[Execution Copy]
INVESTMENT AGREEMENT
among
EQUITY RESOURCE CAMBRIDGE FUND LIMITED PARTNERSHIP,
EQUITY RESOURCE GENERAL FUND LIMITED PARTNERSHIP,
EQUITY RESOURCE FUND XVI LIMITED PARTNERSHIP,
EQUITY RESOURCE FUND XIX LIMITED PARTNERSHIP,
EQUITY RESOURCE BRATTLE FUND LIMITED PARTNERSHIP
EQUITY RESOURCE BRIDGE FUND LIMITED PARTNERSHIP
KRF COMPANY, L.L.C.,
and
KRF3 ACQUISITION COMPANY, L.L.C.
------------------------------
Dated: January 6, 2000
------------------------------
Page
----
Table of Contents
-----------------
Page
ARTICLE 1 DEFINITIONS .................................................. 2
ARTICLE 2 VOTING AGREEMENT, CLOSING DATE
TRANSACTIONS AND USE OF PROCEEDS ............................. 5
2.1 Voting Agreement ............................................. 5
2.2 Closing Date Transactions .................................... 5
2.2.1 LLC Agreement ......................................... 5
2.2.2 Capital Contributions ................................. 5
2.2.3 Issuance of LLC Interests ............................. 5
2.3 Use of Proceeds .............................................. 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF
THE COMPANY .................................................. 5
3.1 Existence and Power .......................................... 5
3.2 Authorization; No Contravention .............................. 6
3.3 Governmental Authorization; Third Party Consents ............. 6
3.4 Binding Effect ............................................... 6
ARTICLE 4 REPRESENTATIONS AND
WARRANTIES OF THE INVESTORS AND BERKSHIRE .................... 6
4.1 Existence and Power .......................................... 6
4.2 Authorization; No Contravention .............................. 7
4.3 Governmental Authorization; Third Party Consents ............. 7
4.4 Binding Effect ............................................... 7
4.5 Purchase for Own Account ..................................... 7
4.6 Investment Experience; Economic Risk; Accredited Investor .... 7
ARTICLE 5 INDEMNIFICATION .............................................. 8
5.1 Indemnification .............................................. 8
5.2 Notification ................................................. 8
5.3 Contribution ................................................. 9
ARTICLE 6 CONDITIONS ................................................... 10
6.1 Notice of the Closing Date ................................... 10
6.2 Merger Agreement Conditions .................................. 10
6.3 Compliance with this Agreement ............................... 10
i
Page
----
ARTICLE 7 TERMINATION .................................................. 10
ARTICLE 8 MISCELLANEOUS ................................................ 10
8.1 Survival of Representations and Warranties ................... 10
8.2 Notices ...................................................... 11
8.3 Successors and Assigns ....................................... 11
8.4 Amendment and Waiver ......................................... 12
8.5 Counterparts ................................................. 12
8.6 Headings ..................................................... 12
8.7 Governing Law; Arbitration ................................... 12
8.8 Severability ................................................. 13
8.9 Entire Agreement ............................................. 13
8.10 No Third Party Beneficiaries ................................. 13
8.11 Further Assurances ........................................... 13
EXHIBITS
EXHIBIT A Amended and Restated Limited Liability Company
Agreement of KRF3 Acquisition Company, L.L.C.
