees to pay all costs
and expenses (including fees and expenses of counsel) that may be incurred by
any Company Officer or Director, his or her heirs or his or her personal
representatives in successfully enforcing the indemnity or other obligations of
Parent under this Section 5.11. The provisions of this Section 5.11 shall
survive the Merger and are in addition to any other rights to which a Company
Officer or Director may be entitled.
(c) In the event that Parent 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 expressly or by
34
<PAGE> 41
operation of law the obligations set forth in this Section 5.11, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each Company Officer or Director.
5.12 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection therewith, the parties hereto agree to cooperate and use their
commercially reasonable efforts to defend against and respond thereto.
5.13 Public Announcements. The parties hereto will consult with each other
before issuing, and provide each other with the reasonable opportunity to review
and comment upon, any press release or otherwise making any public statements
with respect to the transactions contemplated by the Transaction Documents or
the OP Transaction Documents, and shall not issue any such press release or make
any such public statement without the reasonable consent of the other party,
except as may be required by applicable law, by court process or by obligations
pursuant to any listing agreement with any national securities exchange or
transaction reporting system so long as the other party is notified promptly by
the disclosing party of such press release or public statement. The parties
agree that the initial press release to be issued on or after the date of this
Agreement 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 the
Agreement.
5.14 Other Actions. From and after the Prior Execution Date, except as
contemplated by this Agreement, none of the Company, Parent or Newco shall, nor
shall the Company, Parent or Newco permit any of its Subsidiaries to, take or
agree or commit to take any action that is reasonably likely to result in any of
its respective representations or warranties hereunder being untrue in any
material respect or in any of the conditions to the Merger set forth in Article
6 not being satisfied. Each of the parties agrees to use its commercially
reasonable efforts to satisfy the conditions to the Closing set forth in this
Agreement.
5.15 Advice of Changes; SEC Filings. The Company shall confer with Parent
on a regular basis, report on Company operational matters and promptly advise
Parent orally and in writing of any change or event which has, or could
reasonably be expected to have, a Material Adverse Effect on the Company. The
Company or Parent, as the case may be, shall promptly provide each other (or
their respective counsel) copies of all filings made by such party or its
Subsidiaries with the SEC or any other state or federal Governmental Entity in
connection with the Transaction Documents or the OP Transaction Documents and
the transactions contemplated hereby or thereby.
5.16 Conveyance Taxes. The Company, Parent and Newco will (a) cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
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 the Transaction
Documents or the OP Transaction Documents that are required or permitted to be
filed on or before the Effective Time, (b) cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any applicable exemptions to any such tax or fee, and (c)
each pay any such tax or fee which becomes payable by it on or before the
Effective Time.
5.17 WDOP Merger and WROP Merger.
(a) The Company and Parent shall take all necessary action (i) to cause the
WROP Merger and the WDOP Merger to be consummated immediately prior to the
Effective Time (but on the Closing Date), which actions shall include the
actions set forth in Section 5.1 and the distribution of election and consent
forms to the holders of WDOP Class B Common Units substantially in the form of
Exhibit D-1 hereto (a "WDOP Election and Consent Form"), and to the holders of
WROP Class C Common Units and WROP Class D Common Units, each substantially in
the form of Exhibit D-2 and Exhibit D-3 hereto, respectively (each such form, a
"WROP Election and Consent Form") and (ii) thereafter, to cause the Second
Amended and Restated Limited Partnership Agreement of WDOP and the Second
Amended and
35
<PAGE> 42
Restated Limited Partnership Agreement of WROP to take effect. Each party agrees
that the Second Amended and Restated Limited Partnership Agreement of WDOP shall
be substantially in the form attached as Exhibit G hereto, and the Second
Amended and Restated Limited Partnership of WROP shall be substantially in the
form attached as Exhibit H hereto; provided, however, that no party shall object
to any nonsubstantive changes to such partnership agreements requested by any
other party hereto prior to the Effective Time.
(b) The parties acknowledge that if a common limited partner of WDOP or
WROP does not execute and deliver a WDOP Election and Consent Form or a WROP
Election and Consent Form, as applicable, on or before the date of the
Stockholders Meeting, then such common limited partner shall be entitled to
receive only cash in the WDOP Merger or the WROP Merger, as applicable, and
shall not be entitled to elect to receive new securities of Parent.
5.18 Employee Loans. On or before the date hereof, the Company has
delivered to Parent a Loan Repayment Agreement in substantially the form
attached as Exhibit I hereto executed by each officer and director of the
Company who has any outstanding loan from, or other debt obligation to, the
Company, which loan was made, or debt obligation incurred, for the purpose of
purchasing Company Common Stock. Prior to the Effective Time, the Company shall
cause any of its other employees who has any outstanding loan from, or other
debt obligations to, the Company, to execute and deliver a Loan Repayment
Agreement in substantially the form attached as Exhibit I hereto. With respect
to any loan from the Company to any of its employees, other than the persons who
are parties to the employment or consulting agreements listed on Schedule 3.1(l)
to the Company Disclosure Schedule, that was outstanding on the Prior Execution
Date, the Company shall be entitled to forgive an amount of accrued interest on
such loan equal to an amount determined by subtracting (a) dividends on the
Company Common Stock (that was purchased with the proceeds of such loan) which
are authorized and declared for any period after the third quarter of the
Company's 1999 fiscal year (which dividend is payable in the fourth quarter)
from (b) interest accrued on such loan after the payment of such third quarter
dividend.
5.19 Dividends. The Company shall authorize, declare and pay the minimum
amount of preclosing dividends on Company Common Stock necessary to avoid (a)
jeopardizing its status as a "real estate investment trust" under the Code and
(b) having positive real estate investment trust taxable income for the taxable
year ending at the Effective Time (provided that the foregoing shall not be
deemed to limit the amount of dividends that are otherwise payable by the
Company or Newco under the terms of this Agreement). In addition, upon the
written request of Newco or Parent, the Company shall authorize, declare and pay
any accrued and unpaid dividends to holders of Company Convertible Preferred
Stock, Company Senior Preferred Stock and Company Redeemable Preferred Stock to
but excluding the Closing Date immediately prior to the Effective Time.
5.20 Assistance. From and after the Prior Execution Date, if Parent
requests, the Company and its Subsidiaries shall cooperate, and shall use their
commercially reasonable efforts to cause the Company's accountants to cooperate,
in all reasonable respects in connection with any financing efforts (including,
without limitation, the refinancing or assumption of existing indebtedness) of
Parent or its Affiliates (including providing reasonable assistance in the
preparation of one or more offering circulars, private placement memoranda,
registration statements or other offering documents relating to debt and/or
equity financing) and any other filings that may be made by Parent or its
Affiliates with the SEC, all at the sole expense of Parent (or its Affiliates).
From and after the Prior Execution Date, if Parent requests, the Company shall
create new subsidiaries and effect mergers, and conversions of, among wholly
owned Subsidiaries at the direction of Parent and, immediately prior to the
Effective Time, shall transfer any assets and/or liabilities to such entities at
the direction of Parent. In connection with the financing efforts of Parent and
its Affiliates, the Company shall, and shall cause each of its Subsidiaries to,
(i) furnish to its independent accountants (or, if requested by Parent, to
Parent's independent public accountants), such customary management
representation letters as its accountants may reasonably require of the Company
or its Subsidiaries as a condition to its execution of any required accountants'
consents necessary in connection with the delivery of any "comfort" letters
requested by financing sources of Parent or its Affiliates and (ii) furnish to
Parent all financial statements (audited and unaudited) and other information
36
<PAGE> 43
in the possession of the Company or its Subsidiaries or their representatives or
agents as Parent shall reasonably determine are required in connection with such
financing. At the request of Parent, the Company shall use its commercially
reasonable efforts to cause its accountants to deliver to Parent's accountants
the work papers relating to the preparation of the Company's financial
statements or other financial calculations. The Company shall cooperate with
Parent and Newco in obtaining surveys, title commitments and/or policies,
engineering reports, environmental reports and appraisals with respect to the
Company Properties.
5.21 [INTENTIONALLY OMITTED].
5.22 Proxy Solicitor. If requested by Parent, the Company shall engage, at
the Company's expense, a proxy solicitor reasonably acceptable to Parent to
assist in the solicitation of proxies from stockholders relating to the Merger
Vote.
5.23 Drever Partners Stock Purchase Agreement. The Company shall use its
commercially reasonable efforts to cause the transactions contemplated by the
Drever Partners Stock Purchase Agreement to be consummated at or immediately
prior to the Effective Time in accordance with the Drever Partners Stock
Purchase Agreement.
5.24 Company Properties. To the extent of any noncompliance, the Company
shall cause each Company Property to comply with the representations and
warranties contained in Section 3.1(p) on or before the Closing or shall cause
written waivers of compliance, upon which the Parent may rely with respect to
any noncompliance, to be issued by appropriate parties in interest.
5.25 Environmental Matters. As promptly as practicable after the Prior
Execution Date, the Company developed and implemented an operation and
maintenance program at sites with asbestos-containing materials, lead paint or
other conditions for which an operation and maintenance program is recommended
as set forth in Schedule 3.1(o) and for any other material matters identified by
environmental reports delivered after the Prior Execution Date. Neither the
Company nor its Affiliates have, since the Prior Execution Date, or shall
thereafter, engage in repairs, renovations or cause any disturbances at any of
the sites set forth in Schedule 3.1(o) with respect to which sampling prior to
any disturbance is recommended in Schedule 3.1(o).
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Company Stockholder Approval. The Merger and all other actions
contemplated hereby that require the approval of holders of the Company
Common Stock shall have been approved and adopted by the affirmative vote
of the holders of a majority of the outstanding shares of Company Common
Stock entitled to vote thereon.
(b) Other Approvals. All consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from any
Governmental Entity as indicated in Section 3.1(c) or Schedule 3.1(c) to
the Company Disclosure Schedule or Section 3.2(c) or Schedule 3.2(c) to the
Parent/Newco Disclosure Schedule in connection with the execution and
delivery of the Transaction Documents and the consummation of the
transactions contemplated hereby or thereby shall have been made or
obtained (as the case may be). Unless otherwise agreed to by the Company
and Newco (which agreement shall not be unreasonably withheld), no such
governmental consent, approval, permit or authorization shall then be
subject to appeal.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction, no order of any Governmental
37
<PAGE> 44
Entity having jurisdiction over any party hereto, and no other legal
restraint or prohibition shall be in effect (an "Injunction") preventing or
making illegal the consummation of the Merger.
(d) HSR Act. If an HSR filing was required in connection with the
transactions contemplated by this Agreement, the waiting period (and any
extension thereof) applicable to the Merger under the HSR Act shall have
been terminated or shall have expired, and no restrictive order or other
requirements shall have been placed on the Company, Parent or Newco in
connection therewith.
6.2 Conditions to Obligations of Newco to Effect the Merger. The
obligations of Newco to effect the Merger are subject to the satisfaction of the
following conditions, any or all of which may be waived in whole or in part by
Newco:
(a) Representations and Warranties of the Company. Each of the
representations and warranties of the Company set forth in this Agreement
shall be true and correct in all material respects (provided that any
representation or warranty of the Company contained herein that is modified
by a materiality or Material Adverse Effect qualifier(s) shall not be
further qualified hereby) on and as of the scheduled Closing Date (to the
extent that a representation and warranty speaks only as of a particular
date, then as of the Closing Date such representation and warranty shall be
made on and as of such particular date rather than as of the Closing Date),
and Parent shall have received a certificate to such effect signed on
behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate to such effect signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of
the Company.
(c) Consents Under Agreements. Parent shall have been furnished with
evidence reasonably satisfactory to it of the receipt of all Required
Consents, and such Required Consents shall be in form and substance
reasonably satisfactory to Parent.
(d) WDOP Merger and WROP Merger. The conditions precedent to the
consummation of both the WDOP Merger and the WROP Merger set forth in the
WDOP Merger Agreement and in the WROP Merger Agreement, respectively, shall
have been satisfied (or waived), and both the WDOP Merger and the WROP
Merger shall have been consummated.
(e) Financing. The debt and equity financing for the transactions
contemplated hereby shall have been received on terms substantially as
outlined in the Financing Commitments (excluding from this condition the
failure to receive equity financing due to the breach of any equity
Financing Commitment by Parent or an Affiliate of Parent).
(f) Material Adverse Change or Effect. Except as set forth on Schedule
4.1 since the Prior Execution Date, no change, event or effect shall have
occurred that shall have caused, or could reasonably be expected to cause,
a Material Adverse Change or Material Adverse Effect with respect to the
Company, and Parent shall have received a certificate to such effect from
the Chief Executive Officer and Chief Financial Officer of the Company.
(g) Drever Partners Stock Purchase Agreement. The sale of the
outstanding shares of common stock of Drever Partners, Inc. pursuant to the
Drever Partners Stock Purchase Agreement shall have been consummated.
(h) Legal Opinion. Locke Liddell & Sapp LLP, counsel to the Company,
shall have delivered a legal opinion in the form attached as Exhibit J
hereto, dated the Closing Date and addressed to the Company, Parent and
Newco, to the effect that (A) the Company has qualified to be taxed as a
real estate investment trust pursuant to the Code for each of its taxable
years ending December 31, 1993 through December 31, 1999, and the short
taxable year beginning January 1, 2000 and ending when the Closing occurs,
and (B) each Company Partnership (as defined below) is properly treated as
a partnership and not as a "publicly traded partnership" for federal income
taxes. For purposes of this
38
<PAGE> 45
Agreement, the term "Company Partnership" shall include all Company
Subsidiaries that are organized as partnerships included in Schedule 3.1(a)
of the Company Disclosure Schedule. In rendering such opinions, Locke
Liddell & Sapp LLP may rely upon (and the Company shall be required to
make) representations requested of the Company by Locke Liddell & Sapp LLP.
(i) Closing Agreement. The Company shall have entered into a Closing
Agreement with the Internal Revenue Service, as authorized by Section 7121
of the Code, providing that the Company's ownership interest in Court
Ventures, Inc., a Georgia corporation, did not cause a termination of the
Company's status as a REIT under Section 856 of the Code and the fines,
penalties, settlement amounts and other charges incurred in connection with
such Closing Agreement shall not have been greater than $1,000,000.
(j) Conversion of Operating Partnership Units. An aggregate of at
least 937,000 WROP Class C Common Units, WROP Class D Common Units and WDOP
Class B Common Units shall have elected to have such units converted into
Parent Common Limited Partner Interests in the WROP Merger and the WDOP
Merger.
6.3 Conditions to Obligations of the Company to Effect the Merger. The
obligation of the Company to effect the Merger is subject to the satisfaction of
the following conditions, any or all of which may be waived in whole or in part
by the Company:
(a) Representations and Warranties of Newco and Parent. Each of the
representations and warranties of Newco and Parent set forth in this
Agreement shall be true and correct in all material respects (provided that
any representation or warranty of Newco and Parent contained herein that is
modified by a materiality or Material Adverse Effect qualifier(s) shall not
be further qualified hereby) on and as of the scheduled Closing Date (to
the extent that a representation and warranty speaks only as of a
particular date, then as of the Closing Date such representation and
warranty shall be made on and as of such particular date rather than as of
the Closing Date), and the Company shall have received a certificate to
such effect signed on behalf of Newco by the Chief Executive Officer and
the Chief Financial Officer of Newco and signed on behalf of Parent by its
general partner.
(b) Performance of Obligations of the Company. Each of Newco and
Parent shall have performed in all material respects all obligations
required to be performed by each of them under this Agreement at or prior
to the Closing Date, and the Company shall have received a certificate to
such effect signed on behalf of Newco by the Chief Executive Officer and
the Chief Financial Officer of Newco and signed on behalf of Parent by its
general partner.
ARTICLE 7
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company entitled to vote thereon:
(a) by mutual written consent of the Company, Parent and Newco, or by
mutual action of their respective Boards of Directors or general partner,
as applicable;
(b) by either the Company, Parent or Newco:
(i) if (A) any Governmental Entity shall have issued any Injunction
or taken any other action permanently restraining, enjoining or
otherwise prohibiting the consummation of the Merger, the WDOP Merger or
the WROP Merger, and such Injunction or other action shall have become
final and nonappealable; or (B) the Merger Vote shall not have been
obtained upon a vote held at a duly held meeting of stockholders, or at
any adjournment thereof, or (C) unless (1) prohibited by an event
described in clause (A) or (2) resulting from any act or omission of
Parent or Newco or their Affiliates, as of the day immediately prior to
the Termination Date,
39
<PAGE> 46
either (x) no meeting of the Company's stockholders shall have been held
pursuant to Section 5.4 or (y) if held, no vote shall have been taken in
respect of Merger;
(ii) if the Merger shall not have been consummated by June 30, 2000
(the "Termination Date"); provided, however, that the right to terminate
this Agreement under this Section 7.1(b)(ii) shall not be available to
any party whose breach of any representation or warranty or failure to
fulfill any covenant or agreement under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before
such date; or
(iii) in the event, at any time on and after the Prior Execution
Date up to and immediately prior to the Effective Time, of a breach by
the Company, on the one hand, or Parent or Newco, on the other hand, of
any representation, warranty, covenant or other agreement contained in
this Agreement which (A), if such breach were to have occurred on the
scheduled Closing Date, would give rise to the failure of a condition
set forth in Section 6.2(a) or (b) or Section 6.3(a) or (b), as
applicable, and (B) cannot be cured or, if curable, has not been cured
within 30 days after the giving of written notice to the breaching party
of such breach (a "Material Breach"); provided that in no event shall
such 30-day period extend beyond the Termination Date; and provided,
further, that the parties agree that a breach of the second sentence of
Section 5.4 or the obligations of the Company under Section 4.2 cannot
be cured and shall be deemed a "willful breach" for the purposes of
Section 7.2(a) (provided that the terminating party is not then in
Material Breach of any representation, warranty, covenant or other
agreement contained in this Agreement);
(c) by Parent or Newco if, prior to the Stockholders Meeting, (i) the
Company Special Committee or the Board of Directors of the Company shall
have withdrawn or modified, in any manner which is adverse to Parent or
Newco, its recommendation or approval of the Merger, this Agreement or the
transactions contemplated hereby, or shall have resolved to do so, (ii) the
Board of Directors of the Company shall have recommended to the
stockholders of the Company any Company Acquisition Proposal or any
transaction described in the definition of Company Acquisition Proposal, or
shall have resolved to do so, or (iii) a tender offer or exchange offer for
outstanding shares of stock of the Company then representing 50% or more of
the combined power to vote generally for the election of directors is
commenced, and the Board of Directors of the Company does not, within the
applicable period required by law, recommend that the stockholders of the
Company not tender their shares into such tender or exchange offer;
(d) by the Company if, prior to the Stockholders Meeting, (i) the
Company Special Committee or the Board of Directors of the Company shall
have determined to withdraw or modify, in any manner which is adverse to
Parent or Newco, its recommendation or approval of the Merger and this
Agreement and the transactions contemplated hereby pursuant to Section 4.2,
(ii) the Company shall have given notice to Parent advising Parent that the
Company has received a Company Superior Proposal from a third party,
specifying the material terms and conditions of such Company Superior
Proposal (including the identity of the third party), and advising Parent
that the Company intends to terminate this Agreement in accordance with
this Section 7.1(d), and (iii) either (A) Parent and Newco shall not have
revised their acquisition proposal within five business days after the date
on which such notice is deemed to have been given to them, or (B) if Parent
and Newco within such period shall have revised their acquisition proposal,
the Board of Directors of the Company, after consultation with the
Company's financial advisor, shall have determined in its good faith
reasonable judgment that the third party's Company Acquisition Proposal is
superior to the Company's revised acquisition proposal; provided that the
Company may not effect such termination pursuant to this Section 7.1(d)
unless the Company has contemporaneously with such termination tendered
payment to Parent, or its designee, of the Break Up Fee pursuant to Section
7.2(b) and the Termination Expenses of Parent and Newco pursuant to Section
7.2(d)(i) and the five business day period has expired (it being understood
that any amendment to the price or material terms of a Company Superior
Proposal shall require an additional notice under clause (ii) above and an
additional period of five business days under clause (iii) above);
40
<PAGE> 47
(e) by Parent or Newco if, after the Prior Execution Date, a change,
event or effect shall have caused or could reasonably be expected to cause
a Material Adverse Change or Material Adverse Effect with respect to the
Company;
(f) pursuant to Section 8.8;
(g) by Parent or Newco, if any Financing Commitment expires or
otherwise terminates pursuant to its terms; provided, however, that (i) no
termination pursuant to this Section 7.1(g) shall be effective unless
Parent or Newco shall have given written notice to the Company of such
termination no later than 30 days after such expiration or termination of
such Financing Commitment, and (ii) if Parent or Newco does not exercise
such right to terminate this Agreement within such 30-day period, then the
condition to Newco's obligation to effect the Merger under Section 6.2(e)
shall automatically be deleted from this Agreement after the end of such
30-day period;
(h) by Parent or Newco if, on the scheduled Closing Date, the
providers of debt financing under the debt Financing Commitments (excluding
the Financing Commitment of The Chase Manhattan Bank) are willing to
provide debt financing pursuant to the terms of such Financing Commitments,
but the aggregate gross proceeds available from such debt financing are
less than $865,000,000;
(i) by Parent or Newco if, on the scheduled Closing Date, the
condition to Newco's obligation to effect the Merger set forth in Section
6.2(e) has not been satisfied;
(j) by the Company if, on the scheduled Closing Date, (i) neither
Parent nor Newco has the right to terminate this Agreement pursuant to
Section 7.1, (ii) all of the conditions to Newco's obligation to effect the
Merger under Section 6.1 and Section 6.2 have been satisfied, and (iii)
Newco fails or refuses to effect the Merger. The Company agrees that it
shall not be entitled to terminate this Agreement pursuant to Section
7.1(b)(iii) under the circumstances set forth in the immediately preceding
sentence of this Section 7.1(j);
(k) by Parent or Newco if, on the scheduled Closing Date, the
condition to Newco's obligation to effect the Merger set forth in Section
6.2(j) has not been satisfied;
(l) by Parent or Newco, if the retention bonuses provided for in
Section 3.1(l) exceed Two Million Dollars ($2,000,000);
(m) by Parent or Newco, if the fines, penalties, settlement amounts
and other charges incurred in connection with the Closing Agreement
referred to in Section 6.2(j) exceed One Million Dollars ($1,000,000); or
(n) by Parent or Newco, if on or before the scheduled Closing Date
definitive settlement agreements between the plaintiffs and the defendants
in those actions styled, Berkowitz, et al. v. Walden Residential
Properties, Inc., et al.; No. 3: 99-CV-2356-D; In the United States
District Court for the Northern District of Texas and Feldman, et al. v.
Walden Residential Properties, Inc., et al.: No. CC-99-11645a; In Dallas
County Court at Law No. 1, shall not have been signed and the courts in
such actions shall not have entered orders giving preliminary approval to
the proposed settlements.
A terminating party shall provide written notice of termination to the
other parties specifying with particularity the reason for such termination. If
more than one provision in this Section 7.1 is available to a terminating party
in connection with a termination, a terminating party may rely on any and all
available provisions in this Section 7.1 for any such termination.
7.2 Effect of Termination.
(a) In the event of termination of this Agreement by any party hereto as
provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto except with
respect to this Section 7.2, the second and third sentences of Section 5.3,
Section 5.13 and Article 8; provided, however, that if such termination results
from a willful breach (except as provided in Section 8.8 and excluding from
being deemed a willful breach any termination by the Company pursuant to Section
7.1(j)) by a party hereto of any of its representations or warranties or of
41
<PAGE> 48
any of its covenants or agreements contained in this Agreement, the breaching
party shall be fully liable for such breach notwithstanding the termination of
this Agreement (it being understood that such liability shall be reduced by any
payments made under Section 7.2(b), (c) or (d)).
(b) If (i) Parent or Newco terminates this Agreement pursuant to Section
7.1(c) or (ii) the Company terminates this Agreement pursuant to Section 7.1(d),
then the Company shall, on the day of, and (with respect to Section 7.1(d)) as a
condition to the effectiveness of, such termination, pay Parent or its designee
a fee in cash equal to Twenty-Six Million Seven Hundred Fifty Thousand Dollars
($26,750,000) (such fee is referred to as the "Break Up Fee"), by wire transfer
of immediately available funds to an account designated by Parent.
(c) If (i) this Agreement is terminated by either Parent, Newco or the
Company pursuant to clauses (B) or (C) of Section 7.1(b)(i) because the
stockholders of the Company shall not have approved the Merger at the
Stockholders Meeting referred to in Section 5.4 or because no meeting was held
or no vote taken, (ii) at the time of such Stockholders Meeting (or, in the case
where no meeting was held, at any time within 30 days prior to the date of
termination) there shall have been pending a Company Acquisition Proposal and
(iii) within 12 months after the date of termination the Company agrees to or
consummates a Company Acquisition Proposal (whether or not such Company
Acquisition Proposal is the same Company Acquisition Proposal pending at the
time of such meeting or, in the case where no meeting was held, pending at any
time within 30 days prior to the date of such termination), then at the closing
or other consummation of such Company Acquisition Proposal the Company shall pay
Parent or its designee an amount equal to the Break Up Fee by wire transfer of
immediately available funds to an account designated by Parent.
(d) (i) In addition to any other amounts that may be payable pursuant to
this Section 7.2, if this Agreement is terminated for any reason pursuant to
Section 7.1 (other than (A) pursuant to Section 7.1(a), (B) by the Company
pursuant to Section 7.1(b)(iii) because Parent or Newco is in Material Breach of
this Agreement, (C) by Parent or Newco pursuant to Section 7.1(h), (D) by Parent
or Newco pursuant to Section 7.1(i) if, on the scheduled Closing Date, the
condition to Newco's obligation to effect the Merger set forth in Section 6.2(e)
has not been satisfied solely due to the failure of either (1) The Chase
Manhattan Bank to provide debt financing under its Financing Commitment or (2)
Holding or Parent fail to receive the common and preferred equity investments
referred to in item 14 of Schedule 3.2(g), or (E) by Parent or Newco pursuant to
Section 7.1(n)), then the Company shall, on the date of such termination, pay to
Parent the Termination Expenses (as defined below) of Parent and Newco payable
hereunder in cash by wire transfer of immediately available funds to an account
designated by Parent. The Termination Expenses of Parent payable hereunder shall
be an amount equal to the lesser of Twelve Million Dollars ($12,000,000) or the
total Termination Expenses of Parent and Newco.
(ii) In addition to any other amounts that may be payable pursuant to this
Section 7.2, if this Agreement is terminated by the Company pursuant to Section
7.1(b)(iii) because Parent or Newco is in Material Breach of this Agreement,
Parent shall, on the date of such termination, pay to the Company the
Termination Expenses of the Company payable hereunder in cash by wire transfer
of immediately available funds to an account designated by the Company. The
Termination Expenses of the Company payable hereunder shall be an amount equal
to the lesser of Two Million Dollars ($2,000,000) or the total Termination
Expenses of the Company (such lesser amount, the "Base Amount").
(iii) As used herein, "Termination Expenses" shall mean such amount as may
be required to reimburse a party and its Affiliates for all reasonable
out-of-pocket fees, costs and expenses incurred by any of them in connection
with their (or any of their agent's or consultant's) due diligence efforts or
the transactions contemplated by the Transaction Documents and the OP
Transaction Documents, including, without limitation, (A) fees, costs and
expenses of accountants, counsel (including a reasonable allocation of the time
of any in-house counsel engaged on the transactions contemplated hereby),
financial advisors and other similar advisors, (B) fees paid to any Governmental
Entity and (C) fees, costs and expenses paid or payable to third parties under
any financing commitments or similar arrangements or in connection with
financing transactions or efforts, including, without limitation, any purchaser
or underwriter's
42
<PAGE> 49
discounts relating to the sale of the debt or equity financing (except for the
principal amount payable in connection therewith, but including all accrued
interest payable in connection therewith), the making of any repurchase offer in
respect of such financing, costs in connection with interest rate hedging or
protection agreements, or any fees paid or payable to financing sources upon the
termination of this Agreement, and (D) any fees, costs and expenses incurred in
connection with the performance or receipt of environmental studies and reports,
title commitments, property surveys, market surveys, termite reports, property
appraisals, and engineering reports (environmental and structural) as part of
the due diligence conducted in connection with the transactions contemplated by
the Transaction Documents and the OP Transaction Documents. Notwithstanding the
foregoing, in the case of the Company, the Termination Expenses shall be an
amount equal to the lesser of (i) the Base Amount and (ii) the sum of (A) the
maximum amount that can be paid to the Company without causing it to fail to
meet the requirements of Section 856(c)(2) and (3) of the Code determined as if
the payment of such amount did not constitute income described in Sections
856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as
determined by independent accountants to the Company and (B) in the event the
Company receives an opinion from outside counsel (the "Termination Tax Opinion")
to the effect that the receipt by the Company of the Base Amount would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Sections 856(c)(2) and (3) of the Code (the "REIT Requirements") or
that receipt by the Company of the remaining balance of the Base Amount
following the receipt of and pursuant to such opinion would not be deemed
constructively received prior thereto, the Base Amount less the amount payable
under clause (A) above. In the event that the Company is not able to receive the
full Base Amount, Parent shall place the unpaid amount in escrow and shall not
release any portion thereof to the Company unless and until the Company receives
any one or combination of the following: (x) a letter from its independent
accountants indicating the maximum amount that can be paid at that time without
causing it to fail to meet the REIT Requirements or (y) a Termination Tax
Opinion, in which event Parent shall pay to the Company the lesser of the unpaid
Base Amount or the maximum amount stated in the letter referred to in the
immediately preceding clause (x) above or, as applicable, the Termination Tax
Opinion.
(e) Any Break Up Fee or Termination Expenses of Parent or Newco shall be
paid by the Company without reservation of rights or protests, and the Company
(and its Affiliates) upon making such payment shall be deemed to have released
and waived any and all rights that it may have to recover such amounts. Any
Termination Expenses of the Company shall be paid by Parent without reservation
of rights or protests, and Parent (and its Affiliates) upon making such payment
shall be deemed to have released and waived any and all rights that it may have
to recover such amounts. Nothing contained in this Section 7.2(e) shall be
deemed to override or effect the parenthetical at the end of Section 7.2(a).
(f) (i) If this Agreement is terminated by the Company under Section
7.1(j), the parties agree and acknowledge that the Company will suffer damages
that are not practicable to ascertain, and Parent and Newco agree to pay the
Company as liquidated damages a fee in cash (the "Liquidated Damages Base
Amount") equal to Five Million Dollars ($5,000,000), by wire transfer of
immediately available funds to an account designated by the Company within five
days after such termination. The parties agree that the foregoing liquidated
damages are reasonable considering all the circumstances existing as of the date
hereof and constitute the parties' good faith estimate of the actual damages
reasonably expected to result from such termination of this Agreement by the
Company. The Company agrees that, to the fullest extent permitted by law, the
Company's right to terminate this Agreement and the Company's right to receive
payment of the liquidated damages described above as provided in this Section
7.2(f) shall be the Company's sole and exclusive right and remedy if the Closing
does not occur with respect to any damages whatsoever that the Company may
suffer or allege to suffer as a result of any claim or cause of action asserted
by the Company relating to or arising from the Transaction Documents and the OP
Transaction Documents and the transactions contemplated hereby or thereby, and
no other damages (including, without limitation, the payment of any Termination
Expenses of the Company) shall be payable by Parent, Newco or any Parent
Affiliate (as hereinafter defined) in connection with such termination.
Notwithstanding the foregoing, the liquidated damages shall be an amount equal
to the lesser of (i) the Liquidated Damages Base Amount and (ii) the sum of (A)
the maximum amount that can be paid to the
43
<PAGE> 50
Company without causing it to fail to meet the requirements of Section 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute Qualifying Income, as determined by independent accountants to the
Company, and (B) in the event the Company receives the Termination Tax Opinion
to the effect that the receipt by the Company of the Liquidated Damages Base
Amount would either constitute Qualifying Income or would be excluded from gross
income within the meaning of the REIT Requirements or that receipt by the
Company of the remaining balance of the Liquidated Damages Base Amount following
the receipt of and pursuant to such opinion would not be deemed constructively
received prior thereto, the Liquidated Damages Base Amount less the amount
payable under clause (A) above. In the event that the Company is not able to
receive the full Liquidated Damages Base Amount, Parent shall place the unpaid
amount in escrow and shall not release any portion thereof to the Company unless
and until the Company receives any one or combination of the following: (x) a
letter from its independent accountants indicating the maximum amount that can
be paid at that time without causing it to fail to meet the REIT Requirements or
(y) a Termination Tax Opinion, in which event Parent shall pay to the Company
the lesser of the unpaid Liquidated Damages Base Amount or the maximum amount
stated in the letter referred to in the immediately preceding clause (x) above
or, as applicable, the Termination Tax Opinion.
(ii) As a condition of payment, and upon receipt of such amount as
liquidated damages under this Section 7.2(f), the Company hereby irrevocably and
unconditionally releases, acquits, and forever discharges Parent, Newco and all
Parent Affiliates of and from any and all Released Claims (as defined below),
including without limitation, all Released Claims arising out of, based upon,
resulting from or relating to the negotiation, execution, performance, breach or
otherwise related to or arising out of the Transaction Documents or any
agreement entered into in connection therewith or related thereto and any
transaction contemplated by any Transaction Documents or any such other
agreement. "Released Claims" as used herein shall mean any and all charges,
complaints, claims, causes of action, promises, agreements, rights to payment,
rights to any equitable remedy, rights to any equitable subordination, demands,
debts, liabilities, express or implied contracts, obligations of payment or
performance, rights of offset or recoupment, accounts, damages, costs, losses or
expenses (including attorneys' and other professional fees and expenses) held by
any party hereto, whether known or unknown, matured or unmatured, suspected or
unsuspected, liquidated or unliquidated, absolute or contingent, direct or
derivative.
7.3 Amendment. Subject to Section 7.5, this Agreement may be amended by the
parties hereto at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company entitled to vote
thereon; provided, however, that after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without first
obtaining such further approval. Subject to Section 7.5, this Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
7.4 Extension; Waiver. Subject to Section 7.5, at any time prior to the
Effective Time, the parties hereto may, to the extent legally allowed: (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto; (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto; and
(c) waive compliance with any of the agreements or conditions contained herein.
Subject to Section 7.5, any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party.
7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require (i) in the case of the Company,
action by its Board of Directors and the Company Special Committee, (ii) in the
case of Newco, action by its Board of Directors, and (iii) in the case of
Parent, action by its general partner.
44
<PAGE> 51
ARTICLE 8
GENERAL PROVISIONS
8.1 Payment of Expenses. Except as otherwise expressly provided in this
Agreement or by law, if the Closing does not occur, each party hereto shall pay
its own expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, except
that the Company and Parent shall share equally the expenses incurred by the
Company and Parent in connection with the printing and mailing of the Proxy
Statement and all filing fees paid in connection with the Proxy Statement to the
SEC and provided that this Section 8.1 shall in no way affect the rights and
obligations of the parties under Article 7. Notwithstanding the foregoing, if
the Closing does occur, then the Company shall pay or reimburse Parent or Newco
for all costs and expenses incurred by them or their Affiliates in connection
with the transactions contemplated by the Transaction Documents or the OP
Transaction Documents.
8.2 Nonsurvival of Representations, Warranties and Agreements. Subject to
the remaining provisions of this Section 8.2, the representations, warranties
and agreements in this Agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any other party
hereto, any person controlling any such party or any of their officers,
directors, representatives or agents whether prior to or after the execution of
this Agreement. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, and any liability for breach or violation thereof
shall terminate absolutely and be of no further force and effect at and as of
the Effective Time, except for the agreements that by their terms contemplate
performance after the Effective Time. The Confidentiality Agreement shall
survive the execution and delivery of this Agreement, and the provisions of the
Confidentiality Agreement shall apply to all information and material delivered
hereunder.
8.3 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received (a) when so delivered personally, (b) upon receipt
of an appropriate electronic answer back or confirmation when so delivered by
telegraph or telecopy (to such number specified below or another number or
numbers as such person may subsequently designate by notice given hereunder), or
(c) five business days after the date of mailing to the following address or to
such other address or addresses as such person may subsequently designate by
notice given hereunder, if so delivered by mail:
(i) if to the Company, to:
Walden Residential Properties, Inc.
5080 Spectrum Drive, Suite 1000 East
Addison, Texas 75001
Telecopy: (972) 490-2781
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Telecopy: (214) 740-8800
Attention: Kenneth L. Betts
45
<PAGE> 52
and (b) if to Parent or Newco, to:
Oly Hightop Parent, L.P.
Oly Hightop Corporation
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Telecopy: (214) 740-7340
Attention: General Counsel
with copies to:
Vinson & Elkins L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Telecopy: (214) 220-7716
Attention: Michael D. Wortley
8.4 Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents, glossary of defined terms 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 word
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." Unless the context
otherwise requires, "or" is disjunctive but not necessarily exclusive, and words
in the singular include the plural and in the plural include the singular.
8.5 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, it being understood that all
parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement and any other documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof. The provisions of Sections
5.7, 5.11 and 8.11 are intended to be for the benefit of, and shall be
enforceable by, the persons referred to therein and their respective heirs and
representatives; provided, however, that this Agreement (including such
provisions) shall be enforceable only against the parties hereto. Except as
provided in the immediately preceding sentence, this Agreement is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder.
8.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland, without giving effect to the
principles of conflicts of law thereof.
8.8 No Remedy in Certain Circumstances. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a Material Breach of this Agreement or makes this
Agreement impossible to perform, in which case this Agreement shall terminate.
Except as otherwise contemplated by this Agreement, to the extent that a party
hereto took an action inconsistent herewith or failed to take action consistent
herewith or required hereby pursuant to an order or judgment of a court or other
competent authority, such party shall not incur any liability or obligation
unless such party breached its obligations under the Confidentiality Agreement
or did not in good faith seek to resist or object to the imposition or entering
of such order or judgment.
46
<PAGE> 53
8.9 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
solely upon, inure to the sole benefit of and be enforceable solely by the
parties and their respective successors and assigns.
8.10 Specific Performance. The Company hereby acknowledges and agrees that
the failure of the Company to perform its obligations under the Transaction
Documents and the OP Transaction Documents in accordance with their specific
terms or to otherwise comply with such obligations, including its failure to
take all actions as are necessary on its part to the consummation of the Merger,
the WDOP Merger and the WROP Merger will cause irreparable injury to Parent and
Newco for which damages, even if available, will not be an adequate remedy.
Accordingly, the Company hereby consents to the issuance of injunctive relief by
any court of competent jurisdiction to compel performance of the Company's
obligations, including an injunction to prevent breaches, and to the granting by
any such court of the remedy of specific performance of the terms and conditions
of the Transaction Documents and the OP Transaction Documents.
8.11 No Affiliate Liability. Each of the following is herein referred to as
a "Parent Affiliate:" (a) any direct or indirect holder of any equity interests
or securities in Parent or Newco (whether limited or general partners, members,
stockholders or otherwise), (b) any Affiliate of Parent or Newco, or (c) any
director, officer, employee, representative or agent of (i) Parent or Newco,
(ii) any Affiliate of Parent or Newco or (iii) any such holder of equity
interests or securities referred to in clause (a) above. No Parent Affiliate
shall have any liability or obligation of any nature whatsoever in connection
with or under the Transaction Documents or the OP Transaction Documents or the
transactions contemplated hereby or thereby, and the Company hereby waives and
releases all claims of any such liability and obligation, it being understood
that no such person or entity (other than Parent or Newco) shall be liable for
or in respect of the Transaction Documents and the OP Transaction Documents or
the transactions contemplated hereby or thereby.
8.12 Schedule Definitions. All capitalized terms in the Company Disclosure
Schedule or Parent/ Newco Disclosure Schedule shall have the meanings ascribed
to them herein, unless the context otherwise requires or as otherwise defined.
8.13 Effect of Amendment and Restatement. This Agreement constitutes an
amendment and restatement of the Prior Agreement pursuant to Section 7.3 of the
Prior Agreement. The Company, Parent and Newco hereby agree that the Prior
Agreement shall hereafter be void and of no further force or effect. References
to the "Agreement and Plan of Merger" or the "Merger Agreement" contained in any
other instrument or document referenced in or executed in conjunction with the
Prior Agreement shall mean this Agreement.
[THE REMAINDER OF PAGE IS INTENTIONALLY BLANK]
47
<PAGE> 54
IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
its respective officer thereunto duly authorized, all as of the date first
written above.
WALDEN RESIDENTIAL PROPERTIES, INC.,
a Maryland corporation
By: /s/ MARSHALL B. EDWARDS
-------------------------------------
Name: Marshall B. Edwards
Title: President and Chief Executive
Officer
OLY HIGHTOP CORPORATION,
a Maryland corporation
By: /s/ HAL R. HALL
-------------------------------------
Name: Hal R. Hall
Title: Vice President
OLY HIGHTOP PARENT, L.P.,
a Delaware limited partnership
By: Oly Hightop Parent GP, LLC,
its general partner
By: /s/ HAL R. HALL
-------------------------------------
Name: Hal R. Hall
Title: Vice President
48
<PAGE> 1
EXHIBIT 99.1
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
OLY HIGHTOP PARENT, L.P.
THE PARTNERSHIP INTERESTS IN OLY HIGHTOP PARENT, L.P. ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS SET FORTH IN ARTICLE 8
OF THIS AGREEMENT AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD,
ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH THE TERMS AND
CONDITIONS THEREOF.