EXHIBIT B Merger Agreement
ii
[Execution Copy]
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT, dated as of January 6, 2000 (this "Agreement"),
among Equity Resource Fund XVI Limited Partnership, Equity Resource Fund XIX
Limited Partnership, Equity Resource General Fund Limited Partnership, Equity
Resource Cambridge Fund Limited Partnership, Equity Resource Brattle Fund
Limited Partnership, Equity Resource Bridge Fund Limited Partnership, all
Massachusetts limited partnerships (each, an "Investor" and collectively, the
"Investors"), KRF Company, L.L.C., a Delaware limited liability company
("Berkshire") and KRF3 Acquisition Company, L.L.C., a Delaware limited liability
company (the "Company");
WHEREAS, subject to the terms and conditions contained herein,
Berkshire and the Investors wish to enter into the Amended and Restated Limited
Liability Company Agreement of the Company in the form attached hereto as
Exhibit A (the "LLC Agreement");
WHEREAS, prior to the date hereof, Berkshire has caused to be
contributed to the capital of the Company 10,826 investor limited partnership
interests of Fund III (as defined below) (the "Existing Berkshire
Contribution");
WHEREAS, Berkshire and the Investors wish to make the capital
contributions to the Company pursuant to Section 3.1 (Capital Contributions) of
the LLC Agreement;
WHEREAS, to evidence such capital contributions, the Company wishes to
issue and sell to the Investors and Berkshire, and the Investors and Berkshire
wish to purchase from the Company, the LLC Interests (as defined herein), having
the terms and conditions set forth in the LLC Agreement.
WHEREAS, the Company intends to utilize the proceeds of the issuance of
the LLC Interests to consummate a merger with Xxxxx Realty Fund Ltd.- III, a
Massachusetts limited partnership ("Fund III") upon terms and conditions
substantially similar to the terms and conditions set forth in the form attached
hereto as Exhibit B (the "Merger Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
2
ARTICLE 1
DEFINITIONS
-----------
As used in this Agreement, and unless the context requires a different
meaning, the following terms have the meanings indicated:
"Affiliate" shall mean, with respect to any Person, (i) any other
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person,
(ii) any Person that is an officer of, member of, partner in, or trustee of, or
serves in a similar capacity with respect to, the specified Person or of which
the specified Person is an officer, member, partner or trustee, or with respect
to which the specified Person serves in a similar capacity, (iii) any Person
that, directly or indirectly, is the beneficial owner of 10% or more of any
class of equity securities of, or otherwise has a substantial beneficial
interest in, the specified Person or of which the specified Person is directly
or indirectly the owner of 10% or more of any class of equity securities or in
which the specified Person has a substantial beneficial interest, (iv) any
Immediate Family Member of the specified Person and (v) any Affiliate of a
Person described in subsections (i)-(iv). For the purposes of this definition,
"control" shall mean, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Investment Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Amendment" means the amendment to the Fund III Agreement to permit the
Company to enter into the Merger Agreement.
"Berkshire" has the meaning set forth in the preamble to this
Agreement.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in the State of New York or the Commonwealth of
Massachusetts are authorized or required by law or executive order to close.
"Capital Contribution" has the meaning set forth in the LLC Agreement.
In the case of the Investors, the Capital Contribution shall mean all of the
Units owned by them on the Closing Date. In the case of Berkshire, the Capital
Contribution shall mean the sum of (a) the Existing Berkshire Contribution and
(b) $954,810 in cash, subject to increase in the sole discretion of Berkshire.
"Certificate of Formation" means the certificate of formation of the
Company, duly filed with the Secretary of State of the State of Delaware.
"Closing Date" means a Business Day following the Meeting Date
designated by the Company as the Closing Date.
3
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Company" has the meaning set forth in the preamble to this Agreement.
"Contractual Obligations" means as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Existing Berkshire Contribution" has the meaning set forth in the
preamble to this Agreement.
"Fund III" has the meaning set forth in the preamble to this Agreement.
"Fund III Agreement" means the Amended Agreement of Limited Partnership
of Fund III, dated as of June 1, 1982, as amended from time to time.
"Governmental Authority" means the government of any country, state,
city, locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Immediate Family Member" means with respect to any person, such
person's spouse, parent, parent-in-law, issue, brother, sister, brother-in-law,
sister-in-law, or child-in-law.
"Indemnified Party" and "Indemnified Parties" have the meanings set
forth in Section 5.2 (Notification).
"Investor" or "Investors" has the meaning set forth in the preamble to
this Agreement.
"Investor Representative" has the meaning set forth in Section 8.7(b)
to this Agreement (Governing Law; Arbitration).
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever.
"LLC Agreement" has the meaning set forth in the preamble to this
Agreement.