IN ADDITION, THE PARTNERSHIP INTERESTS HAVE NOT BEEN REGISTERED (i) UNDER ANY
STATE SECURITIES LAWS (THE "STATE ACTS"), OR (ii) UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "FEDERAL SECURITIES ACT"), IN RELIANCE
UPON EXEMPTIONS PROVIDED THEREIN, AND NEITHER THE PARTNERSHIP INTERESTS NOR ANY
PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED, OR
TRANSFERRED AT ANY TIME EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER ANY APPLICABLE STATE ACTS OR IN A TRANSACTION THAT IS EXEMPT
FROM REGISTRATION UNDER SUCH STATE ACTS OR THAT IS OTHERWISE IN COMPLIANCE WITH
SUCH STATE ACTS, AND (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE FEDERAL SECURITIES ACT OR IN A TRANSACTION THAT IS EXEMPT FROM REGISTRATION
UNDER THE FEDERAL SECURITIES ACT OR THAT IS OTHERWISE IN COMPLIANCE WITH THE
FEDERAL SECURITIES ACT.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1 DEFINED TERMS
1.1 Definitions.....................................................................................1
1.2 Construction...................................................................................14
ARTICLE 2 GENERAL PROVISIONS
2.1 Purpose........................................................................................14
2.2 Powers.........................................................................................14
2.3 Name...........................................................................................15
2.4 Names and Addresses of Partners................................................................15
2.5 Place of Business..............................................................................15
2.6 Additional Filings.............................................................................15
2.7 Ownership......................................................................................15
2.8 No Partner Responsible for Other Partner's Commitments.........................................15
2.9 Term...........................................................................................15
2.10 Registered Office; Registered Agent............................................................15
ARTICLE 3 CAPITAL CONTRIBUTIONS
3.1 Capital Contributions..........................................................................16
3.2 Admission of Additional Limited Partners.......................................................16
3.3 Return of Capital..............................................................................17
3.4 Interest on Capital Contributions..............................................................17
3.5 No Preemptive Rights...........................................................................18
3.6 Optional Capital Contributions.................................................................18
ARTICLE 4 ACCOUNTING; BOOKS AND RECORDS; TAX MATTERS
4.1 Books and Records..............................................................................18
4.2 Bank Accounts..................................................................................18
4.3 Reports........................................................................................18
4.4 Preparation of Tax Returns.....................................................................18
4.5 Tax Elections..................................................................................19
4.6 Tax Matters Partner............................................................................19
4.7 Certain Elections..............................................................................20
ARTICLE 5 DISTRIBUTIONS; ALLOCATIONS
5.1 Requirement and Characterization of Distributions..............................................21
5.2 Distributions Upon Liquidation.................................................................22
5.3 Allocations of Profits and Losses..............................................................22
5.4 Special Allocations............................................................................22
5.5 Curative Allocations...........................................................................24
5.6 Loss Limitation................................................................................24
5.7 Tax Allocations: Code Section 704(c)..........................................................24
5.8 Other Allocation Rules.........................................................................25
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 6 STATUS OF LIMITED PARTNERS
6.1 Participation in Management....................................................................25
6.2 Limited Liability..............................................................................25
6.3 Outside Activities of Limited Partners.........................................................25
6.4 Rights of Limited Partners Relating to the Partnership.........................................26
ARTICLE 7 MANAGEMENT AND OPERATION OF BUSINESS
7.1 Authority of the General Partner...............................................................26
7.2 Issuances of Additional Partnership Interests..................................................28
7.3 Amendment of Certificate of Limited Partnership................................................29
7.4 Compensation of General Partner or Affiliates..................................................29
7.5 Expenses.......................................................................................29
7.6 Indemnification................................................................................30
7.7 Liability of the General Partner...............................................................31
7.8 Compliance with Law............................................................................32
7.9 Outside Activities of General Partner..........................................................32
ARTICLE 8 TRANSFERS OF INTERESTS IN AND WITHDRAWALS FROM THE
PARTNERSHIP
8.1 Transfer.......................................................................................33
8.2 Transfer of General Partner's Partnership Interest.............................................33
8.3 Limited Partners' Rights to Transfer...........................................................33
8.4 Substituted Limited Partners...................................................................34
8.5 Assignees......................................................................................34
8.6 General Provisions.............................................................................35
8.7 Admission of Successor General Partner.........................................................35
8.8 Removal of the General Partner.................................................................36
ARTICLE 9 DISSOLUTION
9.1 Dissolution Events.............................................................................36
9.2 Winding Up.....................................................................................37
9.3 Timing; Negative Capital Accounts..............................................................39
9.4 Deemed Distribution and Recontribution.........................................................39
9.5 Rights of Partners.............................................................................39
9.6 Notice of Dissolution..........................................................................40
9.7 Termination of Partnership and Cancellation of Certificate of Limited Partnership..............40
9.8 Reasonable Time for Winding-Up.................................................................40
9.9 Waiver of Partition............................................................................40
ARTICLE 10 POWER OF ATTORNEY
10.1 Power of Attorney..............................................................................40
10.2 Duration of Power..............................................................................42
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 11 MISCELLANEOUS
11.1 Amendments.....................................................................................42
11.2 Meetings of the Partners.......................................................................43
11.3 Complete Agreement.............................................................................44
11.4 Governing Law..................................................................................44
11.5 Binding Effect.................................................................................44
11.6 Headings.......................................................................................44
11.7 Severability...................................................................................44
11.8 Multiple Counterparts; Facsimile Signatures....................................................45
11.9 Execution of Documents.........................................................................45
11.10 Reliance on Authority..........................................................................45
11.11 No Third Party Beneficiary.....................................................................45
11.12 References to this Agreement...................................................................45
11.13 Notices........................................................................................45
11.14 Title to Partnership Property..................................................................46
11.15 Reliance on Authority of Person Signing Agreement..............................................46
11.16 Waiver.........................................................................................46
11.17 Investment Representation......................................................................46
ARTICLE 12
REGISTRATION RIGHTS
Section 12.1 Demand Registration...................................................................47
Section 12.2 Piggyback Registrations...............................................................50
Section 12.3 Shelf Registration....................................................................51
Section 12.4 Holdback Agreement....................................................................52
Section 12.5 Registration Procedures...............................................................52
Section 12.6 Suspension of Dispositions............................................................56
Section 12.7 Registration Expenses.................................................................56
Section 12.8 Indemnification.......................................................................57
Section 12.9 Successors............................................................................60
</TABLE>
-iii-
<PAGE> 5
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
OLY HIGHTOP PARENT, L.P.
This Second Amended and Restated Limited Partnership Agreement (this
"Agreement") of OLY HIGHTOP PARENT, L.P., a Delaware limited partnership (the
"Partnership"), is made and entered into as of this 6th day of January, 2000, by
and among Oly Hightop Parent GP, LLC, as the general partner (the "General
Partner"), and those parties identified as Limited Partners on a schedule (the
"Ownership Schedule") prepared by the General Partner in accordance with this
Agreement (the "Limited Partners"). This Agreement supersedes and replaces the
previous Limited Partnership Agreement for the Partnership entered into as of
September 22, 1999, as amended and restated by the First Amended and Restated
Limited Partnership Agreement for the Partnership dated November 5, 1999.
ARTICLE 1
DEFINED TERMS
1.1 Definitions. When used in this Agreement, the following terms will
have the meanings set forth below.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation
D promulgated under the Securities Act.
"ACT" means the Delaware Revised Uniform Limited Partnership
Act, as amended from time to time.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 3.2 hereof and who is shown
as such on the books and records of the Partnership.
"ADJUSTED CAPITAL ACCOUNT" means the Capital Account
maintained for each Partner as of the end of each Fiscal Year (i) increased by
any amounts that such Partner is obligated to restore pursuant to any provision
of this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
(ii) increased by such Partner's allocable share (as determined under Section
752 of the Code) of any nonrecourse indebtedness of the Partnership to the
extent that such indebtedness could not be repaid out of the Partnership's
assets if all of the Partnership's assets were sold at their respective Gross
Asset Values as of the end of the Fiscal Year and the proceeds from the sales
were used to pay the Partnership's liabilities, and (iii) decreased by the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1
<PAGE> 6
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition
of Adjusted Capital Account is intended to comply with the provisions of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account
as of the end of the relevant Fiscal Year.
"ADJUSTMENT EVENT" has the meaning specified in Section 3.6
hereof.
"ADVICE" has the meaning set forth in Section 12.6 of this
Agreement.
"AFFILIATE" or "AFFILIATED" means, as to any Person, any other
Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with such specified
Person. For the purposes of this definition, "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 "affiliated," "controlling" and
"controlled" have the meanings correlative to the foregoing. In the case of an
individual, the term "Affiliate" shall include (i) any lineal descendants of
such individual and the spouse of such individual or of such descendants, (ii)
any trusts controlled by, or established and maintained for the benefit of,
individuals included in (i) above, and (iii) the estate of any of the foregoing.
In the case of an estate, trust, or partnership, the term "Affiliate" shall
include any beneficiary or partner thereof.
"AGREEMENT" has the meaning assigned to such term in the first
paragraph hereof.
"APPROVAL" and "APPROVE" means approval in writing.
"ASSIGNEE" means a Person to whom one or more Partnership
Interests have been transferred in a manner permitted under this Agreement, but
who has not become a Substituted Partner.
"AUTHORITY" means any governmental or quasi-governmental
authority, whether administrative, executive, judicial, legislative or other, or
any combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other
political unit or subdivision or other entity of any of the foregoing, whether
domestic or foreign.
"BANKRUPTCY" means, with respect to any Partner, the first to
occur of (i) the entry of a decree or order for relief against the Partner by a
court of competent jurisdiction in any involuntary case brought against the
Partner under any bankruptcy, insolvency or other similar law (collectively,
"DEBTOR RELIEF LAWS") generally affecting the rights of creditors and relief of
debtors
2
<PAGE> 7
now or hereafter in effect; (ii) the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or other similar agent under
applicable Debtor Relief Laws for the Partner or for any substantial part of its
assets or property; (iii) the ordering of the winding up or liquidation of the
Partner's affairs; (iv) the filing of a petition in any such involuntary
bankruptcy case, which petition remains undismissed for a period of 180 days or
which is not dismissed or suspended pursuant to Section 305 of the Federal
Bankruptcy Code (or any corresponding provision of any future United States
bankruptcy law); (v) the commencement by the Partner of a voluntary case under
any applicable Debtor Relief Law now or hereafter in effect; (vi) the consent by
the Partner to the entry of an order for relief in an involuntary case under any
such law or to the appointment of or the taking of possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar agent
under any applicable Debtor Relief Laws for the Partner or for any substantial
part of its assets or property; (vii) the making by the Partner of any general
assignment for the benefit of its creditors; or (viii) the failure by the
Partner generally to pay its debts as such debts become due.
"BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York are authorized or required by
law to close.
"CAPITAL ACCOUNT" means, with respect to any Partner, the
capital account maintained for such Partner in accordance with the rules of
Section 1.704-1(b)(2)(iv) of the Regulations.
Subject to Section 1.704-1(b)(2)(iv) of the Regulations:
(i) To each Partner's Capital Account there shall be
credited such Partner's Capital Contribution (net of liabilities that
the Partnership is considered to assume or to take subject to under
Code Section 752) and such Partner's distributive share of Profits and
any items in the nature of income or gain that are specially allocated
pursuant to Section 5.4 or Section 5.5 hereof.
(ii) To each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any property
distributed to such Partner pursuant to any provision of this Agreement
(net of liabilities that such Partner is considered to assume or to
take subject to under Code Section 752) and such Partner's distributive
share of Losses and any items in the nature of expenses or losses that
are specially allocated pursuant to Section 5.4 or Section 5.5 hereof.
(iii) After the Effective Date, in the event all or a
portion of a Partnership Interest is transferred in accordance with the
terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred
Partnership Interest.
The provisions of this Agreement relating to the maintenance of Capital Accounts
are intended to comply with Section 1.704-1(b) of the Regulations, and they
shall be interpreted and applied in a manner consistent with such Regulations.
3
<PAGE> 8
"CAPITAL CONTRIBUTION" means, with respect to any Partner, the
total amount of cash or the Gross Asset Value of other property contributed (or
deemed to have been contributed) to the Partnership with respect to the
Partnership Interest held by such Partner. Any reference to the Capital
Contribution of a Partner shall include the Capital Contribution made by a
predecessor holder of the Partnership Interest of such Partner.
"CERTIFICATE" means the Certificate of Limited Partnership
filed in the office of the Delaware Secretary of State to form the Partnership,
as amended from time to time in accordance with the terms hereof and the Act.
"CLAIM" has the meaning assigned to such term in Section 7.6
hereof.
"CLASS" means a class of Partnership Interests distinguished
by a specific alphabetical or other designation.
"COMMON LIMITED PARTNER" means Oly Hightop Holding, L.P., a
Delaware limited partnership, or any other Person admitted pursuant to this
Agreement as a Common Limited Partner either pursuant to the WDOP Merger or WROP
Merger or in connection with the issuance of newly-created Common Limited
Partner Interests or as a Substituted Partner with respect to any transferred
Common Limited Partner Interests (or any portion thereof), each for only so long
as such Person remains as a Common Limited Partner in accordance with this
Agreement and the Act.
"COMMON LIMITED PARTNER INTEREST" means the Partnership
Interest of a Common Limited Partner.
"CODE" means the Internal Revenue Code of 1986, as amended and
in effect from time to time, and any successor statutory provisions thereto.
"COMPANY" means Walden Residential Properties, Inc., a
Maryland corporation or any successor thereto by way of merger, consolidation,
or transfer of all or substantially all of its assets, and any successors to
such successors by similar means.
"DEBTOR RELIEF LAWS" has the meaning assigned to such term in
the definition of "Bankruptcy" set forth in this Article 1.
"DEMAND REGISTRATION" has the meaning set forth in Section
12.1.1(a) of this Agreement.
"DEMAND REQUEST" has the meaning set forth in Section
12.1.1(a) of this Agreement.
"DISTRIBUTABLE ASSETS" means the cash, securities and any
other assets of the Partnership available to the Partnership for distribution to
the Partners, as determined by the General
4
<PAGE> 9
Partner after payment of or provision for the following with respect to the
Partnership and its Subsidiaries:
(i) all operating expenses including property taxes;
(ii) all scheduled payments of principal, interest
and other charges due during any relevant period in respect of any
indebtedness;
(iii) all expenditures for capital improvements to
assets or property;
(iv) all current liabilities (including, but not
limited to, trade payables and other accounts payable, security
deposits and property taxes payable); and
(v) Working Capital Reserves in such amounts as the
General Partner deems necessary or advisable.
"DISTRIBUTION DATE" has the meaning assigned to such term in
Section 5.1(a) hereof.
"EFFECTIVE DATE" means September 22, 1999.
"EXCESS WITHHOLDING AMOUNT" has the meaning assigned to such
term in Section 5.1(c) hereof.
"EXCHANGE ACT" has the meaning set forth in Section 12.5(f) of
this Agreement.
"EXCLUDED REGISTRATION" means a registration under the
Securities Act of (i) securities pursuant to one or more Demand Registrations
pursuant to Section 12.1 hereof, (ii) securities registered on Form S-8 or any
similar successor form and (iii) securities registered to effect the acquisition
of or combination with another Person.
"FEDERAL SECURITIES ACT" means the Securities Act of 1933, as
amended.
"FISCAL YEAR" means (i) the period commencing on the Effective
Date and ending on December 31, 1999, (ii) any subsequent twelve-month period
commencing on January 1 and ending on December 31, or (iii) any portion of a
period described in clause (ii) that is considered a short taxable year of the
Partnership for federal income tax purposes.
"GENERAL PARTNER" means Oly Hightop Parent GP, LLC, a Delaware
limited liability company, and any other Person admitted pursuant to this
Agreement in the capacity of general partner of the Partnership, each for only
so long as such Person remains as a general partner in accordance with this
Agreement and the Act.
"GENERAL PARTNER INTEREST" means a Partnership Interest of a
General Partner.
5
<PAGE> 10
"GROSS ASSET VALUE" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) As of the Effective Date, the Gross Asset Value
of the Partnership's assets shall be their gross fair market value, as
reasonably determined by the General Partner.
(ii) The initial Gross Asset Value of any asset
contributed (or deemed to have been contributed) by a Partner to the
Partnership shall be the gross fair market value of such asset, as
determined by the contributing Partner and the General Partner. The
initial Gross Asset Value of
(A) each WDOP Class B Common Unit deemed
contributed pursuant to the WDOP Merger Agreement shall be an
amount equal to the WDOP Cash Merger Consideration less any
applicable WDOP Refinancing Distribution; and
(B) each WROP Class C Unit or WROP Class D
Unit deemed contributed pursuant to the WROP Merger Agreement
shall be an amount equal to the WROP Cash Merger Consideration
less any applicable WROP Refinancing Distribution.
(iii) The Gross Asset Values of all Partnership
assets shall be adjusted to equal their respective gross fair market
values, as determined by the General Partner as of the following times:
(A) the acquisition of an additional Partnership Interest by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution, except as provided in Section 3.6; (B) the distribution
by the Partnership to a Partner of more than a de minimis amount of
property as consideration for a Partnership Interest; and (C) the
liquidation of the Partnership within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations.
(iv) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be adjusted to equal the gross fair
market value of such asset on the date of the distribution as
determined by the General Partner.
(v) The Gross Asset Values of Partnership assets
shall be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section 732(d), Code
Section 734(b) or Code Section 743(b), but only to the extent that (x)
such adjustments are taken into account in determining Capital Accounts
pursuant to clause (vi) of the definition of "Profits" or "Losses" and
(y) an adjustment pursuant to clause (iii) immediately above is not
required in connection with the transaction.
(vi) No adjustment of Gross Asset Values shall be
made in connection with any Optional Capital Contribution until after
the Adjustment Event has occurred.
6
<PAGE> 11
"HOLDER" has the meaning set forth in Section 12.1.1(a) of
this Agreement.
"INCAPACITY" or "INCAPACITATED" means, (i) as to any Partner
who is a natural Person, death, total physical disability or entry by a court of
competent jurisdiction adjudicating such Partner incompetent to manage such
Partner's estate; (ii) as to any corporation that is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or revocation
of its charter; (iii) as to any partnership that is a Partner, the dissolution
of such partnership; (iv) as to any estate that is a Partner, the distribution
by the fiduciary of the estate's entire Partnership Interest in the Partnership;
(v) as to any trustee of a trust that is a Partner, the termination of the trust
(but not the substitution of a new trustee); or (vi) as to any Partner, the
Bankruptcy of such Partner.
"INDEMNITEE" means (i) any Person made a party to a proceeding
by reason of such Person's status as (A) a Partner, (B) a director, officer,
shareholder, partner, member or employee of a Partner, or (C) any Affiliate of
any Person described in (A) or (B) hereof, and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time (whether before or after the event
giving rise to potential liability).
"INSPECTORS" has the meaning set forth in Section 12.5(f) of
this Agreement.
"IRS" means the United States Internal Revenue Service or any
successor thereto.
"LAW" shall mean any (a) administrative, judicial, legislative
or other action, code, consent decree, constitution, decree, directive,
enactment, finding, guideline, law, injunction, interpretation, judgment, order,
ordinance, policy statement, proclamation, promulgation, regulation,
requirement, rule, rule of law, rule of public policy, settlement agreement,
statute, or writ of any Authority, domestic or foreign; (b) the common law, or
other legal or quasi-legal precedent; or (c) arbitrator's, mediator's or
referee's award, decision, finding or recommendation; including, in each such
case or instance, any interpretation, directive, guideline or request, whether
or not having the force of law including, in all cases, without limitation any
particular section, part or provision thereof.
"LIEN" shall mean any of the following: mortgage; lien
(statutory or other); or other security agreement, arrangement or interest;
hypothecation, pledge or other deposit arrangement; assignment; charge; levy;
executory seizure; attachment; garnishment; encumbrance (including any easement,
exception, reservation or limitation, right of way, and the like); conditional
sale, title retention, voting agreement or other similar agreement, arrangement,
device or restriction; preemptive or similar right; the filing of any financial
statement under the Uniform Commercial Code or comparable law of any
jurisdiction; restriction on sale, transfer, assignment, disposition or other
alienation; or any option, equity, claim or right of or obligation to, any other
Person, of whatever kind and character.
"LIMITED PARTNER" means any Common Limited Partner. To the
extent a General Partner is also a Limited Partner, the General Partner shall be
entitled to exercise all rights associated
7
<PAGE> 12
with its Limited Partner Interest without regard to any duties or obligations
imposed on the General Partner in its capacity as a General Partner.
"LIMITED PARTNER INTEREST" means a Partnership Interest of a
Limited Partner.
"LIQUIDATING EVENT" has the meaning assigned to such term in
Section 9.1(b) hereof.
"LIQUIDATOR" has the meaning assigned to such term in Section
9.2 hereof.
"LOSSES" has the meaning assigned to such term in the
definition of "Profits" and "Losses" as set forth in this Article 1.
"MAJORITY IN INTEREST" means, with respect to any Partners
holding any series or Class of Partnership Interests, one or more Partners
holding such series or Class of Partnership Interests and owning more than 50%
of the Percentage Interests owned by all Partners holding that series or Class
of Partnership Interests.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in Section
12.1.4 of this Agreement.
"NASD" has the meaning set forth in Section 12.5(n) of this
Agreement.
"NEWCO" means Oly Hightop Corporation, a Maryland corporation.
"NONRECOURSE DEDUCTIONS" has the meaning assigned to such term
in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions
for a Fiscal Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"NONRECOURSE LIABILITY" has the meaning assigned to such term
in Regulations Section 1.752-1(a)(2).
"OPTIONAL CAPITAL CONTRIBUTION" has the meaning assigned to
such term in Section 3.6 hereof.
"ORGANIZATIONAL EXPENSES" means all expenses incurred in
organizing the Partnership, including all expenses incurred by the General
Partner and the Limited Partners for legal costs associated with drafting and
negotiating the terms of this Agreement.
"OWNERSHIP SCHEDULE" has the meaning assigned to such term in
the introductory paragraph hereof.
"PARTNER" means any General Partner or Limited Partner. If a
Partner transfers its Partnership Interest, such Person shall remain a Partner
in respect of such Partnership Interest until
8
<PAGE> 13
the transferee is admitted as a Substituted Partner in respect of such
Partnership Interest in accordance with this Agreement and the Act, if ever.
"PARTNER MINIMUM GAIN" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"PARTNER NONRECOURSE DEBT" has the meaning assigned to such
term in Regulations Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Fiscal Year shall be
determined in accordance the rules of Regulations Section 1.704-2(i)(2).
"PARTNERSHIP" has the meaning assigned to such term in the
first paragraph of this Agreement.
"PARTNERSHIP EXPENSES" has the meaning assigned to such term
in Section 7.5(b) hereof.
"PARTNERSHIP INTEREST" means an ownership interest in the
Partnership and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement and the Act,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in Partnership Minimum Gain, for a
Fiscal Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
"PERCENTAGE INTEREST" means for any Partner, as of any date of
determination, a fraction, expressed as a percentage, the numerator of which is
that Partner's Capital Account balance and the denominator of which is the
aggregate Capital Account balances of all Partners.
"PERSON" means an individual or a corporation, partnership,
limited liability company, trust, unincorporated organization, joint stock
company, joint venture, association or other entity, or any government, or any
agency or political subdivision thereof.
"PROFITS" and "LOSSES" means, for each Fiscal Year, an amount
equal to the Partnership's taxable income or loss as reported on the
Partnership's U.S. Partnership Return of Income (Form 1065) for such Fiscal
Year, determined in accordance with Code Section 703(a) (for
9
<PAGE> 14
this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this definition of "Profits" and "Losses"
shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in
Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Section 1.704- 1(b)(2)(iv)(i) of the
Regulations, and not otherwise taken into account in computing Profits
and Losses shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to clauses (iii) or (iv) of the
definition of Gross Asset Value, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such asset
for purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is recognized
for federal income tax purposes shall be computed by reference to the
Gross Asset Value of the property disposed of, notwithstanding that the
adjusted tax basis of such property differs from its Gross Asset Value;
(v) The depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income
or loss shall be taken into account for such Fiscal Year in accordance
with Section 1.704-1(b)(2)(iv)(g) of the Regulations;
(vi) To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Section 734(b) is
required, pursuant to Section 1.704- 1(b)(2)(iv)(m)(4) of the
Regulations, to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Partner's
Partnership Interest, the amount of such adjustment shall be treated as
an item of gain (if the adjustment increases the basis of the asset) or
loss (if the adjustment decreases such basis) from the disposition of
such asset and shall be taken into account for purposes of computing
Profits or Losses; and
(vii) Notwithstanding any other provisions of this
definition, any items which are specially allocated pursuant to Section
5.4 or Section 5.5 hereof shall not be taken into account in computing
Profits or Losses.
The amounts of the items of Partnership income, gain, loss or deduction
available to be specially allocated pursuant to Section 5.4 or Section 5.5
hereof shall be determined by applying rules analogous to those set forth in
clauses (i) through (vi) above.