"LLC Interests" means the limited liability company interests in the
Company, having the terms and conditions set forth in the LLC Agreement.
4
"Losses" has the meaning set forth in Section 5.1 (Indemnification).
"Meeting Date" means the date of the special meeting of the partners of
Fund III at which the Amendment and Merger Agreement and the transactions
contemplated thereby are considered and voted upon.
"Member" has the meaning set forth in Section 1.1 (Definitions) of the
LLC Agreement.
"Merger Agreement" has the meaning set forth in the preamble to this
Agreement.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"Purchased Interests" means the LLC Interests purchased on the Closing
Date pursuant to Article 2 (Voting Agreement, Closing Date Transactions and Use
of Proceeds) of this Agreement.
"Requirements of Law" means as to any Person, any law, treaty, rule,
regulation, right, privilege, qualification, license or franchise or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable or binding upon such Person or any of its property or to
which such Person or any of its property is subject or pertaining to any or all
of the transactions contemplated or referred to herein.
"SEC" has the meaning set forth in Section 3.3 of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended (or any
successor statute thereto), and the rules and regulations of the Commission
promulgated thereunder.
"Transaction Documents" means collectively, this Agreement, the LLC
Agreement and the Voting Agreement.
"Units" has the meaning set forth in the Fund III Agreement.
"Voting Agreement" means the Voting Agreement, dated the date hereof,
among the parties hereto.
5
ARTICLE 2
VOTING AGREEMENT, CLOSING DATE
TRANSACTIONS AND USE OF PROCEEDS
--------------------------------
2.1 Voting Agreement. Simultaneously with the execution hereof, each of
the Investors has executed the Voting Agreement relating to the approval of the
Amendment and the merger contemplated by the Merger Agreement and the
consummation of the transactions contemplated thereby.
2.2 Closing Date Transactions. Subject to the conditions set forth in
Article 6 (Conditions), the parties hereto covenant and agree that on the
Closing Date the following shall occur simultaneously:
2.2.1 LLC Agreement. Each of the Investors and Berkshire shall
execute and deliver the LLC Agreement;
2.2.2 Capital Contributions. Each of the Investors and
Berkshire shall make their respective Capital Contributions as provided in
Section 3.1 (Capital Contributions) of the LLC Agreement and Exhibit A thereto;
provided, that, Berkshire shall not be required to contribute more than $954,810
in addition to the Existing Berkshire Contribution; and
2.2.3 Issuance of LLC Interests. The Company shall issue LLC
Interests to each Investor and Berkshire in respect of the Capital Contributions
made by it as of such date.
2.3 Use of Proceeds. As soon as practicable following the Closing Date,
the Company shall use the proceeds from the sale of the Purchased Interests,
together with other available funds, to consummate the merger of the Company and
Fund III upon terms and conditions substantially similar to the terms and
conditions set forth in the Merger Agreement, and as otherwise may be required
in connection with the ownership and management of the properties acquired
thereby and for other limited liability company purposes.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
---------------------------------
The Company hereby represents and warrants to the Investors and
Berkshire as follows:
6
3.1 Existence and Power. The Company (i) is a limited liability company
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and (ii) has the requisite power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents to which it is a party.
3.2 Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and each of the other Transaction
Documents to which it is a party and the transactions contemplated hereby and
thereby, including, without limitation, the sale, issuance and delivery of the
LLC Interests (a) have been duly authorized by all necessary action of the
Company, (b) do not contravene the terms of the Certificate of Formation or the
LLC Agreement of the Company and (c) do not violate, conflict with or result in
any breach or contravention of or the creation of any Lien under, any
Contractual Obligation of the Company, or any Requirements of Law applicable to
the Company. The Company is not a party to or bound by any agreement which is
currently in effect, granting any rights to any Person which are inconsistent
with the rights to be granted to the Investors or Berkshire by the Company in
the LLC Agreement.
3.3 Governmental Authorization; Third Party Consents. Except for
filings to be made with the Securities and Exchange Commission (the "SEC") and
the approval of the Amendment and the merger by the holders of Units of Fund
III, no approval, consent, compliance, exemption, authorization, or other action
by, or notice to, or filing with, any Governmental Authority or any other
Person, and no lapse of a waiting period under any Requirement of Law, is
necessary or required to be obtained by the Company in connection with the
execution, delivery or performance (including, without limitation, the sale,
issuance and delivery of the LLC Interests) by the Company or of any of the
Transaction Documents to which it is a party.
3.4 Binding Effect. This Agreement and each of the other Transaction
Documents to which the Company is a party have been duly executed and delivered
by the Company and constitute the legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
ARTICLE 4
REPRESENTATIONS AND
WARRANTIES OF THE INVESTORS AND BERKSHIRE
-----------------------------------------
Each Investor and Berkshire hereby represents and warrants (severally
as to itself and not jointly) to the Company as follows:
7
4.1 Existence and Power. Such Person (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation and (b) has the requisite power and authority to execute, deliver and
perform its obligations under this Agreement and each of the other Transaction
Documents to which it is a party.
4.2 Authorization; No Contravention. The execution, delivery and
performance by such Person of this Agreement and each of the other Transaction
Documents to which it is a party and the transactions contemplated hereby and
thereby, including, without limitation, the purchase of the Purchased Interests,
(a) have been duly authorized by all necessary action by such Person, (b) do not
contravene the terms of the organizational documents of such Person, and (c) do
not violate, conflict with or result in any breach or contravention of or the
creation of any Lien under, any Contractual Obligation of such Person, or any
Requirement of Law applicable to such Person, except for such violation,
conflict, breach, contravention or Lien which would not have a material adverse
effect on the ability of such Person to consummate the transactions contemplated
by the Transaction Documents.
4.3 Governmental Authorization; Third Party Consents. Except for
filings to be made with the SEC, no approval, consent, compliance, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person and no lapse of a waiting period
under a Requirement of Law, is necessary or required to be obtained by such
Person in connection with the execution, delivery or performance (including,
without limitation, the purchase of the Purchased Interests) by such Person.
4.4 Binding Effect. This Agreement and each of the other Transaction
Documents to which such Person is a party have been duly executed and delivered
by such Person and constitute the legal, valid and binding obligations of such
Person, enforceable against it in accordance with their respective terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
4.5 Purchase for Own Account. The LLC Interests to be acquired by such
Person pursuant to this Agreement are being or will be acquired for its own
account and with no intention of distributing or reselling such LLC Interests or
any part thereof in any transaction that would be in violation of the securities
laws of the United States of America, or any state. Such Person understands and
agrees that any sale or other disposition of LLC Interests may be made only in
compliance with the Securities Act and applicable state securities laws, as then
in effect, and the LLC Agreement.
4.6 Investment Experience; Economic Risk; Accredited Investor. Such
Person has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risk of an investment in the
Purchased Interests
8
hereunder. Such Person understands that it must bear the economic risk of an
investment in the Purchased Interests for an indefinite length of time because
the Purchased Interests have not been registered under the Securities Act or any
applicable state securities laws. Such Person further understands that the
purchase of the Purchased Interests involves a high degree of risk, and that
such Person has been given the opportunity to ask questions of and receive
answers from the Company regarding the Purchased Interests.
ARTICLE 5
INDEMNIFICATION
---------------
5.1 Indemnification. (a) Except as otherwise provided in this Article
5, Berkshire and the Company, severally and not jointly, agree to indemnify,
defend and hold harmless the Investors and their Affiliates and their respective
officers, directors, agents, employees, subsidiaries, partners, members and
controlling persons to the fullest extent permitted by law from and against any
and all claims, losses, liabilities, damages, deficiencies, judgements,
assessments, fines, settlements, costs or expenses (including interest,
penalties and reasonable fees, disbursements and other charges of counsel)
(collectively, "Losses") based upon, arising out of or otherwise in respect of
any inaccuracy in or any breach of any representation, warranty, covenant or
agreement of Berkshire or the Company contained in this Agreement.