10
<PAGE> 15
"QUALIFIED IPO" means an initial public offering of
Partnership Interests in an offering registered under the Securities Act which
results in the Partnership receiving gross proceeds of not less than
$30,000,000.
"RECORDS" has the meaning set forth in Section 12.5(j) of this
Agreement.
"REGISTRABLE AMOUNT" has the meaning set forth in Section
12.1.1(a) of this Agreement.
"REGISTRABLE INTERESTS" means (a) the class of Partnership
Interests issued to the Limited Partners on the Effective Date and owned by the
Limited Partners and their successors and assigns, (b) any additional
Partnership Interests owned by Persons to whom the Partnership shall hereafter
grant registration rights and (c) any securities issued or issuable with respect
to any of the securities referred to in clauses (a) and (b) above in connection
with a recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Interests, such securities shall
cease to be Registrable Interests when (i) a registration statement with respect
to the sale of such securities shall have become effective under the Securities
Act and such securities shall have been sold or otherwise transferred in
accordance with such registration statement, (ii) they shall have been sold or
otherwise transferred pursuant to Rule 144 (or any successor rule) under the
Securities Act or (iii) they shall have ceased to be outstanding.
"REQUESTING HOLDERS" has the meaning set forth in Section
12.1.1(a) of this Agreement.
"REQUIRED FILING DATE" has the meaning set forth in Section
12.1.1(b) of this Agreement.
"RECAPTURE INCOME" means any gain recognized by the
Partnership upon the disposition of any property or asset of the Partnership,
which gain is characterized as ordinary income because it represents the
recapture of deductions previously taken with respect to such property or asset.
"RECORD DATE", with respect to each distribution of
Distributable Assets pursuant to Section 5.1 hereof, means the date determined
by the General Partner which is at least 10 calendar days prior to the date of
distribution.
"REGULATIONS" means the Income Tax Regulations promulgated by
the United States Department of the Treasury, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
"REGULATORY ALLOCATIONS" has the meaning assigned to such term
in Section 5.5 hereof.
11
<PAGE> 16
"SEC" has the meaning Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER AFFILIATES" has the meaning set forth in Section 12.8
of this Agreement.
"SHELF REGISTRATION" has the meaning assigned to such term in
Section 12.3 hereof.
"STATE ACTS" has the meaning assigned to such term on the
cover page hereof.
"SUBSIDIARY" of any Person means (i) a corporation a majority
of whose outstanding shares of capital stock or other equity interests with
voting power, under ordinary circumstances, to elect directors, is at the time,
directly or indirectly, owned by such Person, by one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person, and
(ii) any other Person (other than a corporation) in which such Person, a
subsidiary of such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has (x) at
least a majority ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person.
"SUBSTITUTED PARTNER" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 8.4 hereof.
"SUSPENSION NOTICE" has the meaning set forth in Section 12.6
of this Agreement.
"TAX MATTERS PARTNER" has the meaning assigned to such term in
Section 4.6 hereof.
"TERMINATING CAPITAL TRANSACTION" means any sale or other
disposition of all or substantially all of the assets of the Partnership or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Partnership.
"TRANSACTION" means the merger of Newco with and into the
Company pursuant to the Walden Merger Agreement.
"TRANSACTION EFFECTIVE DATE" means the effective time of the
Transaction which shall occur upon the filing of the Articles of Merger
(prepared and executed in accordance with the relevant provisions of Title 8 of
the Corporations and Associations Article of the Annotated Code of Maryland and
the Maryland General Corporation Law) to evidence the Transaction with, and
acceptance for record of those Articles of Merger by, the State Department of
Assessments and Taxation of Maryland, or at such later time (but not to exceed
30 days after the Articles of Merger are accepted for record by the State of
Department of Assessments and Taxation of Maryland) specified in the Articles of
Merger.
12
<PAGE> 17
"WALDEN MERGER AGREEMENT" means the Second Amended and
Restated Agreement and Plan of Merger, dated as of January 6, 2000, among the
Company, Newco, and the Partnership.
"WDOP" means Walden/Drever Operating Partnership, L.P., a
Delaware limited partnership.
"WDOP CASH MERGER CONSIDERATION" has the meaning set forth in
the WDOP Merger Agreement.
"WDOP CLASS B COMMON LIMITED PARTNER" means a "Class B Common
Limited Partner" of WDOP as defined in the Amended and Restated Limited
Partnership Agreement of WDOP dated May 21, 1997, as amended to the date hereof.
"WDOP CLASS B COMMON UNIT" means a partnership interest of a
WDOP Class B Common Limited Partner in WDOP.
"WDOP EFFECTIVE TIME" means the effective time of the WDOP
Merger.
"WDOP MERGER" means the merger of WDOP Merger Sub, L.P., a
Delaware limited partnership, with and into WDOP pursuant to the WDOP Merger
Agreement.
"WDOP MERGER AGREEMENT" means the Second Amended and Restated
Agreement and Plan of Merger, dated as of January 6, 2000, among WDOP, WDOP
Merger Sub, L.P., a Delaware limited partnership, Parent and the Company.
"WDOP REFINANCING DISTRIBUTION" has the meaning set forth in
the WDOP Merger Agreement.
"WORKING CAPITAL RESERVES" means the amount of reserves set
aside for the proper operation of the Partnership or its Subsidiaries from time
to time in the sole discretion of the General Partner.
"WROP" means Walden Residential Operating Partnership, L.P., a
Delaware limited partnership.
"WROP CASH MERGER CONSIDERATION" has the meaning set forth in
the WROP Merger Agreement.
"WROP CLASS C LIMITED PARTNER" means a "Class C Limited
Partner" of WROP as defined in the Amended and Restated Limited Partnership
Agreement of WROP dated March 4, 1993, as amended to the date hereof.
13
<PAGE> 18
"WROP CLASS C UNIT" means a partnership interest of a WROP
Class C Limited partner in WROP.
"WROP CLASS D LIMITED PARTNER" means a "Class D Limited
Partner" of WROP as defined in the Amended and Restated Limited Partnership
Agreement of WROP dated March 4, 1993, as amended to the date hereof.
"WROP CLASS D UNIT" means a partnership interest of a WROP
Class D Limited Partner in WROP.
"WROP EFFECTIVE TIME" means the effective time of the WROP
Merger.
"WROP MERGER" means the merger of WROP Merger Sub, L.P., a
Delaware limited partnership, with and into WROP, pursuant to the WROP Merger
Agreement.
"WROP MERGER AGREEMENT" means the Second Amended and Restated
Agreement and Plan of Merger, dated as of January 6, 2000, among WROP, WROP
Merger Sub, L.P., a Delaware limited partnership, and the Company.
"WROP REFINANCING DISTRIBUTION" has the meaning set forth in
the WROP Merger Agreement.
1.2 Construction. As used herein, the singular shall include the plural
and the masculine gender shall include the feminine and neuter, and vice versa,
as the context requires; words such as "herein," "hereinafter," "hereof,"
"hereto," "hereby" and "hereunder," when used with reference to this Agreement,
refer to this Agreement as a whole, unless the context otherwise requires.
ARTICLE 2
GENERAL PROVISIONS
2.1 Purpose. The purpose and nature of the business of the Partnership
is to invest in (either directly or through the acquisition of interests in
partnerships or other entities), purchase (either directly or through the
acquisition of interests in partnerships or other entities), develop, own,
manage, lease, finance and dispose of multi-family real estate properties and
any improvements thereon, enter into any partnership, joint venture, or similar
arrangement whose primary business is to engage in any of the foregoing, or to
own interests in any entity primarily engaged in any of the foregoing, and to do
anything necessary or appropriate to accomplish the foregoing.
2.2 Powers. The Partnership shall be empowered to do any and all acts
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.
14
<PAGE> 19
2.3 Name. The name of the Partnership shall be Oly Hightop Parent, L.P.
The Partnership's business may be conducted under any other name or names
approved by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or
similar words or letters shall be included in the Partnership's name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The General Partner in its sole and absolute discretion may change
the name of the Partnership at any time and from time to time and shall furnish
written notification to the Limited Partners no later than 90 days after making
any such change.
2.4 Names and Addresses of Partners. The names and addresses of the
Partners are set forth in the books and records of the Partnership.
2.5 Place of Business. The principal place of business of the
Partnership shall be at 200 Crescent Court, Suite 1600, Dallas, Texas 75201. The
General Partner may change the place of business at any time and from time to
time by providing prompt notice to the Limited Partners. The Partnership also
may have such other offices or places of business as the General Partner
determines to be appropriate.
2.6 Additional Filings. The Partnership shall make any filings or
disclosures required by the laws of any other state with respect to the
qualification of the Partnership as a foreign limited partnership under the
internal laws of each such state.
2.7 Ownership. Unless otherwise required by applicable law, the
Partnership Interest of each Partner shall be treated as personal property for
all purposes.
2.8 No Partner Responsible for Other Partner's Commitments. No Partner
shall be responsible or liable for any indebtedness or obligation of any other
Partner incurred, either before or after the execution of this Agreement, in
good faith in carrying out the purpose of the Partnership, or hereafter
undertaken or incurred on behalf of the Partnership under or pursuant to the
terms of this Agreement, or assumed in writing by the Partnership, and the
Partnership hereby indemnifies and agrees to hold the Partners harmless from all
such obligations and indebtedness.
2.9 Term. The Partnership shall continue until the dissolution of the
Partnership pursuant to the express provisions of Article 9 hereof or as
otherwise provided by Law.
2.10 Registered Office; Registered Agent. The initial registered office
and registered agent of the Partnership in the State of Delaware shall be as set
forth in the Certificate. The General Partner may from time to time change the
registered office and the registered agent. If the General Partner changes the
Partnership's registered office or agent (or if the General Partner is notified
of a change in the registered agent's office address), the General Partner shall
promptly notify each Limited Partner of any such change.
15
<PAGE> 20
ARTICLE 3
CAPITAL CONTRIBUTIONS
3.1 Capital Contributions. The General Partner shall prepare, as soon
as practicable following the Effective Date, the Ownership Schedule which shall
be included in the books and records of the Partnership maintained by the
General Partner and which shall reflect, as of the Transaction Effective Date,
the name of each Partner and type of Partnership Interest owned by such Partner.
The books and records of the Partnership shall reflect (A) the Capital Account
of each Partner and (B) the Percentage Interest of each Partner, which
Percentage Interest shall be adjusted in the books and records of the
Partnership from time to time by the General Partner to the extent necessary to
reflect accurately redemptions, Capital Contributions, the issuance of
additional Partnership Interests, the transfer of Partnership Interests or
similar events having an effect on a Partner's Percentage Interest, including,
without limitation, the Transaction, the WDOP Merger and the WROP Merger. The
General Partner shall from time to time make additional Capital Contributions to
the Partnership to maintain the ratio of the General Partner's and Limited
Partners' Capital Contributions at 99.99% to .01%. Except as provided in the
foregoing sentence, the Partners shall have no obligation to make any additional
Capital Contributions or loans to the Partnership. Notwithstanding anything in
this Agreement to the contrary, no capital called by the Partnership (or by any
Partner) shall be deemed an asset of or contribution to the Partnership unless
and until such capital is released from custodial or escrow accounts by the
General Partner and is (i) invested by and for the account of the Partnership in
stock or other securities that the General Partner designates as Partnership
portfolio assets or (ii) used for Partnership expenses or other purposes that
the General Partner expressly authorizes.
3.2 Admission of Additional Limited Partners.
(a) At the WDOP Effective Time, the holders of WDOP Class B
Common Units whose units are converted into Common Limited Partner Interests
pursuant to the WDOP Merger shall be admitted as Common Limited Partners and
shall receive a Common Limited Partner Interest in an amount based upon the
Gross Asset Value of such holder's deemed Capital Contribution, in each case,
automatically and without any further action or Approval of any Person,
including the General Partner. The General Partner is authorized and directed to
issue the Common Limited Partner Interests to the Common Limited Partners under
this Section 3.2(a) and amend the Ownership Schedule to the extent necessary to
reflect the admission of the Common Limited Partners under this Section 3.2(a)
at the WDOP Effective Time.
(b) At the WROP Effective Time, the holders of WROP Class C
Units and WROP Class D Units whose units are converted into Common Limited
Partner Interests pursuant to the WROP Merger shall be admitted as Common
Limited Partners and shall receive a Common Limited Partner Interest in an
amount based upon the Gross Asset Value of such holder's deemed Capital
Contribution automatically and without any further action or Approval of any
Person, including the General Partner. The General Partner is authorized and
directed to issue the Common Limited Partner Interests to the Common Limited
Partners under this Section 3.2(b) and (ii) amend the
16
<PAGE> 21
Ownership Schedule to the extent necessary to reflect the admission of the
Common Limited Partners under this Section 3.2(b) at the WROP Effective Time.
(c) Except as provided in Sections 3.2(a) and 3.2(b), after
the Transaction Effective Date, a Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an "Additional Limited Partner" only upon furnishing to the
General Partner (i) a written agreement in form satisfactory to the General
Partner accepting all of the terms and conditions of this Agreement, including,
but not limited to, the power of attorney granted in Section 10.2 hereof and
(ii) such other documents or instruments as may be required in the discretion of
the General Partner in order to effect such Person's admission as an Additional
Limited Partner. The General Partner shall provide prompt notice to all Limited
Partners of the admission to the Partnership of an Additional Limited Partner.
(d) Notwithstanding anything to the contrary in this Section
3.2 and except as provided in Section 3.2(a) and (b), no Person shall be
admitted as an Additional Limited Partner without the consent of the General
Partner, which consent may be given or withheld in the General Partner's sole
and absolute discretion. Except as provided in Section 3.2(a) and (b), the
admission of any Person as an Additional Limited Partner shall become effective
on the date upon which the name of such Person is recorded on the books and
records of the Partnership as being a Partner, following the consent of the
General Partner to such admission.
(e) If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Fiscal Year, then Profits,
Losses, each item thereof and all other items allocable among Partners and
Assignees for such Fiscal Year shall be allocated among such Additional Limited
Partner and all other Partners and Assignees by taking into account their
varying interests during the Fiscal Year in accordance with Section 706(d) of
the Code, using any permissible method selected by the General Partner in its
sole discretion. Solely for purposes of making such allocations, each of such
items for the calendar month in which an admission of any Additional Limited
Partner occurs shall be allocated among all Partners and Assignees including
such Additional Limited Partner. All distributions of Distributable Assets with
respect to which the Record Date is before the date of such admission shall be
made solely to Partners and Assignees other than the Additional Limited Partner,
and all distributions of Distributable Assets thereafter shall be made to all
the Partners and Assignees including such Additional Limited Partners in
accordance with, and subject to the limitations of, this Agreement.
3.3 Return of Capital. No Partner shall have the right to demand or
receive the return of such Partner's Capital Contributions to the Partnership.
3.4 Interest on Capital Contributions. No Partner shall receive any
interest or amount computed like interest on such Partner's Capital
Contributions to the Partnership or such Partner's Capital Account,
notwithstanding any disproportion therein as between or among the Partners.
17
<PAGE> 22
3.5 No Preemptive Rights. No Person shall have any preemptive,
preferential or other similar right with respect to (i) additional Capital
Contributions or loans to the Partnership or (ii) the issuance or sale of any
Partnership Interests.
3.6 Optional Capital Contributions. If additional funds are required by
the Partnership after the Transaction Effective Date for any Partnership
purpose, the General Partner may elect to call for optional Capital
Contributions to be funded by Oly Hightop Holding, L.P., a Delaware limited
partnership, or its designee (in each case, an "Optional Capital Contribution").
Notwithstanding anything to the contrary in this Agreement, the funding of any
Optional Capital Contribution shall not cause an adjustment of the Gross Asset
Values of the Partnership assets until after the first to occur of (i) the date
that is three years after the Transaction Effective Date or (ii) the aggregate
amount of Optional Capital Contributions made pursuant to this Section 3.6
exceeds $355,000,000 (the first to occur of the events in clauses (i) and (ii)
referred to as an "Adjustment Event"). Oly Hightop Holding, L.P. or its designee
will have 15 Business Days after written notice from the General Partner to
elect to fund an Optional Capital Contribution. In exchange for any Optional
Capital Contributions, the General Partner may issue Common Limited Partner
Interests or any other class or series of Partnership Interests pursuant to
Section 7.2.
ARTICLE 4
ACCOUNTING; BOOKS AND RECORDS; TAX MATTERS
4.1 Books and Records. The books and records of the Partnership shall,
at the cost and expense of the Partnership, be kept or caused to be kept on the
accrual method of accounting for financial and tax reporting purposes by the
General Partner (or such other Person as the General Partner may from time to
time designate) at the principal place of business of the Partnership. Such
books and records shall be kept on the basis of the Partnership's Fiscal Year.
4.2 Bank Accounts. All funds of the Partnership shall be deposited in
its name in an account or accounts maintained with such bank as is determined by
the General Partner. The funds of the Partnership shall not be commingled with
the funds of any other Person except to the extent that the General Partner
utilizes sweep accounts with respect to the properties and other real property
owned or managed by affiliates of the General Partner. Checks shall be drawn
upon the Partnership account or accounts only for the purposes of the
Partnership and shall be signed by the General Partner or such Person or Persons
as are authorized by the General Partner.
4.3 Reports. As soon as practicable, but in no event later than 120
days after the close of each calendar year, the General Partner shall cause to
be mailed to each Limited Partner as of the close of the calendar year summary
financial statements of the Partnership for such calendar year, presented in
accordance with generally accepted accounting principles.
4.4 Preparation of Tax Returns. The General Partner shall arrange for
the preparation and timely filing of all returns of Partnership income, gains,
deductions, losses and other items required of the Partnership for federal and
state income tax purposes and shall use all reasonable efforts to
18
<PAGE> 23
furnish to each Limited Partner, within 60 days of the close of each taxable
year, IRS Form K-1, comparable state forms for the jurisdictions in which
income-producing property of the Partnership is located and any other tax
information reasonably required by Limited Partners for federal and state income
tax reporting purposes.
4.5 Tax Elections. Except as otherwise provided herein, the General
Partner shall, in its sole and absolute discretion, determine whether to make
any available election pursuant to the Code. The General Partner shall have the
right to seek to revoke any such election upon the General Partner's
determination in its sole and absolute discretion that such revocation is in the
best interests of the Partners.
4.6 Tax Matters Partner.
(a) The General Partner shall be the "Tax Matters Partner" of
the Partnership for federal income tax purposes. The General Partner will timely
notify the IRS as required of its designation as Tax Matters Partner. Pursuant
to Section 6230 of the Code, upon receipt of notice from the IRS of the
beginning of an administrative proceeding with respect to the Partnership, the
tax matters partner shall furnish the IRS with the name, address and profits
interest of each of the Limited Partners and the Assignees; provided, however,
that such information is provided to the Partnership by the Limited Partners and
the Assignees.
(b) Except as required by applicable Law, the Tax Matters
Partner shall not take any positions for federal income tax purposes contrary to
the intended federal income tax treatment of transactions, allocations, and
distributions described in, or made pursuant to, this Agreement. To the extent
not inconsistent with the foregoing provisions, the Tax Matters Partner is
authorized, but not required:
(i) to enter into any settlement with the IRS
with respect to any administrative or
judicial proceedings for the adjustment of
Partnership items required to be taken into
account by a Partner for income tax
purposes, to seek judicial review of such
final adjustment, including the filing of a
petition for readjustment with the Tax Court
or the United States Claims Court, or the
filing of a complaint of for refund with the
District Court of the United States for the
district in which the Partnership's
principal place of business is located;
(ii) in the event that a notice of a final
administrative adjustment at the Partnership
level of any item required to be taken into
account by a Partner for tax purposes (a
"final adjustment") is mailed to the Tax
Matters Partner, to seek judicial review of
such final adjustment, including the filing
of a petition for readjustment with the Tax
Court or the United States Claims Court, or
the filing of a complaint for
19
<PAGE> 24
refund with the District Court of the United
States for the district in which the
Partnership's principal place of business is
located;
(iii) to intervene in any action brought by any
other Partner for judicial review of a final
adjustment;
(iv) to file a request or an administrative
adjustment with the IRS at any time and if
any part of such request is not allowed by
the IRS, to file an appropriate pleading
(petition or complaint) for judicial review
with respect to such request;
(v) to enter into an agreement with the IRS to
extend the period for assessing any tax
which is attributable to any item required
to be taken into account by a Partner for
tax purposes, or an item affected by such
item; and
(vi) to take any other action on behalf of the
Partners of the Partnership in connection
with any tax audit or judicial review
proceeding to the extent permitted by Law.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by Law, is a matter in the sole and absolute discretion of the Tax
Matters Partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.6 hereof shall be fully applicable to the Tax
Matters Partner in its capacity as such.
(c) The Tax Matters Partner shall receive no compensation for
its services. All third party costs and expenses incurred by the Tax Matters
Partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging an accounting firm or a law
firm to assist the Tax Matters Partner in discharging its duties hereunder, so
long as the compensation paid by the Partnership for such services is
reasonable.
4.7 Certain Elections. The Partnership shall elect to deduct expenses,
if any, incurred by it in organizing the Partnership ratably over a sixty-month
period as provided in Section 709 of the Code. In connection with the first
transfer of a Partnership Interest permitted under this Agreement, the General
Partner shall cause the Partnership, on behalf of the Partnership and at the
time and in the manner provided in Section 1.754-1(b) of the Regulations, to
make an election to adjust the basis of the Partnership's property in the manner
provided in Sections 734(b) and 743(b) of the Code.
20
<PAGE> 25
ARTICLE 5
DISTRIBUTIONS; ALLOCATIONS
5.1 Requirement and Characterization of Distributions.
(a) Distributable Assets may be distributed by the Partnership
at such time (each a "Distribution Date") and in such amounts as the General
Partner may determine, in its sole discretion, to the General Partner and to the
Common Limited Partners in proportion to their respective Percentage Interests.
(b) The General Partner shall have the power to determine any
alternative minimum tax adjustments and tax preference items in such manner and
in such amounts as the General Partner may determine in the General Partner's
discretion.
(c) If, pursuant to (i) any provision of the Code or the
Regulations or (ii) any comparable state law, the Partnership is required to
withhold any tax with respect to a Partner's distributive share of partnership
income, gain, loss, deduction or credit, the Partnership shall withhold the
required amount and pay the same over to the taxing authorities as required by
the Code, the Regulations or state law. The amount withheld will be deducted
from the amount that would otherwise be distributed to that Partner, but will be
treated as though it had been distributed to the Partner with respect to which
the Partnership is required to withhold. If at any time the amount required to
be withheld by the Partnership exceeds the amount of money that would otherwise
be distributed to the Partner with respect to which the withholding requirement
applies on the following Record Date (the "Excess Withholding Amount"), then the
Partnership shall provide notice and a brief explanation to such Partner of the
Excess Withholding Amount and if such amount is not paid within 30 days from the
date of such notice the Excess Withholding Amount shall be considered a loan
from the Partnership to such Partner. Such loan shall bear interest at 14% until
discharged by such Partner by repayment. Any amounts otherwise distributable to
such Partner on each Record Date following such Record Date referred to in
determining the Excess Withholding Amount will be treated as a repayment of such
loan.
(d) If distributions of property (rather than cash) are made
by the Partnership, the General Partner shall treat such property as though it
were sold for its fair market value, crediting or debiting the Capital Accounts,
as the case may be, for the difference between the fair market value and basis
of such property (the hypothetical gain or hypothetical loss, as the case may
be). The General Partner shall have the discretion to distribute cash or
property to any Partner provided that the fair market value of the cash and
property received by all Partners in the distribution is in compliance with
Section 5.1(a). Fair market value shall be determined by the General Partner in
its reasonable discretion. Notwithstanding the foregoing, if the property to be
distributed is securities of another issuer and the securities are then listed
on a national securities exchange or traded over the counter, the fair market
value of the securities shall be equal to the average of the closing prices, the
average of the last sales prices, or the average of the bid and asked prices, as
the case may be, for the 20 trading days immediately preceding the distribution
date.
21
<PAGE> 26
5.2 Distributions Upon Liquidation. Proceeds from a Terminating Capital
Transaction, and any other proceeds received or reductions in reserves made
after commencement of the liquidation of the Partnership, shall be distributed
to the Partners in accordance with Section 9.2 hereof.
5.3 Allocations of Profits and Losses. After giving effect to the
special allocations set forth in Sections 5.4 and 5.5 hereof, Profits and Losses
for a Fiscal Year or other period shall be allocated for both tax and Capital
Account purposes, in the following manner:
(a) Profits shall be allocated in the following order and
priority:
(i) first, to the Common Limited Partners and
the General Partner, in proportion to and to
the extent of an amount equal to the excess,
if any, of (A) the cumulative Losses
allocated to such Partners pursuant to
Section 5.3(b)(ii) hereof for all prior
Fiscal Years, over (B) the cumulative
Profits allocated to such Partners pursuant
to this Section 5.3(a)(i) for all prior
Fiscal Years; and
(ii) thereafter, to the General Partner and the
Common Limited Partners in proportion to
their respective Percentage Interests.
(b) Losses shall be allocated in the following order and
priority:
(i) first, to the General Partner and the Common
Limited Partners in proportion to and until
the amount of Losses allocated pursuant to
this clause (i) for the current Fiscal Year
equals the excess, if any, of (A) the sum of
(I) their respective Capital Account
balances on the Effective Date, (II) the
Capital Contributions made by such Partners
subsequent to the Effective Date and (III)
the cumulative amount of Profits allocated
to such Partners pursuant to Section
5.3(a)(ii) hereof over (B) the sum of (I)
cumulative amount of Losses allocated to
such Partners pursuant to this clause (i)
for all prior Fiscal Years and (II) the
cumulative amount of distributions made to
them pursuant to Section 5.1(a) hereof; and
(ii) thereafter, to the General Partner and to
the Common Limited Partners in proportion to
their respective Percentage Interests.
5.4 Special Allocations. The following special allocations shall be
made in the following order:
(a) Notwithstanding any other provision of this Agreement to
the contrary, if in any Fiscal Year there is a net decrease in Partnership
Minimum Gain, then each Partner shall first be
22
<PAGE> 27
allocated items of Partnership income for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to the portion of such Partner's
share of the net decrease in Partnership Minimum Gain, determined in accordance
with the provisions of Regulations Section 1.704-2(g). As provided in
Regulations Section 1.704-2(j), income of the Partnership allocated for any
Fiscal Year under this subsection shall consist first of items of book gain
recognized from the disposition of Partnership property subject to Nonrecourse
Liabilities to the extent of the decrease in Partnership Minimum Gain that is
attributable to such disposition, with any remaining allocated income deemed to
be made up of a pro rata portion of the Partnership's other items of gross
income for such taxable year.
(b) Notwithstanding any other provision of this Agreement to
the contrary, except as specified in Section 5.4(a), if in any Fiscal Year there
is a net decrease in Partner Minimum Gain, then each Partner shall first be
allocated items of Partnership income for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to the portion of such Partner's
share of the net decrease in such Partner Minimum Gain, determined in accordance
with the provisions of Regulations Section 1.704-2(i). As provided in
Regulations Section 1.704-2(j), income of the Partnership allocated for any
taxable year under this subsection shall consist first of items of book gain
recognized from the disposition of Partnership property subject to Partner
Nonrecourse Debt to the extent of the decrease in Partner Minimum Gain that is
attributable to such disposition, with any remaining allocated income deemed to
be made up of a pro rata portion of the Partnership's other items of gross
income for such taxable year.
(c) In the event any Partner unexpectedly receives any
adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704- 1(b)(2)(ii)(d)(6) of
the Regulations, items of Partnership income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Regulations, the Adjusted Capital Account Deficit, if
any, of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 5.4(c) shall be made only if and to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Article 5 have been tentatively made as if this
Section 5.4(c) were not in the Agreement.
(d) In the event a Limited Partner (who is not also a General
Partner) has a deficit Capital Account at the end of any Fiscal Year that is in
excess of the sum of (i) the amount the Limited Partner is obligated to restore
pursuant to any provision of this Agreement, and (ii) the amount the Limited
Partner is deemed to be obligated to restore pursuant to Section 1.704-
1(b)(2)(ii)(c) of the Regulations, the Limited Partner shall be specially
allocated items of Partnership income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this Section 5.4(d)
shall be made only if and to the extent that the Limited Partner would have a
deficit Capital Account in excess of such sum after all other allocations
provided for in this Article 5 have been made as if Section 5.4(c) hereof and
this Section 5.4(d) were not in the Agreement.
23
<PAGE> 28
(e) Notwithstanding anything to the contrary in this
Agreement, any Partner Nonrecourse Deductions for any Fiscal Year or other
period shall be allocated to the Partner who bears the economic risk of loss
with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable.
(f) To the extent an adjustment to the adjusted tax basis of
any Partnership asset is required pursuant to Code Section 732(d), Code Section
734(b) or Code Section 743(b), the Capital Accounts of the Partners shall be
adjusted pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations.
5.5 Curative Allocations. The allocations set forth in Sections 5.4 and
5.6 hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Partners that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Partnership
income, gain, loss or deduction pursuant to this Section 5.5. Therefore,
notwithstanding any other provision of this Article 5 (other than the Regulatory
Allocations), the General Partner shall make such offsetting special allocations
of Partnership income, gain, loss or deduction in whatever manner it determines
appropriate so that, after such offsetting allocations are made, each Partner's
Capital Account balance is, to the extent possible, equal to the Capital Account
balance such Partner would have had if the Regulatory Allocations were not part
of the Agreement and all Partnership items were allocated pursuant to Section
5.3.
5.6 Loss Limitation. The Losses allocated to a Limited Partner pursuant
to Section 5.3(b) hereof shall not exceed the maximum amount of Losses that can
be so allocated without causing a Limited Partner to have an Adjusted Capital
Account Deficit at the end of any Fiscal Year. All Losses in excess of the
limitations set forth in this Section 5.6 shall be allocated among the Partners
other than the Limited Partner referred to in the immediately preceding sentence
in accordance with Section 5.3(b) hereof.
5.7 Tax Allocations: Code Section 704(c). In accordance with Code
Section 704(c) and the Regulations promulgated thereunder, income, gain, loss,
and deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with the definition of Gross Asset Value in
Section 1.1). In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to clause (v) of the definition of Gross Asset Value in
Section 1.1, subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset Value in
the same manner as under Code Section 704(c) and the Regulations promulgated
thereunder. The Partnership shall use any method approved under Section 704(c)
of the Code and the applicable regulations with respect to the assets owned by
the Partnership on the Effective Date, as chosen by the General Partner in its
sole discretion.
24
<PAGE> 29
5.8 Other Allocation Rules.
(a) Profits and Losses, each item thereof and all other items
allocable among Partners for the Fiscal Year that includes the Effective Date
shall be allocated among the Partners by taking into account their varying
interests during such Fiscal Year in accordance with Section 706(d) of the Code,
using any permissible method selected by the General Partner in its sole
discretion.
(b) Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall to the extent possible, after
taking into account other required allocations of gain pursuant to this Article
5, be characterized as Recapture Income in the same proportions and to the same
extent as such Partners have been allocated any deductions directly or
indirectly giving rise to the treatment of such gains as Recapture Income.
(c) If a Partnership Interest is transferred during any Fiscal
Year, the Profits or Losses attributable to such Partnership Interest for such
Fiscal Year shall be divided and allocated proportionately between the
transferor and the transferee in accordance with Section 8.6(d) hereof.
(d) In accordance with Section 752 of the Code and Regulations
Section 1.752- 3(a)(3), excess Nonrecourse Liabilities shall be allocated to the
Partners, to the extent possible, in accordance with their respective Percentage
Interests.
ARTICLE 6
STATUS OF LIMITED PARTNERS
6.1 Participation in Management. The Limited Partners, as such, shall
not (i) participate in the management or control of the Partnership's business,
(ii) transact any business for the Partnership, nor (iii) have the power to act
for or bind the Partnership, said powers being vested solely and exclusively in
the General Partner. The Limited Partners shall have only the voting rights
expressly set forth in this Agreement or as required under the Act.
6.2 Limited Liability. No Limited Partner shall be bound by, or
personally liable for, the expenses, liabilities, or obligations of the
Partnership, except as provided in the Act.
6.3 Outside Activities of Limited Partners. Any Limited Partner and any
officer, director, employee, agent, trustee, family member, partner, shareholder
or Affiliate of any Limited Partner shall be entitled to and may have business
interests and activities that are in direct competition with the Partnership or
that are enhanced by the activities that are in direct competition with the
Partnership or that are enhanced by the activities of the Partnership. No
Partner or any other Person shall have any rights by virtue of this Agreement or
the partnership relationship established hereby in any business ventures of any
other Person even if such opportunity is of a character that, if presented to
the Partnership, any Partner or such other Persons, could be taken by such
Person.
25
<PAGE> 30
6.4 Rights of Limited Partners Relating to the Partnership. In addition
to other rights provided by this Agreement or by the Act, each Limited Partner
shall have the right, upon five Business Days' prior written notice, at such
Limited Partner's own expense (including reimbursement for actual third party
copying and administrative charges that the General Partner may incur):
(a) to obtain a list of the name and last known business,
residence or mailing address of each Partner; and
(b) to obtain additional copies of this Agreement and the
Certificate and all amendments thereto, together with executed copies of all
powers of attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed.
ARTICLE 7
MANAGEMENT AND OPERATION OF BUSINESS
7.1 Authority of the General Partner. At all times during the existence
of this Partnership, and subject to any express Approvals otherwise required by
this Agreement, the General Partner shall have all rights and powers which may
be possessed by a general partner pursuant to the Act and shall have the
exclusive right and the obligation acting solely by itself and without the
necessity of approval by any Limited Partner or any other Person to operate,
manage and control the Partnership and its business, assets and affairs. The
General Partner shall have the authority to execute on behalf of the Partnership
such agreements, contracts, instruments and other documents as it shall from
time to time approve, such approval to be conclusively evidenced by its
execution and delivery of any of the foregoing, including, without limitation:
(i) checks, drafts, notes and other negotiable instruments; (ii) deeds of trust
and assignments of rights; (iii) contracts for the sale of assets, deeds,
leases, assignments and bills of sale; and (iv) loan agreements, mortgages,
security agreements, pledge agreements and financing statements. In addition to
the powers given to the General Partner by Law, and without limiting the
generality of the foregoing powers of the General Partner, the General Partner
shall have the power and authority to do the following on behalf of and at the
cost, expense and risk of, the Partnership:
(a) to borrow money for the Partnership from any Person,
including the General Partner or its Affiliates; provided that any loans from
the General Partner or its Affiliates must be on terms substantially similar to
those that could have been obtained from a non-Affiliate;
(b) to create a Lien on all or any part of the Partnership's
assets in order to secure loans or advances to the Partnership;
(c) to acquire by purchase, lease, contribution of property or
otherwise and own, hold, sell, convey, transfer or dispose of real or personal
property which may be necessary, convenient or incidental to the accomplishment
of the purposes of the Partnership;
26
<PAGE> 31
(d) to guarantee obligations of any Person;
(e) to collect all income of the Partnership and to satisfy
all obligations of the Partnership;
(f) to prosecute, defend and settle legal, arbitration or
administrative proceedings on behalf of or against the Partnership or, to the
extent relating to the Partnership, any of its Partners;
(g) to make investments in or loans to any Subsidiary of the
Partnership on such terms and conditions as the General Partner deems advisable
and in the best interest of the Partnership;
(h) to make capital contributions to any Subsidiary;
(i) to dissolve or liquidate any Subsidiaries of the
Partnership;
(j) to establish Working Capital Reserves;
(k) to pay, collect, compromise, settle, arbitrate or
otherwise adjust any and all claims or demands of or against or relating to the
Partnership;
(l) to employ at the Partnership's expense such Persons,
firms, companies, agents, employees, attorneys, accountants, financial advisors,
appraisers, surveyors, engineers, architects, business consultants and such
other professionals under terms and conditions and for such amounts as are
commercially reasonable and appropriate;
(m) to establish, maintain or close one or more bank accounts
in the Partnership's name for the Partnership funds, authorize designees to
disburse such funds on behalf of the Partnership, and, for such purpose, certify
the adoption of appropriate banking resolutions;
(n) to issue any additional Partnership Interests and admit
additional Partners in accordance with Section 7.2;
(o) subject to the restrictions of Section 11.1, to amend this
Agreement and the Certificate;
(p) to admit the transferee of a Partner's Partnership
Interest as a Substituted Partner in accordance with Section 8.4;
(q) subject to the restrictions of Section 7.5, receive
reimbursement for Partnership Expenses incurred on behalf of the Partnership and
paid by the General Partner or any of its Affiliates;
27
<PAGE> 32
(r) to exercise the voting rights of the Partnership on
account of its ownership of any voting securities held by the Partnership as the
General Partner deems appropriate;
(s) to distribute cash or other assets of the Partnership to
the Partners in accordance with Article 5 of this Agreement;
(t) to sell, exchange or otherwise dispose of all or
substantially all of the Partnership assets;
(u) to merge or otherwise consolidate the Partnership with any
other entity, or effect a reorganization of the Partnership, pursuant to the Act
or otherwise;
(v) to dissolve the Partnership, except as otherwise provided
in Section 9.1, or continue the Partnership after its dissolution due to an
event described in Section 9.1;
(w) to call for Optional Capital Contributions pursuant to
Section 3.6 hereof as necessary to meet the Partnership's obligations; and
(x) to perform all other necessary and appropriate acts in
connection with the Partnership business.
7.2 Issuances of Additional Partnership Interests. The General Partner
is hereby authorized to cause the Partnership from time to time to issue to
Persons additional Partnership Interests in one or more classes, or one or more
series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties all as shall
be determined by the General Partner in its sole and absolute discretion and
without the approval of any of the Limited Partners, including, but not limited
to, (i) the allocations of items of Partnership income, gain, loss, deduction
and credit to each such class or series of Partnership Interests; (ii) the right
of each such class or series of Partnership Interests to share in Partnership
distributions; (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership; (iv) the price at
and the terms and conditions on which such class or series of Partnership
Interests may be redeemed by the Partnership, if such Partnership Interests are
redeemable by the Partnership; (v) the rate at and the terms and conditions on
which such class or series of Partnership Interests may be converted into any
other class or series of Partnership Interests of the Partnership, if any class
or series of Partnership Interests are issued with the privilege of conversion;
and (vi) the right of such class or series of Partnership Interests to vote on
matters relating to the relative rights and preferences of such class. Upon the
issuance of any class or series of Partnership Interests which shall not be
identical to the Partnership Interests issued on the Effective Date, the General
Partner (pursuant to the General Partner's power of attorney from the Limited
Partners), without the consent at the time of any Limited Partner or Assignee,
may amend any provision of this Agreement (including without limitation Article
5 and Article 9) and may add any new provision to this Agreement, and execute,
swear to, acknowledge, deliver, file and record an amended Certificate of
Limited Partnership and whatever other documents may be required in connection
therewith, as shall
28
<PAGE> 33
be necessary or desirable to reflect the issuance of such class or series of
Partnership Interests and the relative rights and preferences of such class or
series of Partnership Interests as to the matters set forth in the preceding
sentence. The General Partner shall do all things necessary to comply with the
Act and is authorized and directed to do all things it deems to be necessary or
advisable in connection with any such future issuance to reflect the issuance of
the Partnership Interest and the admission of any Partner acquiring the
Partnership Interest, including, without limitation, compliance with any
statute, rule, regulation or guideline of any federal, state or other
governmental agency or any securities exchange on which the Partnership
Interests or other such security is listed for trading.
7.3 Amendment of Certificate of Limited Partnership. To the extent that
such action is determined by the General Partner to be reasonable and necessary
or appropriate and provided that such action is not inconsistent with any
provision of this Agreement, the General Partner shall file amendments to and
restatements of the Certificate and do all the things to maintain the
Partnership as a limited partnership (or a partnership in which the limited
partners have limited liability) under the laws of the State of Delaware and
each other state or the District of Columbia in which the Partnership may elect
to do business or own property. The General Partner shall not be required,
before filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner. The General Partner shall use all reasonable
efforts to cause to be filed such other certificates or documents as may be
reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability to the extent provided by applicable
law) in the State of Delaware and any other state or the District of Columbia in
which the Partnership may elect to do business or own property.
7.4 Compensation of General Partner or Affiliates. Other than the
General Partner's right to distributions and expense reimbursement as described
herein, neither the General Partner nor any of its Affiliates shall be entitled
to any fees or other compensation in connection with the discharge of the
General Partner's duties hereunder.
7.5 Expenses.
(a) The Partnership shall be responsible for and shall pay or
reimburse the General Partner for all Partnership Expenses. All Partnership
Expenses shall be paid out of Working Capital Reserves and other funds of the
Partnership determined by the General Partner to be available for such purpose.
As used herein, the term "Partnership Expenses" means the Organizational
Expenses and all other costs, expenses or obligations of the Partnership
incurred by the Partnership or by the General Partner or any of its Affiliates
on behalf of the Partnership in connection with the conduct of the business and
affairs of the Partnership, including without limitation:
(i) all costs and expenses related to the business of
the Partnership, including, without limitation, all costs and
expenses of acquiring, holding and disposing of any
Partnership investments and any financings related thereto;
29
<PAGE> 34
(ii) all routine third party expenses incurred in the
formation and day-to-day operation of the Partnership, such as
legal and accounting, maintenance of books and records of the
Partnership, obtaining valuations or appraisals of the
Partnership's assets, the preparation and dispatch to the
Partners of checks, financial reports, tax returns and notices
required pursuant to this Agreement and the holding of
meetings of the Partners and other out-of-pocket expenses of
the General Partner and its Affiliates incurred to third
parties who are not Affiliates of the General Partner in
connection with the business of the Partnership;
(iii) all expenses incurred in connection with the
registration, qualification or exemption of the Partnership
under any applicable federal, state, local or foreign Law;
(iv) all expenses incurred in connection with any
litigation or administrative or arbitration proceedings
involving or related to the Partnership (including the cost of
any investigation and preparation) and the amount of any
judgment or settlement paid in connection therewith; and
(v) the cost of preparing and filing, on behalf of
the Partnership, all required local, state and federal tax
returns, reports with the SEC and other documents relating to
the Partnership.
(b) If the Company is merged into the Partnership pursuant to
the Transaction, the Partnership shall assume the obligations of the Company
under a monitoring agreement to be entered into between the Company and Oly
Hightop Holding, L.P. All payments made under the Monitoring Agreement to an
Affiliate of the General Partner shall be treated as Partnership Expenses.
7.6 Indemnification.
(a) The Partnership shall indemnify and hold harmless each
Indemnitee from and against any and all claims, actions, demands, losses, costs,
expenses (including attorneys' fees), and damages based upon or resulting or
arising from any act or any failure to act by the Indemnitee (except for an act
or failure to act constituting gross negligence or willful misconduct) or by
reason of the Indemnitee's position as such (a "Claim") to the full extent
permitted under the Act. The indemnification authorized by this Section 7.6
shall include any judgment, award, settlement, and the payment of reasonable
attorneys' fees and other expenses (not limited to taxable costs) incurred in
settling or defending any claims, threatened action or actual legal or
arbitration proceeding. The Partnership shall pay any and all costs, expenses
(including attorneys' and expert witnesses' fees), and obligations paid or
incurred by the Indemnitee in connection with investigating, defending, being a
witness in or participating in (including on appeal), or preparing to defend, be
a witness in or participate in, any Claim with respect to which indemnification
is permitted under the Act (or, if applicable, reimburse the Indemnitee for any
and all such costs, expenses and obligations previously paid by it) in advance
of the final disposition or conclusion of such Claim. If, when, and to the
extent
30
<PAGE> 35
that it shall be finally judicially determined that the Indemnitee would not be
permitted to be indemnified with respect to a Claim under applicable Law or
pursuant to the terms hereof, then, upon such final determination, the
Indemnitee shall reimburse the Partnership without interest for all amounts so
advanced to it by the Partnership or paid on its behalf by the Partnership.
(b) The indemnification provided by this Section 7.6 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity unless otherwise provided in a written
agreement with such Indemnitee or in the writing pursuant to which such
Indemnitee is indemnified.
(c) In no event shall any Partner be liable to any Indemnitee
by reason of the indemnification provisions set forth in this Agreement.