(b) Except as otherwise provided in this Article 5, each
Investor agrees to indemnify, defend and hold harmless the Company, Berkshire,
and their Affiliates and their respective officers, directors, agents,
employees, subsidiaries, partners, members and controlling persons to the
fullest extent permitted by law from and against any Losses based upon, arising
out of or otherwise in respect of any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of such Investor contained in
this Agreement.
(c) Except as otherwise provided in this Article 5, the
Company agrees to indemnify, defend and hold harmless Berkshire, the Investors
and their respective Affiliates, officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons to the fullest extent
permitted by law from and against any Losses based upon or arising out of or
otherwise in respect of any litigation commenced by or on behalf of Unitholders
relating to the Merger and the transactions contemplated thereby; provided that
the Company shall not have any liability to any of the foregoing parties to the
extent that any such Loss arises out of or is based upon such parties' fraud,
gross negligence, willful malfeasance or conduct that is the subject of a
criminal proceeding (where such party has a reasonable cause to believe that
such conduct was unlawful). Berkshire shall make capital contributions to the
Company in the event the Company is otherwise unable to satisfy such indemnity
obligations, which shall constitute additional Capital Contributions of the
Managing Member pursuant to Section 3.1(b)(i) of the LLC Agreement.
9
5.2 Notification. Each Person entitled to indemnification under this
Article 5 (an "Indemnified Party") shall, promptly after the receipt of notice
of the commencement of any action, investigation, claim or other proceeding
against such Indemnified Party in respect of which indemnity may be sought from
the indemnifying parties under this Article 5 (the "Indemnifying Parties"),
notify the Indemnifying Parties in writing of the commencement thereof. The
failure of any Indemnified Party to so notify the Indemnifying Parties of any
such action shall not relieve the Indemnifying Parties from any liability which
it may have to such Indemnified Party (a) other than pursuant to this Article 5
or (b) under this Article 5 unless, and only to the extent that, such failure
results in the Indemnifying Parties' forfeiture of substantial rights or
defenses. In case any such action, claim or other proceeding shall be brought
against any Indemnified Party, and it shall notify the Indemnifying Parties of
the commencement thereof, the Indemnifying Parties shall be entitled to assume
the defense thereof at their own expense, with counsel reasonably satisfactory
to such Indemnified Party in its reasonable judgment; provided, however, that
any Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense at its own expense. Notwithstanding the foregoing,
in any action, claim or proceeding in which both the Indemnifying Parties, on
the one hand, and an Indemnified Party, on the other hand, are, or are
reasonably likely to become, a party, such Indemnified Party shall have the
right to employ separate counsel at the expense of the Indemnifying Parties and
to control its own defense of such action, claim or proceeding if, in the
reasonable opinion of counsel to such Indemnified Party, a conflict or potential
conflict exists between the Indemnifying Parties, on the one hand, and such
Indemnified Party, on the other hand, that would make such separate
representation advisable; provided, however, that the Indemnifying Parties shall
not be liable for the fees and expenses of more than one counsel to all
Indemnified Parties. Each Indemnifying Party agrees that it will not, without
the prior written consent of the Indemnified Party, settle, compromise or
consent to the entry of any judgment in any pending or threatened claim, action
or proceeding relating to the matters contemplated hereby (if any Indemnified
Party is a party thereto or has been actually threatened to be made a party
thereto) unless such settlement, compromise or consent includes an unconditional
release of the Indemnified Party from all liability arising or that may arise
out of such claim, action or proceeding. The Indemnifying Parties shall not be
liable for any settlement of any claim, action or proceeding effected against an
Indemnified Party without its written consent. Notwithstanding the foregoing or
anything to the contrary contained in this Agreement, nothing in this Article 5
shall restrict or limit any rights that any Indemnified Party may have to seek
equitable relief.
5.3 Contribution. If and to the extent that the indemnification
provided for in Section 5.1 (Indemnification) is unenforceable for any reason,
each Indemnifying Party shall make the maximum contribution to the payment and
satisfaction of amounts with respect to such Losses that such Indemnifying Party
would otherwise be obligated to provide indemnification for pursuant to this
Article 5 as shall be permissible under applicable laws.