(d) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 7.6 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
7.7 Liability of the General Partner.
(a) Neither the General Partner nor any Affiliate of the
General Partner, nor any officer, director, manager, member, employee,
stockholder, or partner of the General Partner or any of its Affiliates, shall
be liable, responsible, or accountable in damages or otherwise to the
Partnership or any Partner by reason of, arising from, or relating to the
operations, business, or affairs of or any action taken or failure to act on
behalf of the Partnership, the General Partner, or any of their respective
Affiliates, except to the extent that any of the foregoing is determined, by a
final, nonappealable order of a court of competent jurisdiction, to have been
primarily caused by the gross negligence, willful misconduct, or bad faith of
the person claiming exculpation.
(b) The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership and the Partners, that,
except as expressly provided herein, the General Partner is under no obligation
to consider the separate interests of the Limited Partners alone in deciding
whether to cause the Partnership to take (or decline to take) any actions, and
that the General Partner shall not be liable for damages to the Partnership or
any Partner for losses sustained, liabilities incurred, or benefits not derived
by Limited Partners in connection with such decisions, so long as the General
Partner has acted in good faith and with fair dealing and without gross
negligence.
(c) The General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by it in good faith and without gross negligence.
31
<PAGE> 36
(d) Any amendment, modification or repeal of this Section 7.7
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability to the Partnership and
the Limited Partners under this Section 7.7 as in effect immediately prior to
such amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
(e) In exercising its authority under this Agreement, the
General Partner may, but shall be under no obligation to, take into account the
tax consequences to any Partner of any action taken by it. The General Partner
and the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner pursuant
to its authority under this Agreement.
7.8 Compliance with Law. The General Partner shall manage the affairs
of the Partnership in accordance with all applicable Laws. Each Partner hereby
agrees to cooperate and use its reasonable best efforts to assist the
Partnership in obtaining or making any and all consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any Authority
required by or with respect to the Partnership of such Partner in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
7.9 Outside Activities of General Partner. Any General Partner and any
officer, director, employee, agent, trustee, member, partner, shareholder or
Affiliate of any General Partner shall be entitled to and may have business
interests and activities that are in direct competition with the Partnership or
that are enhanced by the activities that are in direct competition with the
Partnership or that are enhanced by the activities of the Partnership. No
Partner or any other Person shall have any rights by virtue of this Agreement or
the partnership relationship established hereby in any business ventures of any
other Person even if such opportunity is of a character that, if presented to
the Partnership, any Partner or such other Persons, could be taken by such
Person.
ARTICLE 8
TRANSFERS OF INTERESTS IN AND
WITHDRAWALS FROM THE PARTNERSHIP
8.1 Transfer.
(a) The term "transfer," when used in this Article 8 with
respect to a Partnership Interest, shall be deemed to refer to a transaction by
which a Partner purports to assign all or any part of its Partnership Interest
to another Person, and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise.
32
<PAGE> 37
(b) No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article 8. Any transfer or purported transfer of a Partnership Interest not made
in accordance with this Article 8 shall be null and void.
8.2 Transfer of General Partner's Partnership Interest. The General
Partner shall not transfer all or any part of its General Partner Interest,
whether now owned or hereafter acquired, except in accordance with the terms of
this Section 8.2. The General Partner may transfer its General Partner Interest
(a) without the Approval of any other Partner if such transfer is made to (i) an
Affiliate of the General Partner, (ii) any Person with which the General Partner
merges or consolidates or effects some other business combination, or (iii) any
Person that acquires all or substantially all of the assets of the General
Partner or (b) with the Approval of a Majority in Interest of the Limited
Partners of each Class, which the Limited Partners may, in their sole
discretion, grant or deny. To the extent that both the General Partner that
transfers its General Partner Interest in compliance with this Section 8.2 and
the transferee of such interest express their intent in writing that the
transferee become a Substituted Partner in respect of the transferred General
Partner Interest, each Limited Partner hereby consents to such substitution.
8.3 Limited Partners' Rights to Transfer.
(a) The transfer of all or any portion of a Partnership
Interest by a Limited Partner shall not require the consent of any other Limited
Partner. No Limited Partner shall have the right to transfer all or any portion
of its Partnership Interest without the prior written consent of the General
Partner which consent may be given or withheld in the General Partner's sole and
absolute discretion; provided, however, that a Limited Partner shall have the
right to transfer all or any portion of its Partnership Interest without the
consent of the General Partner (i) to an Affiliate of such Limited Partner, (ii)
by operation of law or (iii) in accordance with the laws of descent and
distribution.
(b) If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator or receiver
of such Limited Partner's estate shall have all the rights of a Limited Partner,
but no more rights than those enjoyed by other Limited Partners, for the purpose
of settling or managing the estate and such power as the incapacitated Limited
Partner possessed to transfer all or any part of its Partnership Interest. The
Incapacity of a Limited Partner, in and of itself, shall not dissolve or
terminate the Partnership.
(c) Notwithstanding any provision herein to the contrary, no
transfer by a Limited Partner of such Partner's Partnership Interest may be made
to any Person if in the opinion of legal counsel for the Partnership, it would
result in (i) the Partnership being treated, for federal income tax purposes, as
an association taxable as a corporation or a "publicly traded partnership"
within the meaning of Section 7704(b) of the Code or (ii) the violation of any
applicable Law.
8.4 Substituted Limited Partners.
33
<PAGE> 38
(a) Except as provided in Section 8.3(a), upon the transfer of
a Limited Partner Interest permitted by this Article 8, the transferee shall not
become a Substituted Partner unless and until (i) the transferee on or prior to
the date of the transfer agrees in writing to become a Partner in the
Partnership bound by all of the terms and conditions of this Agreement, (ii) the
transferee pays all reasonable expenses of the Partnership incurred in
connection with such substitution and assumes all obligations of the
transferring Partner under this Agreement, (iii) the transferring Partner and
its transferee execute and deliver such instruments and agreements as counsel
for the Partnership deems reasonably necessary or desirable to effect such
substitution, and (iv) the General Partner consents to such substitution which
consent may be given or withheld in the General Partner's sole and absolute
discretion.
(b) A transferee who has been admitted as a Substituted
Partner in accordance with this Article 8 shall have all the rights and powers
and be subject to all the restrictions and liabilities of a Limited Partner
under this Agreement.
(c) Upon the admission of a Substituted Partner, the General
Partner shall amend the Ownership Schedule to reflect the Capital Account and
Percentage Interest of such Substituted Partner and to eliminate or adjust, if
necessary, the name, address and interest of the predecessor of such Substituted
Partner.
8.5 Assignees. If the transferee of a Partnership Interest has not
become a Substituted Partner pursuant to the terms of this Article 8, such
transferee shall be considered an Assignee for purposes of this Agreement. To
the extent so assigned, an Assignee shall be entitled to receive distributions
from the Partnership and the share of Profits, Losses, and any other items of
income, gain, loss, deduction and credit of the Partnership attributable to the
Partnership Interest assigned to such transferee but shall not be deemed to be a
holder of a Partnership Interest for any other purpose under this Agreement, and
shall not be entitled to vote such Partnership Interest or Approve any matter
presented to the Partners for a vote or Approval (and the Partner who assigned
the Partnership Interest to the Assignee shall remain entitled to vote such
Partnership Interest or Approve but shall not have any other rights under this
Agreement with respect to such Partnership Interest). In the event any such
transferee desires to make a further assignment of any such Partnership
Interest, such transferee shall be subject to all the provisions of this Article
8 to the same extent and in the same manner as any Partner desiring to make an
assignment of Partnership Interests.
8.6 General Provisions.
(a) No Limited Partner may withdraw from the Partnership other
than as a result of a permitted transfer of all of such Limited Partner's
Partnership Interest in accordance with this Article 8.
(b) Any Limited Partner who shall transfer all of his
Partnership Interest in a transfer permitted pursuant to this Article 8 shall
cease to be a Limited Partner upon the admission of all Assignees of such
Partnership Interest as Substituted Limited Partners.
34
<PAGE> 39
(c) Other than with respect to Assignees under Section 8.5
hereof, transfers pursuant to this Article 8 may only be made on the first or
last day of a calendar month, unless the General Partner otherwise agrees.
(d) If any Partnership Interest is transferred or assigned in
compliance with the provisions of this Article 8 on any day other than the first
day of a Fiscal Year, then Profits, Losses, each item thereof and all other
items attributable to such Partnership Interest for such Fiscal Year shall be
allocated to the transferor Partner and to the transferee Partner, by taking
into account their varying interests during the Fiscal Year in accordance with
Section 706(d) of the Code, using any permissible method selected by the General
Partner, in its sole discretion. Solely for purposes of making such allocations,
for assignments that occur on or prior to the 15th day of a calendar month each
of such items for the calendar month in which the assignment occurs shall be
allocated to the assignor, and for assignments that occur after the 15th day of
a calendar month each of such items for the calendar month in which the
assignment occurs shall be allocated to the Assignee. All distributions of
Distributable Assets attributable to such Partnership Interest with respect to
which the Record Date is before the date of such transfer or assignment shall be
made to the transferor Partner and all distributions of Distributable Assets
thereafter attributable to such Partnership Interest shall be made to the
transferee Partner.
8.7 Admission of Successor General Partner. A successor to all of the
General Partner Interest pursuant to Section 8.2 or Section 8.8 hereof shall be
admitted to the Partnership as the substituted General Partner, effective as of
the date of, and immediately prior to the time of, such transfer or election.
The successor General Partner shall carry on the business of the Partnership
without dissolution. The admission of the successor General Partner shall be
subject to such successor's execution and delivery of a written agreement
accepting all of the terms and conditions of this Agreement, together with such
other documents or instruments as may be required by the Act to effect the
admission of the new General Partner to the Partnership, including a certificate
of amendment to this Agreement and/or an amended Certificate. In the event that
an admission occurs on any day other than the first day of a Fiscal Year, all
items attributable to the General Partner Interest for such Fiscal Year shall be
allocated between the transferring General Partner and such successor as
provided in Section 8.6(d) hereof.
8.8 Removal of the General Partner. During the term of this
Partnership, the General Partner may be removed (a) by the vote of a Majority in
Interest of the Common Limited Partners only for gross negligence or willful
misconduct on the part of the General Partner as determined in a final and
non-appealable judicial action or (b) at any time without cause by the vote of
the holders of at least 75% of the Common Limited Partner Interests. Any such
removal shall become effective immediately following such determination, and
upon its removal the General Partner shall automatically become a Common Limited
Partner of the Partnership. In such event, a Majority in Interest of the Common
Limited Partners (not including the former General Partner) may (a) elect a
substituted General Partner in the place and stead of the General Partner in
order to avoid the dissolution of the Partnership in accordance with the
provisions of Section 9.1(c) and (b) transfer a portion of their Partnership
Interest to the substituted General Partner such that the substituted
35
<PAGE> 40
General Partner shall acquire a .01% Percentage Interest which shall be taken
from the Percentage Interests of all Common Limited Partners (other than the
former General Partner) proportionately in accordance with the ratios of such
interests. The admission of the substituted General Partner shall be effective
as of the date of removal of the former General Partner. If the General Partner
is removed under this Section 8.8, the holders of a Majority in Interest of the
Common Limited Partners (other than the former General Partner) may amend any
provision of this Agreement necessary to effect the removal of the General
Partner.
ARTICLE 9
DISSOLUTION
9.1 Dissolution Events.
(a) Except as set forth in this Article 9, no Partner shall
have the right to dissolve the Partnership. The Partnership shall not be
dissolved by the admission of Substituted Partners or Additional Limited
Partners, or by the admission of a successor General Partner in accordance with
the terms of this Agreement. Upon the transfer of the Partnership Interest of
the General Partner under Section 8.2 hereof, any successor General Partner
shall continue the business of the Partnership.
(b) The Partnership shall dissolve, and its affairs shall be
wound up, upon the first to occur of any of the following ("Liquidating Event"):
(i) an event of withdrawal of the General
Partner, as defined in the Act, including
the removal of the General Partner under
Section 8.8 hereof;
(ii) an election to dissolve the Partnership is
made by the General Partner upon 30 days'
written notice to all Limited Partners;
(iii) the entry of a decree of judicial
dissolution of the Partnership pursuant to
Section 17-802 of the Act or any successor
provision;
(iv) the sale or disposition of all or
substantially all of the assets and
properties of the Partnership; or
(v) the Bankruptcy of the General Partner.
(c) Election to Continue the Partnership. Following a
Liquidating Event described in Section 9.1(b)(i) or (v) hereof, the business of
the Partnership shall be continued with the Partnership properties and assets,
and such properties and assets shall not be liquidated, provided the Partnership
is continued as set forth in this Section 9.1(c). The Partnership and its
business shall be continued pursuant to this Section 9.1(c) if, within 90 days
after the occurrence of such Liquidating
36
<PAGE> 41
Event, a Majority in Interest of the remaining Partners elect to continue the
Partnership and elect a Person to be admitted, effective as of the date of the
Liquidating Event, to the Partnership as successor General Partner. Upon the
satisfaction of all conditions necessary to the continuation of the Partnership,
including the admission of a successor General Partner and the amendment of the
Partnership's Certificate (if required by applicable law), the Partnership shall
be continued without any further Approval of any Partner, in which case the
Partnership shall continue to conduct the business of the Partnership with the
Partnership's properties and assets in accordance with, and the Partnership and
interests of the Partners shall continue to be governed by, the terms and
provisions of this Agreement.
9.2 Winding Up.
(a) Upon the occurrence of a Liquidating Event (other than
those described in Section 9.1(b)(i) or (v) hereof) or upon the expiration of
the 90 day period for continuation of the Partnership set forth in Section
9.1(c) hereof with respect to Liquidating Events described in Section 9.1(b)(i)
or (v) hereof if no election to continue the Partnership has occurred, the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. No Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the
Partnership's business and affairs. The General Partner or, in the event there
is no remaining General Partner, any Person elected by a Majority in Interest of
the Limited Partners (the General Partner or such other Person being referred to
herein as the "Liquidator") shall be responsible for overseeing the winding up
and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom shall be applied and distributed in the following
order:
(i) First, to the payment and discharge of all
of the Partnership's debts and liabilities
to creditors other than the Partners;
(ii) Second, to the payment and discharge of all
of the Partnership's debts and liabilities
to the Partners; and
(iii) The balance, if any, to the General Partner
and the Common Limited Partners pro rata in
accordance with the positive balances of
their Capital Accounts, after giving effect
to all contributions, distributions, and
allocations for all periods (including, if
applicable, the allocation of Profit and
Loss realized from or in connection with the
Liquidating Event and the winding up of the
Partnership under this Section 9.2).
The General Partner shall not receive any compensation for any services
performed pursuant to this Article 9.
37
<PAGE> 42
(b) Notwithstanding the provisions of Section 9.2(a) hereof
that require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, the Liquidator may, in its sole and
absolute discretion, defer for a reasonable time the liquidation of any assets
except those necessary to satisfy liabilities of the Partnership (including to
those Partners as creditors) and/or distribute to the Partners in lieu of cash,
in accordance with the provisions of Section 9.2(a) hereof, such Partnership
assets as the Liquidator deems not suitable for liquidation. The Liquidator
shall have the discretion to distribute cash or property to any Partner provided
that the fair market value of the cash and property received by all Partners in
the distribution is distributed in accordance with Section 9.2(a)(iii). In the
event that assets of the Partnership are distributed in kind to the Partners,
adjustments to the Partners' Capital Accounts for purposes of determining the
amount of such assets distributable to each of the Partners shall be made by
taking into account the hypothetical gain or loss that would have been
recognized had the assets been sold for their fair market value on the date of
the distribution in kind. The Liquidator shall determine the fair market value
of any property distributed in kind using such reasonable method of valuation as
it may adopt. Notwithstanding the foregoing, if the property to be distributed
is securities of another issuer and the securities are then listed on a national
securities exchange or traded over the counter, the fair market value of the
securities shall be equal to the average of the closing prices, the average of
the last sales prices, or the average of the bid and asked prices, as the case
may be, for the 20 trading days immediately preceding the distribution date.
(c) In the discretion of the Liquidator, a pro rata portion of
the distributions that would otherwise be made to the General Partner and
Limited Partners pursuant to this Article 9 may be:
(i) distributed to a trust established for the
benefit of the Partners for the purposes of
liquidating Partnership assets, collecting
amounts owed to the Partnership, and paying
any contingent or unforeseen liabilities or
obligations of the Partnership or the
Partners arising out of or in connection
with the Partnership. The assets of any such
trust shall be distributed to its
beneficiaries as soon as practicable, in the
reasonable discretion of the Liquidator, in
the same proportions as the amount
distributed to such trust by the Partnership
would otherwise have been distributed to the
Partners who are such beneficiaries or from
whom the beneficiaries derived such status
pursuant to this Agreement; or
(ii) withheld or escrowed to provide a reasonable
reserve for Partnership liabilities
(contingent or otherwise) and to reflect the
unrealized portion of any installment
obligations owed to the Partnership,
provided that such withheld or escrowed
amounts shall be distributed to the Partners
in the manner and order of priority set
forth in Section 9.2(a) as soon as
practicable.
38
<PAGE> 43
9.3 Timing; Negative Capital Accounts. In the event that the
Partnership is "liquidated" upon the occurrence of a Liquidating Event within
the meaning of Regulations Section 1.704- 1(b)(2)(ii)(g), distributions shall be
made pursuant to this Article 9 to the General Partner and Limited Partners who
have positive balances in their Capital Accounts in compliance with Regulations
Section 1.704-1(b)(2)(ii)(b)(2). No Partner shall be liable to the Partnership
or to any other Partner for any negative balance outstanding in each such
Partner's Capital Account, whether such negative Capital Account results from
the allocation of Losses or other items of deduction and loss to such Partner or
from distributions to such Partner, and such Partner shall not have any
obligation to make any contribution to the capital of the Partnership with
respect to such deficit and such deficit shall not be considered a debt owed to
the Partnership or, except as required by the Act with respect to a deficit of
the General Partner, to any other Person for any purpose whatsoever.
9.4 Deemed Distribution and Recontribution. Notwithstanding any other
provision of this Article 9, in the event the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event
has occurred, the Partnership's property shall not be liquidated, the
Partnership's liabilities shall not be paid or discharged, and the Partnership's
affairs shall not be wound up. Instead, for federal income tax purposes and for
purposes of maintaining Capital Accounts pursuant to this Agreement, the
Partnership shall be deemed to have distributed the property in kind to the
General Partner and Limited Partners, who shall be deemed to have assumed and
taken such property subject to all Partnership liabilities, all in accordance
with their respective Capital Accounts. Immediately thereafter, the General
Partner and Limited Partners shall be deemed to have recontributed the
Partnership property in kind to the Partnership, which shall be deemed to have
assumed and taken such property subject to all such liabilities.
9.5 Rights of Partners. Except as otherwise provided in this Agreement,
each Partner shall look solely to the assets of the Partnership for the return
of his Capital Contributions and shall have no right or power to demand or
receive property other than cash from the Partnership. Except as otherwise
provided in this Agreement, no Partner shall have priority over any other
Partner as to the return of his Capital Contributions, distributions, or
allocations.
9.6 Notice of Dissolution. In the event a Liquidating Event occurs or
an event occurs that would, but for an election or vote by one or more Partners
required pursuant to Section 9.1 hereof, result in a dissolution of the
Partnership, the General Partner shall, within 30 days thereafter, provide
written notice thereof to each of the Partners.
9.7 Termination of Partnership and Cancellation of Certificate of
Limited Partnership. Upon the completion of the liquidation of the Partnership
cash and property as provided in Section 9.2 hereof, the Partnership shall be
terminated, a certificate of cancellation shall be filed, and all qualifications
of the Partnership as a foreign limited partnership in jurisdictions other than
the State of Delaware shall be canceled and such other actions as may be
necessary to terminate the Partnership shall be taken.
39
<PAGE> 44
9.8 Reasonable Time for Winding-Up. A reasonable time shall be allowed
for the orderly winding-up of the business and affairs of the Partnership and
the liquidation of its assets pursuant to Section 9.2 hereof, in order to
minimize any losses otherwise attendant upon such winding-up, and the provisions
of this Agreement shall remain in effect between the Partners during the period
of liquidation.
9.9 Waiver of Partition. Each Partner hereby waives any right to
partition of the Partnership property.
ARTICLE 10
POWER OF ATTORNEY
10.1 Power of Attorney.
(a) Each Limited Partner and each Assignee hereby constitutes
and appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to, and provided that
any action taken pursuant to the power granted to any such Person pursuant to
this Section 10.1 is not inconsistent with any other provision of this
Agreement,:
(i) execute, swear to, seal, acknowledge,
deliver, file and record in the appropriate
public offices (A) all certificates,
documents and other instruments (including,
without limitation, this Agreement and the
Certificate and all amendments or
restatements thereof) that the General
Partner or the Liquidator deems appropriate
or necessary to form, qualify or continue
the existence or qualification of the
Partnership as a limited partnership (or a
partnership in which the limited partners
have limited liability to the extent
provided by applicable law) in the State of
Delaware and in all other jurisdictions in
which the Partnership may or plans to
conduct business or own property; (B) all
instruments that the General Partner or
Liquidator deems appropriate or necessary to
reflect any amendment, change, modification
or restatement of this Agreement as
permitted in and in accordance with this
Agreement; (C) all conveyances and other
instruments or documents that the General
Partner deems appropriate or necessary to
reflect the dissolution and liquidation of
the Partnership pursuant to the terms of
this Agreement, including, but not limited
to, a certificate of cancellation; (D) all
instruments relating to the admission,
withdrawal, removal or substitution of any
Partner pursuant to, or other events
described in, Articles 7, 8 or 9 hereof or
the Capital Contribution of any Partner; and
(E) all certificates,
40
<PAGE> 45
documents and other instruments relating to
the determination of the rights, preferences
and privileges of Partnership Interests; and
(ii) execute, swear to, seal, acknowledge and
file all ballots, consents, approvals,
waivers, certificates and other instruments
appropriate or necessary, in the sole and
absolute discretion of the General Partner
or Liquidator, to evidence, confirm or
ratify any vote, consent, approval,
agreement or other action which is made or
given by the Partners hereunder or is
consistent with the terms of this Agreement
or appropriate or necessary, in the sole
discretion of the General Partner or
Liquidator, to effectuate the terms or
intent of this Agreement.
(b) The foregoing grant of authority:
(i) is a special power of attorney coupled with an
interest in favor of the General Partner and, as such, shall be
irrevocable and shall survive the dissolution of all or any of the
Limited Partners or Assignees; and
(ii) may be exercised for each Limited Partner or
Assignee by a signature of the General Partner or by listing the names
of all the applicable Limited Partners and Assignees and executing any
instrument with the signature of the General Partner acting as
attorney-in-fact for all of them.
(c) Nothing contained herein shall be construed as authorizing
the General Partner or Liquidator to amend this Agreement except in accordance
with the terms of Section 11.1 hereof or as may be otherwise expressly provided
for in this Agreement.
10.2 Duration of Power. The power of attorney granted herein is hereby
declared to be irrevocable and a power coupled with an interest in recognition
of the fact that each of the Partners will be relying upon the power of the
General Partner or Liquidator to act as contemplated by this Agreement in any
filing or other action by it on behalf of the Partnership, and it shall survive
and not be affected by the subsequent Incapacity of any Limited Partner or
Assignee and the transfer of all or any portion of such Limited Partner's or
Assignee's Partnership Interest, shall survive the Incapacity of the Limited
Partner, and shall extend to such Limited Partner's or Assignee's heirs,
successors, assigns and personal representatives. Each such Limited Partner or
Assignee hereby agrees to be bound by any action taken by the General Partner or
Liquidator, acting in good faith pursuant to such power of attorney; and each
such Limited Partner or Assignee hereby waives any and all defenses that may be
available to contest, negate or disaffirm the action of the General Partner or
Liquidator, taken in good faith under such power of attorney. Each Limited
Partner or Assignee shall execute and deliver to the General Partner or the
Liquidator, within 15 days after receipt of the General Partner's or
Liquidator's request therefor, such further designation, powers of attorney and
41
<PAGE> 46
other instruments as the General Partner or the Liquidator, as the case may be,
reasonably deems necessary to effectuate this Agreement and the purposes of the
Partnership.
ARTICLE 11
MISCELLANEOUS
11.1 Amendments.
(a) Amendments to this Agreement may be proposed by the
General Partner and the General Partner shall submit any proposed amendment to
all of the Limited Partners entitled to vote thereon or Approve. The General
Partner shall seek the Approval of the Partners on the proposed amendment or
shall call a meeting to vote thereon and to transact any other business that it
may deem appropriate. Except as provided in Section 8.8, 11.1(b) or 11.1(c), a
proposed amendment shall be adopted and be effective as an amendment hereto if
it is approved by the General Partner and it receives the Approval of a Majority
in Interest of all Limited Partners.
(b) Notwithstanding Section 11.1(a) hereof, the General
Partner shall have the power, without the Approval of the Limited Partners, to
amend this Agreement as may be required to facilitate or implement any of the
following purposes:
(i) to add to the obligations of the General
Partner or surrender any right or power
granted to the General Partner or any
Affiliate of the General Partner for the
benefit of the Limited Partners;
(ii) to reflect the substitution, termination, or
withdrawal of Partners in accordance with
this Agreement;
(iii) to amend any provisions of this Agreement or
add any new provisions as provided for in
Section 7.2;
(iv) to set forth the designations, rights
powers, duties and preferences of the
holders of any additional Partnership
Interests issued pursuant to Section 7.2
hereof;
(v) to reflect any change that does not
adversely affect the Limited Partners in any
material respect, or to cure any ambiguity,
correct or supplement any provision in this
Agreement not inconsistent with law or with
other provisions, or make other changes with
respect to matters arising under this
Agreement that will not be inconsistent with
law or with the provisions of this
Agreement; and
42
<PAGE> 47
(vi) to satisfy any requirements, conditions, or
guidelines contained in any order,
directive, opinion, ruling, or regulations
of a federal or state agency or contained in
federal or state law.
The General Partner shall provide notice promptly to the Limited Partners when
any action under this Section 11.1(b) is taken.
(c) Notwithstanding Sections 11.1(a) and 11.1(b) hereof, this
Agreement, including any definitional provisions under Article 1 hereof, shall
not be amended without the Approval of each Partner adversely affected if such
amendment would (i) convert a Limited Partner Interest in the Partnership into a
General Partner Interest, (ii) modify the limited liability of a Limited Partner
in a manner adverse to such Limited Partner, (iii) alter rights of the Partner
to receive distributions pursuant to Article 5 or the allocations specified in
Article 5 or Article 9 in a manner adverse to such Partner (except as permitted
pursuant to Section 7.2 hereof), (iv) cause the termination of the Partnership
prior to the time set forth in Sections 2.9 or 9.1 hereof, or (v) amend Section
2.8, Section 2.9, Section 6.2, Section 8.8 or any provision of this Section
11.1(c).
11.2 Meetings of the Partners.
(a) Meetings of the Partners may be called by the General
Partner. The call shall state the nature of the business to be transacted.
Notice of any such meeting shall be given to all Partners not less than seven
Business Days nor more than 30 Business Days prior to the date of such meeting.
Partners may vote in person or by proxy at such meeting. Whenever the vote or
Approval of Partners is permitted or required under this Agreement, such vote or
Approval may be given at a meeting of Partners or may be given in accordance
with the procedure prescribed in the definition of "Approved" or "Approval" or
Section 11.2(b) hereof. Except as otherwise expressly provided in this
Agreement, the Approval of holders of a Majority in Interest of the Limited
Partners shall control.
(b) Any action required or permitted to be taken at a meeting
of the Partners may be taken without a meeting if, at least five Business Days
prior to the taking of such action, written notice is sent to all Partners whose
vote or Approval is required with respect to such action, and a written consent
setting forth the action so taken is signed by a Majority in Interest of the
Partners (or such other percentage as is expressly required by this Agreement)
whose vote or consent is required with respect to such action. Such consent may
be in one instrument or in several instruments and shall have the same force and
effect as a vote of a Majority in Interest of the Partners (or such other
percentage as is expressly required by this Agreement) whose vote or consent is
required with respect to such action. Such consent shall be filed with the
General Partner. An action so taken shall be deemed to have been taken at a
meeting held on the effective date so certified.
(c) Each Limited Partner may authorize any Person or Persons
to act for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months
43
<PAGE> 48
from the date thereof unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the Limited Partner executing it, such
revocation to be effective upon the Partnership's receipt of written notice of
such revocation from the Limited Partner executing such proxy.
(d) Each meeting of Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate in his sole discretion.
11.3 Complete Agreement. This Agreement and each agreement referred to
herein and therein constitutes the complete and exclusive statement of the
agreement between the Partners and replaces and supersedes any other oral or
written agreements by and among the Partners or any of them.
11.4 Governing Law. This agreement and the rights of the parties
hereunder shall be governed by, interpreted and enforced in accordance with, the
internal laws (exclusive of the choice of law provisions thereof) of the State
of Delaware as to all matters, including, but not limited to, matters of
validity, construction, effect, performance and remedies.
11.5 Binding Effect. Subject to the provisions of this Agreement
relating to transferability, this Agreement shall be binding upon and inure to
the benefit of the parties signatory hereto, and their respective distributes,
successors and assigns.
11.6 Headings. All headings, title or captions herein are inserted only
for convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
11.7 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstances is or becomes invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other Persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by Law.
11.8 Multiple Counterparts; Facsimile Signatures. This Agreement may be
executed in several counterparts, each of which shall be deemed an original but
all of which shall constitute one and the same instrument. However, in making
proof hereof it shall be necessary to produce only one copy hereof signed by the
party against whom enforcement is sought. Each party hereto hereby acknowledges
the effectiveness of, and agrees to accept, facsimile signatures of any other
party hereto for purposes of executing this Agreement; provided, however, that
any party executing this Agreement by facsimile signature shall provide the
General Partner with the number of original signatures pages as the General
Partner may specify as soon as is practicable following a request for same by
the General Partner.
11.9 Execution of Documents. Each party hereto agrees to execute, with
acknowledgment or affidavit, if required, any and all documents and writings
which may be necessary or expedient in
44
<PAGE> 49
connection with the achievement of the Partnership's purposes, specifically
including the amendment to the Partnership's Certificate contemplated by the
terms hereof and all further amendments thereto or cancellation thereof.
11.10 Reliance on Authority. In no event shall any Person dealing with
the General Partner be obligated to ascertain that the terms of this Agreement
have been complied with, or be obligated to inquire into the necessity or
expediency of any act or action of the General Partner; and every contract,
agreement, deed, mortgage, promissory note, or other instrument or document
executed by the General Partner with respect to the Partnership shall be
conclusive evidence in favor of any and every Person relying thereon or claiming
thereunder that (i) at the time of the execution and/or delivery thereof, this
Agreement was in full force and effect, (ii) such instrument or document was
duly executed in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership and all of the Partners thereof, and (iii) the
General Partner was duly authorized and empowered to execute and deliver any and
every such instrument or documents for and on behalf of the Partnership.
11.11 No Third Party Beneficiary. Except as otherwise provided herein,
this Agreement is made solely and specifically among and for the benefit of the
parties hereto and their respective successors and assigns, and no other Person
shall have any rights, interest or claims hereunder or be entitled to any
benefits under or on account of this Agreement as a third party beneficiary or
otherwise.
11.12 References to this Agreement. Numbered or lettered articles,
sections and subsections herein contained refer to articles, sections and
subsections of this Agreement unless otherwise expressly stated.
11.13 Notices. All notices and other communications provided for herein
shall be given or made by telex, telecopy, facsimile, telegraph, cable or in
writing and telexed, telecopied, faxed, telegraphed, cabled, mailed or delivered
to the intended recipient at the address set forth in the books and records of
the Partnership. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when received by telex,
telecopy, facsimile, telegraph or cable or personally delivered by a courier
service or, by mail, postage prepaid and return receipt requested, in each case,
given or addressed as aforesaid. Any party hereto may, at any time by giving ten
Business Days' prior written notice to the other parties hereto, designate any
other address in substitution of the foregoing address to which such notice
shall be given.
11.14 Title to Partnership Property. Title to Partnership property,
whether real, personal or mixed and whether tangible or intangible, and all
interests in such property shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership property or any portion thereof except as a Partner
in the Partnership. Title to any or all of the Partnership property may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any
45
<PAGE> 50
Partnership property for which legal title is held in the name of the General
Partner or any nominee or Affiliate of the General Partner shall be held for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such property to be vested in
the Partnership as soon as reasonably practicable. All Partnership assets and
properties shall be recorded as the property of the Partnership in its books and
records, irrespective of the name in which legal title to such Partnership
property is held.
11.15 Reliance on Authority of Person Signing Agreement. In the event
that a Partner is any Person other than a natural person, neither the
Partnership nor any Partner shall (i) be required to determine the authority of
the Person signing this Agreement to make any commitment or undertaking on
behalf of such first Person or to determine any fact or circumstance bearing
upon the existence of the authority of such Person; or (ii) be required to see
to the application or distribution of proceeds paid or credited to persons
signing this Agreement on behalf of such first Person.
11.16 Waiver. No failure by any party to insist upon strict performance
of any covenant, duty, agreement or condition of this Agreement or to the
exercise of any right or remedy resulting from a breach thereof shall
constitute, or be deemed to constitute, a waiver of any such breach or any other
covenant, duty, agreement or condition.
11.17 Investment Representation. Each Partner hereby represents that
(i) it is an Accredited Investor and (ii) it is acquiring the interest in the
Partnership to be acquired by it hereunder for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof. Unless
otherwise specified in a notice delivered to the General Partner, each Partner
which is not an individual represents that it has not been formed for the
purpose of acquiring an interest in the Partnership. Each Partner further agrees
that neither such Partner nor any agent acting on its behalf has taken or will
take any action which would subject the issuance or sale of any of the interests
in the Partnership to registration under Section 5 of the Securities Act or
violate the provisions of any securities or blue sky laws of any applicable
jurisdiction.
ARTICLE 12
REGISTRATION RIGHTS
Section 12.1 Demand Registration.
12.1.1 Request for Registration.
(a) At any time after one year following the completion of a
Qualified IPO, the holders of a majority of the Registrable Interests
(each, a "Holder") may request the Partnership, in writing (a "Demand
Request"), to effect the registration under the Securities Act of all
or part of their Registrable Interests (a "Demand Registration");
provided that the Registrable Interests proposed to be sold by the
Holders requesting a Demand Registration
46
<PAGE> 51
(the "Requesting Holders," which term shall include parties deemed
"Requesting Holders" pursuant to Section 12.1.5 hereof) represent, in
the aggregate, Registrable Interests for which the gross sale proceeds
to the Requesting Holders are reasonably expected to be at least $30
million unless such registration request is for all remaining
Registrable Interests, in which case all remaining Registrable
Interests shall be registered as provided in this Section 12.1 (a
"Registrable Amount").
(b) Each Demand Request shall specify the number of
Registrable Interests proposed to be sold (which shall represent a
Registrable Amount) and the intended method of disposition thereof.
Subject to Section 12.1.6, the Partnership shall file the Demand
Registration within 45 days after receiving a Demand Request (the
"Required Filing Date") and shall use all commercially reasonable
efforts to cause the same to be declared effective by the SEC as
promptly as practicable after such filing; provided, that the
Partnership need effect only five Demand Registrations; provided,
further, that if any Registrable Interests requested to be registered
pursuant to a Demand Request under this Section 12.1 are excluded from
a registration pursuant to Section 12.1.4 below, the Holders shall have
the right, with respect to each such exclusion, to one additional
Demand Registration under this Section 12.1; and provided, further,
that the Partnership shall not be obligated to file a registration
statement relating to a registration request under this Section 12.1
more frequently than once in any nine month period or within a period
of six months after the effective date of any other registration
statement of the Partnership other than an Excluded Registration or any
registration statement filed at the request or on behalf of, or for the
benefit of, another securityholder of the Partnership (other than
pursuant to this Section 12.1) in which Holders were not entitled to
include all Registrable Interests requested to be included therein.
12.1.2 Effective Registration and Expenses. A registration
will not count as a Demand Registration until it has become effective (unless
(i) (A) the Requesting Holders shall have made a written request for a
registration which is subsequently withdrawn by the Requesting Holders with
respect to a number of Registrable Interests such that the aggregate Registrable
Interests requested to be included in such registration statement is less than a
Registrable Amount after the Partnership has filed a registration statement with
the SEC in connection therewith, (B) the Partnership has performed its
obligations hereunder in all material respects and (C) there has not been any
event, change or effect which, individually or in the aggregate, has had or
would be reasonably likely to have a material adverse effect on the business,
operations, prospects, assets, condition (financial or otherwise) or results of
operations of the Partnership, or (ii) such registration statement is not
declared effective solely as a result of the failure of the Requesting Holders
to take all actions reasonably required in order to have the registration and
the related registration statement declared effective by the SEC, in which case
such demand will count as a Demand Registration unless the Requesting Holders
pay all Registration Expenses, as hereinafter defined, in connection with such
withdrawn registration); provided, that if, after it has become effective, an
offering of Registrable Interests pursuant to a registration is interfered with
by any stop order, injunction, or other order or requirement of the SEC or other
governmental agency or court, such registration will be deemed not
47
<PAGE> 52
to have been effected and will not count as a Demand Registration, unless such
order, injunction or requirement shall have been imposed solely as a result of
the actions of the Requesting Holders or the failure of the Requesting Holders
to take all actions reasonably required in order to prevent such imposition, in
which case such registration shall be counted as a Demand Registration without
regard to whether it is so interfered with. Subject to the following sentence,
in the event that a Demand Request is made by a Holder that is subsequently
withdrawn by that Holder, all Registration Expenses incurred in connection
therewith shall be borne by that Holder and such withdrawn Demand Request shall
not be counted as a Demand Registration in determining the number of Demand
Registrations to which the Holders are entitled pursuant to Section 12.1.1(b).
In the event that a Demand Request is made by a Holder that is subsequently
withdrawn by that Holder, all Registration Expenses shall be borne by the
Partnership if (i) the Partnership has not performed its obligations hereunder
in all material respects or (ii) there has been any event, change or effect
which, individually or in the aggregate, has had or would be reasonably likely
to have a material adverse effect on the business, operations, prospects,
assets, condition (financial or otherwise) or results of operations of the
Partnership; and in such case a withdrawn Demand Request shall not be counted as
a Demand Registration in determining the number of Demand Registrations to which
the Holders are entitled pursuant to Section 12.1.1(b).
12.1.3 Selection of Underwriters. If requested by the
Requesting Holders, the offering of Registrable Interests pursuant to a Demand
Registration shall be in the form of a "firm commitment" underwritten offering.
The Requesting Holders of a majority of the Registrable Interests to be
registered in a Demand Registration shall determine whether the offering shall
be in the form of a firm commitment underwriting and, if so, shall select the
investment banking firm or firms to manage the underwritten offering; provided
that such selection shall be subject to the consent of the Partnership, which
consent shall not be unreasonably withheld.
12.1.4 Priority on Demand Registrations. No securities to be
sold for the account of any Person (including the Partnership) other than a
Requesting Holder shall be included in a Demand Registration if the managing
underwriter or underwriters shall advise the Requesting Holders in writing that
the inclusion of such securities will materially and adversely affect the price
or success of the offering (a "Material Adverse Effect"). Furthermore, in the
event the managing underwriter or underwriters shall advise the Requesting
Holders that even after exclusion of all securities of other Persons pursuant to
the immediately preceding sentence, the Registrable Interests proposed to be
included in such Demand Registration by Requesting Holders is sufficiently large
to cause a Material Adverse Effect, the Registrable Interests of the Requesting
Holders to be included in such Demand Registration shall equal the number of
Registrable Interests which the Requesting Holders are so advised can be sold in
such offering without a Material Adverse Effect and such Registrable Interests
shall be allocated pro rata among the Requesting Holders on the basis of the
Registrable Interests held by the Requesting Holders.
12.1.5 Rights of Nonrequesting Holders. Upon receipt of any
Demand Request, the Partnership shall promptly (but in any event within 10 days)
give written notice of such proposed Demand Registration to all other Holders,
who shall have the right, exercisable by written notice to
48
<PAGE> 53
the Partnership within 15 days of their receipt of the Partnership's notice, to
elect to include in such Demand Registration such portion of their Registrable
Interests as they may request. All Holders requesting to have their Registrable
Interests included in a Demand Registration in accordance with the preceding
sentence shall be deemed to be "Requesting Holders" for purposes of this Section
12.1.
12.1.6 Deferral of Filing. The Partnership may defer the
filing (but not the preparation) of a registration statement required by Section
12.1 until a date not later than 180 days after the Required Filing Date (or, if
longer, 180 days after the effective date of the registration statement
contemplated by clause (ii) below) if (i) at the time the Partnership receives
the Demand Request, the Partnership or any of its Subsidiaries are engaged in
confidential negotiations or other confidential business activities, disclosure
of which would be required in such registration statement (but would not be
required if such registration statement were not filed), and the General Partner
determines in good faith that such disclosure would be materially detrimental to
the Partnership and its Partners or would have a material adverse effect on any
such confidential negotiations or other confidential business activities, or
(ii) prior to receiving the Demand Request, the General Partner had determined
to effect a registered underwritten public offering of the Partnership's
securities for the Partnership's account and the Partnership had taken
substantial steps (including, but not limited to, selecting a managing
underwriter for such offering) and is proceeding with reasonable diligence to
effect such offering. A deferral of the filing of a registration statement
pursuant to this Section 12.1.6 shall be lifted, and the requested registration
statement shall be filed forthwith, if, in the case of a deferral pursuant to
clause (i) of the preceding sentence, the negotiations or other activities are
disclosed by the Partnership or terminated, or, in the case of a deferral
pursuant to clause (ii) of the preceding sentence, the proposed registration for
the Partnership's account is abandoned. In order to defer the filing of a
registration statement pursuant to this Section 12.1.6, the Partnership shall
promptly (but in any event within 10 days), upon determining to seek such
deferral, deliver to each Requesting Holder a certificate signed by the General
Partner stating that the Partnership is deferring such filing pursuant to this
Section 12.1.6 and, subject to applicable confidentiality agreements, a general
statement of the reason for such deferral and an approximation of the
anticipated delay. Within 20 days after receiving such certificate, the holders
of a majority of the Registrable Interests held by the Requesting Holders and
for which registration was previously requested may withdraw such Demand Request
by giving notice to the Partnership; if withdrawn, the Demand Request shall be
deemed not to have been made for all purposes of this Agreement. The Partnership
may defer the filing of a particular registration statement pursuant to this
Section 12.1.6 only once.
Section 12.2 Piggyback Registrations.
12.2.1 Right to Piggyback. Each time the Partnership proposes
to register any of its equity securities (other than pursuant to an Excluded
Registration) under the Securities Act for sale to the public (whether for the
account of the Partnership or the account of any securityholder of the
Partnership and including any registration statement pursuant to Rule 415 under
the Securities Act (such as a "universal shelf" registration statement)) or
proposes to make such an offering of equity securities pursuant to a previously
filed registration statement pursuant to Rule 415 under the Securities Act and
the form of registration statement to be used permits the registration of
Registrable
49
<PAGE> 54
Interests, the Partnership shall give prompt written notice to each Holder of
Registrable Interests (which notice shall be given not less than 30 days prior
to the proposed effective date of the Partnership's registration statement or
the commencement of the offering in the case of an offering made under a
registration statement pursuant to Rule 415 under the Securities Act), which
notice shall offer each such Holder the opportunity to include any or all of its
or his Registrable Interests in such registration statement, subject to the
limitations contained in Section 12.2.2 hereof. Each Holder who desires to have
its or his Registrable Interests included in such registration statement shall
so advise the Partnership in writing (stating the number of Registrable
Interests desired to be registered and the intended method of disposition)
within 20 days after the date of such notice from the Partnership. Any Holder
shall have the right to withdraw such Holder's request for inclusion of such
Holder's Registrable Interests in any registration statement pursuant to this
Section 12.2.1 by giving written notice to the Partnership of such withdrawal.
Subject to Section 12.2.2 below, the Partnership shall use all commercially
reasonable efforts to include in such registration statement all such
Registrable Interests so requested to be included therein; provided, however,
that the Partnership may at any time withdraw or cease proceeding with any such
registration if it shall at the same time withdraw or cease proceeding with the
registration of all other equity securities originally proposed to be
registered.