10
ARTICLE 6
CONDITIONS
----------
The obligations of the parties to perform the obligations set forth in
Sections 2.2 (Closing Date Transactions) and 2.3 (Use of Proceeds) are subject
to the fulfillment prior to or on the Closing Date of the following conditions:
6.1 Notice of the Closing Date. The Company shall have provided at
least two (2) Business Days' prior written notice to Berkshire and the Investors
of the Closing Date.
6.2 Merger Agreement Conditions. The conditions set forth in Article
VIII of the Merger Agreement shall have been fulfilled or waived by the parties
thereto.
6.3 Compliance with this Agreement. The Company, the Investors and
Berkshire shall have performed and complied with all of their agreements and
conditions set forth or contemplated herein that are required to be performed or
complied with by the Company, the Investors and Berkshire on or before the
Closing Date.
ARTICLE 7
TERMINATION
-----------
Notwithstanding anything to the contrary contained herein, if the
Closing Date shall not have occurred on or prior to August 1, 2000 or Capital
Contributions for each Member, as contemplated by the LLC Agreement, are not
made by each of the Members of the Company by the close of business on the
Closing Date, New York City time, then this Agreement shall terminate and the
parties hereto shall have no further obligations hereunder. This Agreement may
be terminated by the Berkshire at any time. Notwithstanding the foregoing, no
termination of this Agreement shall relieve a party that has breached a
representation, warranty or covenant contained herein from liability therefor or
from any indemnity obligation arising under Article 5 hereof prior to the date
of termination.
ARTICLE 8
MISCELLANEOUS
-------------
8.1 Survival of Representations and Warranties. All of the
representations, warranties and covenants made herein shall survive the
execution and delivery of this Agreement, acceptance of the Purchased Interests
and payment therefor.
11
8.2 Notices. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing and shall be by telecopier,
courier service, overnight mail or personal delivery:
(a) if to an Investor:
c/o Equity Resources Group, Inc.
00 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx Dagbjartsson
with a copy to:
Holland & Knight LLP
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxx, Esq.
(b) if to the Company or Berkshire:
c/o The Berkshire Group
Xxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
with copies to:
The Berkshire Group
Xxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx, Esq.
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by courier
or overnight mail, if delivered by commercial courier service or overnight mail;
five (5) Business Days after being deposited in the mail, postage prepaid, if
mailed; and when receipt is mechanically acknowledged, if telecopied.
8.3 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of the parties
12
hereto. Neither the Company, Berkshire nor the Investors may assign any of their
respective rights under this Agreement, without the written consent of the other
parties.
8.4 Amendment and Waiver.
(a) Amendment. Any amendment, supplement or modification of or
to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by the Company or the Investors from
the terms of any provision of this Agreement, shall be effective (i) only if it
is made or given in writing and signed by the Company, Berkshire and the
Investors, and (ii) only in the specific instance and for the specific purpose
for which made or given. Except where notice is specifically required by this
Agreement, no notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
(b) Waiver. No failure or delay on the part of the Company or
the Investors in exercising any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or the Investors at law, in equity or otherwise.
8.5 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
8.6 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
8.7 Governing Law; Arbitration. (a) This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
regard to the principles of conflicts of law thereof.
(b) Any dispute arising hereunder shall be settled by
arbitration in accordance with the Expedited Procedures of the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA Rules") by a
single arbitrator who is mutually agreeable to Berkshire and the Investors (who
shall be represented by Equity Resources Group, Incorporated (the "Investors'
Representative"). If Berkshire and the Investors' Representative are unable to
agree upon an arbitrator, an arbitrator shall be selected in accordance with the
AAA Rules. Any judgment upon the award rendered by such arbitrator may be
entered in any court of competent jurisdiction. All proceedings in any such
arbitration shall be conducted in Boston, Massachusetts. Jurisdiction of such
arbitrator shall be exclusive as to disputes between Berkshire and the Investors
relating to this Agreement, and Berkshire and the
13
Investors agree that this agreement to arbitrate shall be specifically
enforceable under the laws of Delaware. Neither Berkshire nor any Investor
(including the Investors' Representative) shall have the right to appeal the
arbitrator's decision or otherwise to submit a dispute relating to this
Agreement to a court of law. With respect to matters submitted to arbitration,
each of Berkshire and the Investors shall bear its own respective costs, fees
and expenses (including reasonable fees, expenses and disbursements of
attorneys) in connection with such arbitration. Berkshire, on the one hand, and
the Investors, collectively, on the other hand, shall each pay one-half of the
total costs, fees and expenses of the arbitrator.