12.2.2 Priority on Registrations. If the Registrable Interests
requested to be included in the registration statement by any Holder differ from
the type of securities proposed to be registered by the Partnership and the
managing underwriter advises the Partnership that due to such differences the
inclusion of such Registrable Interests would cause a Material Adverse Effect,
then (i) the number of such Holder's or Holders' Registrable Interests to be
included in the registration statement shall be reduced to an amount which, in
the opinion of the managing underwriter, would eliminate such Material Adverse
Effect or (ii) if no such reduction would, in the opinion of the managing
underwriter, eliminate such Material Adverse Effect, then the Partnership shall
have the right to exclude all such Registrable Interests from such registration
statement provided no other securities of such type are included and offered for
the account of any other Person in such registration statement. Any partial
reduction in number of Registrable Interests to be included in the registration
statement pursuant to clause (i) of the immediately preceding sentence shall be
effected pro rata based on the ratio which such Holder's requested Registrable
Interests bears to the aggregate Registrable Interests requested to be included
in such registration statement by all Persons other than the Partnership who
have requested that their Registrable Interests be included in such registration
statement. If the Registrable Interests requested to be included in the
registration statement are of the same type as the securities being registered
by the Partnership and the managing underwriter advises the Partnership in
writing that the inclusion of such Registrable Interests would cause a Material
Adverse Effect, the Partnership will be obligated to include in such
registration statement, as to each Holder, only a portion of the Registrable
Interests such Holder has requested be registered equal to the ratio which such
Holder's requested Registrable Interests bears to the aggregate Registrable
Interests requested to be included in such registration statement by all Persons
who have requested that their Registrable Interests be included in such
registration statement. If the Partnership initiated the registration, then the
Partnership may include all of its securities in such registration statement
before any of such Holder's requested Registrable Interests are included. If
another
50
<PAGE> 55
securityholder initiated the registration, then the Partnership may not include
any of its securities in such registration statement unless all Registrable
Interests requested to be included in the registration statement by all Holders
are included in such registration statement. If as a result of the provisions of
this Section 12.2.2 any Holder shall not be entitled to include all Registrable
Interests in a registration that such Holder has requested to be so included,
such Holder may withdraw such Holder's request to include Registrable Interests
in such registration statement prior to its effectiveness. No Holder may
participate in any registration statement hereunder unless such Person (x)
agrees to sell such Person's Registrable Interests on the basis provided in any
underwriting arrangements approved by the Partnership and (y) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements, and other documents reasonably required under the terms of such
underwriting arrangements; provided, however, that no such Person shall be
required to make any representations or warranties in connection with any such
registration other than representations and warranties as to (i) such Person's
ownership of his or its Registrable Interests to be sold or transferred free and
clear of all Liens, (ii) such Person's power and authority to effect such
transfer, and (iii) such matters pertaining to compliance with securities laws
and other applicable laws and governmental rules and regulations, if any, as may
be reasonably requested; provided further, however, that the obligation of such
Person to indemnify pursuant to any such underwriting arrangements shall be
several, not joint and several, among such Persons selling securities, and the
liability of each such Person will be in proportion to, and provided further
that such liability will be limited to, the net amount received by such Person
from the sale of his or its Registrable Interests pursuant to such registration.
Section 12.3 Shelf Registration. In addition to the five Demand
Registrations provided for in Section 12.1, Holders of Registrable Interests
shall be entitled to request a shelf registration (a "Shelf Registration"),
provided that such request is otherwise in compliance with the provisions of
Section 12.1 including that the Registrable Interests for which the request is
made constitute a Registrable Amount. The Partnership shall be required to
maintain the effectiveness of the Shelf Registration for at least 24 calendar
months (which period shall be extended if necessary by the amount of time that a
Suspension Notice was in effect pursuant to Section 12.6), it being expressly
agreed and understood that for purposes of this Agreement any subsequent
underwritten "take-down" with respect to the Shelf Registration shall constitute
a Demand Registration to be counted toward the three total Demand Registrations
authorized by Section 12.1. The Partnership shall not be required to effect a
Demand Registration pursuant to Section 12.1 if the Partnership shall at the
time have effective a Shelf Registration pursuant to which the Holders that
requested registration could effect the disposition of such Holders' Registrable
Interests in the manner requested.
Section 12.4 Holdback Agreement. Unless the managing underwriter
otherwise agrees, each of the General Partner and the Holders agrees, in
connection with any underwritten registration, to use its reasonable efforts to
cause its Affiliates to agree, not to effect any public sale or private offer or
distribution of any Registrable Interests during the ten Business Days prior to
the effectiveness under the Securities Act or pricing of any underwritten
offering pursuant to a registration statement in which Registrable Interests are
included and during such time period after the effectiveness under the
Securities Act of any underwritten registration or pricing of underwritten
51
<PAGE> 56
securities (not to exceed 90 days) (except, if applicable, as part of such
underwritten registration) as the Partnership and the managing underwriter may
agree.
Section 12.5 Registration Procedures. Whenever any Holder has requested
that any Registrable Interests be registered pursuant to this Agreement, the
Partnership will use its commercially reasonable efforts to effect the
registration and the sale of such Registrable Interests in accordance with the
intended method of disposition thereof, and pursuant thereto the Partnership
will as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement on
any appropriate form under the Securities Act with respect to such
Registrable Interests and use all commercially reasonable efforts to
cause such registration statement to become effective;
(b) prepare and file with the SEC such amendments,
post-effective amendments, and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of
not less than 120 days (or such lesser period as is necessary for the
underwriters in an underwritten offering to sell unsold allotments) and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(c) furnish to each seller of Registrable Interests and the
underwriters of the securities being registered such number of copies
of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus), any documents incorporated by reference
therein and such other documents as such seller or underwriters may
reasonably request in order to facilitate the disposition of the
Registrable Interests owned by such seller or the sale of such
securities by such underwriters (it being understood that, subject to
Section 12.7 and the requirements of the Securities Act and applicable
state securities laws, the Partnership consents to the use of the
prospectus and any amendment or supplement thereto by each seller and
the underwriters in connection with the offering and sale of the
Registrable Interests covered by the registration statement of which
such prospectus, amendment or supplement is a part);
(d) use all commercially reasonable efforts to register or
qualify such Registrable Interests under such other securities or blue
sky laws of such jurisdictions as the managing underwriter reasonably
requests; use all commercially reasonable efforts to keep each such
registration or qualification (or exemption therefrom) effective during
the period in which such registration statement is required to be kept
effective; and do any and all other acts and things which may be
reasonably necessary or advisable to enable each seller to consummate
the disposition of the Registrable Interests owned by such seller in
such jurisdictions (provided, however, that the Partnership will not be
required to (i) qualify generally to do
52
<PAGE> 57
business in any jurisdiction where it would not otherwise be required
to qualify but for this subparagraph or (ii) consent to general service
of process in any such jurisdiction);
(e) promptly notify each seller and each underwriter and (if
requested by any such Person) confirm such notice in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has
been filed and, with respect to a registration statement or any
post-effective amendment, when the same has become effective, (ii) of
the issuance by any state securities or other regulatory authority of
any order suspending the qualification or exemption from qualification
of any of the Registrable Interests under state securities or "blue
sky" laws or the initiation of any proceedings for that purpose, and
(iii) of the happening of any event which makes any statement made in a
registration statement or related prospectus untrue in any material
respect or which requires the making of any changes in such
registration statement, prospectus or documents so that they will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and, as promptly as practicable
thereafter, prepare and file with the SEC and furnish a supplement or
amendment to such prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Interests, such prospectus will not
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(f) make generally available to the Partnership's
securityholders an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act no later than 30 days after the end
of the 12-month period beginning with the first day of the
Partnership's first fiscal quarter commencing after the effective date
of a registration statement, which earnings statement shall cover said
12-month period, and which requirement will be deemed to be satisfied
if the Partnership timely files complete and accurate information on
Forms 10-Q, 10-K and 8-K under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and otherwise complies with Rule 158 under
the Securities Act;
(g) if requested by the managing underwriter or reasonably
requested by any seller promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing
underwriter or any seller reasonably requests to be included therein,
including, without limitation, with respect to the Registrable
Interests being sold by such seller, the purchase price being paid
therefor by the underwriters and with respect to any other terms of the
underwritten offering of the Registrable Interests to be sold in such
offering, and promptly make all required filings of such prospectus
supplement or post-effective amendment;
(h) as promptly as practicable after filing with the SEC of
any document which is incorporated by reference into a registration
statement (in the form in which it was incorporated), deliver a copy of
each such document to each seller;
53
<PAGE> 58
(i) cooperate with the sellers and the managing underwriter to
facilitate the timely preparation and delivery of certificates (which
shall not bear any restrictive legends unless required under applicable
law) representing securities sold under any registration statement, and
enable such securities to be in such denominations and registered in
such names as the managing underwriter or such sellers may request and
keep available and make available to the Partnership's transfer agent
prior to the effectiveness of such registration statement a supply of
such certificates;
(j) promptly make available for inspection by any seller, any
underwriter participating in any disposition pursuant to any
registration statement, and any attorney, accountant or other agent or
representative retained by any such seller or underwriter
(collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Partnership
(collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the General Partner to supply all information requested by any such
Inspector in connection with such registration statement; provided,
that, unless the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in the registration statement or the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, the Partnership shall not
be required to provide any information under this subparagraph (j) if
(i) the General Partner believes, after consultation with counsel for
the Partnership, that to do so would cause the Partnership to forfeit
an attorney-client privilege that was applicable to such information or
(ii) if either (A) the Partnership has requested and been granted from
the SEC confidential treatment of such information contained in any
filing with the SEC or documents provided supplementally or otherwise
or (B) the General Partner reasonably determines in good faith that
such Records are confidential and so notifies the Inspectors in writing
unless prior to furnishing any such information with respect to (i) or
(ii) such Holder of Registrable Interests requesting such information
agrees to enter into a confidentiality agreement in customary form and
subject to customary exceptions; and provided, further that each Holder
of Registrable Interests agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Partnership and allow the Partnership
at its expense, to undertake appropriate action and to prevent
disclosure of the Records deemed confidential;
(k) furnish to each seller and underwriter a signed
counterpart of (i) an opinion or opinions of counsel to the
Partnership, and (ii) a comfort letter or comfort letters from the
Partnership's independent public accountants, each in customary form
and covering such matters of the type customarily covered by opinions
or comfort letters, as the case may be, as the sellers or managing
underwriter reasonably requests;
(l) use all commercially reasonable efforts to cause the
Registrable Interests included in any registration statement to be
listed on each securities exchange, if any, on which securities of the
same type issued by the Partnership are then listed;
54
<PAGE> 59
(m) provide a CUSIP number for the Registrable Interests
included in any registration statement not later than the effective
date of such registration statement;
(n) cooperate with each seller and each underwriter
participating in the disposition of such Registrable Interests and
their respective counsel in all reasonable respects in connection with
any filings required to be made with the National Association of
Securities Dealers, Inc. ("NASD");
(o) during the period when the prospectus is required to be
delivered under the Securities Act, file within the required time
periods all documents required to be filed with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act;
(p) notify each seller of Registrable Interests promptly of
any request by the SEC for the amending or supplementing of such
registration statement or prospectus or for additional information;
(q) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the
opinion of counsel for the Partnership or the managing underwriter, is
required in connection with the distribution of the Registrable
Interests;
(r) enter into such agreements (including underwriting
agreements in the managing underwriter's customary form) as are
customary in connection with an underwritten registration; and
(s) advise each seller of such Registrable Interests, promptly
after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the SEC suspending the effectiveness of
such registration statement or the initiation or threatening of any
proceeding for such purpose and promptly use all commercially
reasonable efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop
order should be issued.
Section 12.6 Suspension of Dispositions. Each Holder agrees by
acquisition of any Registrable Interests that, upon receipt of any notice (a
"Suspension Notice") from the Partnership of the happening of any event of the
kind described in Section 12.5(e)(iii), such Holder will forthwith discontinue
disposition of Registrable Interests until such Holder's receipt of the copies
of the supplemented or amended prospectus, or until it is advised in writing
(the "Advice") by the Partnership that the use of the prospectus may be resumed,
and has received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, and, if so directed by the
Partnership, such Holder will deliver to the Partnership all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Interests current at the time of receipt of such
notice. In the event the Partnership shall give any such notice, the time period
regarding the effectiveness of registration statements set forth in Section
12.5(b) hereof shall be
55
<PAGE> 60
extended by the number of days during the period from and including the date of
the giving of the Suspension Notice to and including the date when each seller
of Registrable Interests covered by such registration statement shall have
received the copies of the supplemented or amended prospectus or the Advice. The
Partnership shall use its commercially reasonable efforts and take such actions
as are reasonably necessary to render the Advice as promptly as practicable.
Section 12.7 Registration Expenses. All expenses incident to the
Partnership's performance of or compliance with this Article 12, including
without limitation (i) all registration and filing fees, (ii) all fees and
expenses associated with filings required to be made with the NASD (including,
if applicable, the fees and expenses of any "qualified independent underwriter"
as such term is defined in Schedule E of the By-Laws of the NASD, and of its
counsel), as may be required by the rules and regulations of the NASD, (iii)
fees and expenses of compliance with securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue sky"
qualifications of the Registrable Interests), (iv) rating agency fees, (v)
printing expenses (including expenses of printing certificates for the
Registrable Interests in a form eligible for deposit with Depository Trust
Company and of printing prospectuses if the printing of prospectuses is
requested by a holder of Registrable Interests), (vi) messenger and delivery
expenses, (vii) the Partnership's internal expenses (including without
limitation all salaries and expenses of its officers and employees performing
legal or accounting duties), (viii) the fees and expenses incurred in connection
with any listing of the Registrable Interests, (ix) fees and expenses of counsel
for the Partnership and its independent certified public accountants (including
the expenses of any special audit or "cold comfort" letters required by or
incident to such performance), (x) securities acts liability insurance (if the
Partnership elects to obtain such insurance), (xi) the fees and expenses of any
special experts retained by the Partnership in connection with such
registration, and (xii) the fees and expenses of other persons retained by the
Partnership, subject to Section 12.1.2., will be borne by the Partnership,
whether or not any registration statement becomes effective; provided that in no
event shall Registration Expenses include any underwriting discounts or
commissions or transfer taxes or the fees and expenses of counsel for the
Holders.
Section 12.8 Indemnification.
(a) The Partnership agrees to indemnify and reimburse, to the
fullest extent permitted by law, each seller of Registrable Interests,
and each of its employees, advisors, agents, representatives, partners,
members, officers, and directors and each Person who controls such
seller (within the meaning of the Securities Act or the Exchange Act)
and any agent or investment advisor thereof (collectively, the "Seller
Affiliates") (i) against any and all losses, claims, damages,
liabilities, and expenses, joint or several (including, without
limitation, attorneys' fees and disbursements except as limited by
Section 12.8(c) based upon, arising out of or resulting from any untrue
or alleged untrue statement of a material fact contained in any
registration statement, prospectus, or preliminary prospectus relating
to the offer and sale of Registrable Interests or any amendment thereof
or supplement thereto, or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) against any and all loss,
liability, claim,
56
<PAGE> 61
damage, and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement (effected with the Partnership's
consent) of any litigation or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon, arising out of or resulting from any such untrue
statement or omission or alleged untrue statement or omission, and
(iii) against any and all costs and expenses (including reasonable fees
and disbursements of counsel) as may be reasonably incurred in
investigating, preparing, or defending against any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon, arising
out of or resulting from any such untrue statement or omission or
alleged untrue statement or omission, to the extent that any such
expense or cost is not paid under clause (i) or (ii) above; except
insofar as the same are made in reliance upon and in conformity with
information furnished in writing to the Partnership by or on behalf of
such seller or any Seller Affiliate specifically for inclusion in the
registration statement or arise from such seller's or any Seller
Affiliate's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the
Partnership has furnished such seller or Seller Affiliate with a
sufficient number of copies of the same. The reimbursements required by
this Section 12.8(a) will be made by periodic payments during the
course of the investigation or defense, as and when bills are received
or expenses incurred.
(b) In connection with any registration statement in which a
seller of Registrable Interests is participating, each such seller will
furnish to the Partnership in writing such information and affidavits
as the Partnership reasonably requests for use in connection with any
such registration statement or prospectus and, to the fullest extent
permitted by law, each such seller will indemnify and reimburse the
Partnership and the General Partner and their respective directors and
officers and each Person who controls the Partnership or the General
Partner (within the meaning of the Securities Act or the Exchange Act)
against any and all losses, claims, damages, liabilities, and expenses
(including, without limitation, reasonable attorneys' fees and
disbursements except as limited by Section 12.8(c) based upon, arising
out of or resulting from any untrue statement or alleged untrue
statement of a material fact contained in the registration statement,
prospectus, or any preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with any information or
affidavit so furnished in writing by such seller or any of its Seller
Affiliates specifically for inclusion in the registration statement;
provided that the obligation to indemnify will be several, not joint
and several, among such sellers of Registrable Interests, and the
liability of each such seller of Registrable Interests will be in
proportion to, and provided further that such liability will be limited
to, the net amount received by such seller from the sale of Registrable
Interests pursuant to such registration statement; provided, however,
that such seller of Registrable Interests shall not be liable in any
such case to the extent that prior to the filing of any such
registration statement or prospectus or amendment thereof or supplement
thereto, such seller has furnished in writing to the Partnership
information expressly for use
57
<PAGE> 62
in such registration statement or prospectus or any amendment thereof
or supplement thereto which corrected or made not misleading
information previously furnished to the Partnership.
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (provided that the failure to
give such notice shall not limit the rights of such Person except to
the extent that the indemnifying party is materially prejudiced
thereby) and (ii) unless such indemnified party has been advised by
counsel that a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided, however,
that any Person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of
such claim, but the fees and expenses of such counsel shall be at the
expense of such Person unless (A) the indemnifying party has agreed to
pay such fees or expenses, (B) the indemnifying party shall have failed
to assume the defense of such claim and employ counsel reasonably
satisfactory to such Person, (C) the named parties to any such action
or proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such indemnified
party shall have been advised by counsel in writing that there is a
conflict of interest on the part of counsel employed by the
indemnifying party to represent such indemnified party, or (D) the
indemnified party's counsel shall have advised the indemnified party
that there are defenses available to the indemnified party that are
different from or in addition to those available to the indemnifying
party and that the indemnifying party is not able to assert on behalf
of or in the name of the indemnified party (in which case of either (C)
or (D), if such indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action or proceeding on behalf of such
indemnified party but shall have the right to participate through its
own counsel). If such defense is not assumed by the indemnifying party
as permitted hereunder, the indemnifying party will not be subject to
any liability for any settlement made by the indemnified party without
its consent (but such consent will not be unreasonably withheld). If
such defense is assumed by the indemnifying party pursuant to the
provisions hereof, such indemnifying party shall not settle or
otherwise compromise the applicable claim unless (1) such settlement or
compromise contains a full and unconditional release of the indemnified
party or (2) the indemnified party otherwise consents in writing (such
consent not to be unreasonably withheld). An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will
not be obligated to pay the fees and expenses of more than one counsel
for all parties indemnified by such indemnifying party with respect to
such claim, unless any indemnified party shall have been advised by
counsel in writing that a conflict of interest exists between such
indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be
obligated to pay the reasonable fees and disbursements of such
additional counsel or counsels.
58
<PAGE> 63
(d) Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 12.8(a) or Section
12.8(b) are unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages,
liabilities, or expenses (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, liabilities, or expenses (or actions in respect thereof) (i) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified party in connection with the
actions which resulted in the losses, claims, damages, liabilities or
expenses or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect the relative benefits of the indemnified party and indemnifying
party from the offering of the securities covered by such registration
statement as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall
be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by
such indemnifying party or indemnified party, and the parties, relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this
Section 12.8(a) were determined by pro rata allocation (even if the
Holders or any underwriters or all of them were treated as one entity
for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this
Section 12.8(a). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities, or expenses (or
actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or, except as
provided in Section 12.8(d), defending any such action or claim.
Notwithstanding the provisions of this Section 12.8(d), no Holder shall
be required to contribute an amount greater than the dollar amount by
which the proceeds received by such Holder with respect to the sale of
any Registrable Interests exceeds the amount of damages which such
Holder has otherwise been required to pay by reason of such statement
or omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations in this Section 12.8(d) to
contribute shall be several in proportion to the amount of Registrable
Interests registered by them and not joint.
If sufficient indemnification is available under this Section
12.8, the indemnifying parties shall indemnify each indemnified party
to the full extent provided in Section 12.8(a) and Section 12.8(b)
without regard to the relative fault of said indemnifying party or
indemnified party or any other equitable consideration provided for in
this Section 12.8(d).
(e) The indemnification and contribution provided for under
this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of
59
<PAGE> 64
the indemnified party or any officer, director, or controlling Person
of such indemnified party and will survive the transfer of securities.
Section 12.9 Successors. For purposes of this Article 12, all
references to the "Partnership" shall mean the issuer of the Registrable
Interests.
IN WITNESS WHEREOF, the General Partner and the Limited Partner have
executed this Agreement on the date set forth opposite their signatures.
SIGNATURE PAGES OF PARTNERS ATTACHED
60
<PAGE> 65
This signature page is attached to that certain Second Amended and
Restated Limited Partnership Agreement of OLY HIGHTOP PARENT, L.P.
GENERAL PARTNER:
OLY HIGHTOP PARENT GP, LLC, a Delaware limited
liability company
By: Oly Hightop Holding, L.P., its Member
By: Oly Hightop, LLC, its General Partner
Date: January 6, 2000 By: /s/ Hal R. Hall
---------------------------------------
Hal R. Hall
Vice President
<PAGE> 66
This signature page is attached to that certain Second Amended and
Restated Limited Partnership Agreement of OLY HIGHTOP PARENT, L.P..
COMMON LIMITED PARTNER:
OLY HIGHTOP HOLDING, L.P., a Delaware limited
partnership
By: Oly Hightop, LLC, its General Partner
Date: January 6, 2000 By: /s/ Hal R. Hall
---------------------------------------
Hal R. Hall
Vice President