8.8 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
8.9 Entire Agreement. This Agreement, the LLC Agreement and the Voting
Agreement, together with the exhibits hereto or thereto, are intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. This Agreement,
the LLC Agreement and the Voting Agreement together with the exhibits attached
hereto or thereto, supersede all prior agreements and understandings between the
parties with respect to such subject matter.
8.10 No Third Party Beneficiaries. Nothing contained in this Agreement
(other than the provisions of Article 5 (Indemnification)) express or implied,
is intended to or shall confer upon anyone other than the parties (and their
successors and permitted assigns) any right, benefit or remedy of any nature
whatsoever under or by reason of any Transaction Documents.
8.11 Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
Remainder of Page Intentionally Left Blank
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective duly authorized persons on the date
first above written.
KRF3 ACQUISITION COMPANY, L.L.C.
By: KRF Company, L.L.C.,
its managing member
By: The Xxxxx Family Limited Partnership-94,
its sole member
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Xxxxxxx Xxxxx
General Partner
KRF COMPANY, L.L.C.
By: The Xxxxx Family Limited Partnership-94,
its sole member
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Xxxxxxx Xxxxx
General Partner
15
EQUITY RESOURCE CAMBRIDGE FUND
LIMITED PARTNERSHIP
EQUITY RESOURCE GENERAL FUND
LIMITED PARTNERSHIP
EQUITY RESOURCE FUND XVI LIMITED
PARTNERSHIP
EQUITY RESOURCE FUND XIX LIMITED
PARTNERSHIP
EQUITY RESOURCE BRATTLE FUND
LIMITED PARTNERSHIP
EQUITY RESOURCE BRIDGE FUND LIMITED
PARTNERSHIP
By: EQUITY RESOURCES GROUP,
INCORPORATED,
as general partner of each of the foregoing
By: /s/ Xxxxxx Dagbjartsson
-----------------------------------
Xxxxxx Dagbjartsson
Executive Vice President
EXHIBIT A
---------
================================================================================
------------------------------
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
KRF3 ACQUISITION COMPANY, L.L.C.
(A Delaware Limited Liability Company)
------------------------------
Dated as of [________], 2000
================================================================================
Page
----
KRF3 ACQUISITION COMPANY, L.L.C.
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
Table of Contents
-----------------
Page
----
ARTICLE 1 GENERAL PROVISIONS ........................................... 1
1.1 Definitions .................................................. 1
1.2 Name ......................................................... 9
1.3 Principal Office ............................................. 9
1.4 Registered Office and Registered Agent ....................... 9
1.5 Term ......................................................... 9
1.6 Purpose and Power ............................................ 9
ARTICLE 2 MANAGEMENT; LIABILITY OF MEMBERS;
EXPENSES ..................................................... 10
2.1 Rights and Duties of the Managing Member ..................... 10
2.2 Rights and Duties of the Additional Members .................. 12
2.3 Expenses ..................................................... 13
2.4 Officers ..................................................... 13
ARTICLE 3 CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;
DISTRIBUTIONS; ALLOCATIONS ................................... 13
3.1 Capital Contributions ........................................ 13
3.2 Capital Accounts ............................................. 15
3.3 Distributions ................................................ 16
3.4 Allocations .................................................. 17
3.5 Special Allocations .......................................... 18
3.6 Tax Withholding; Withholding Advances ........................ 20
i
Page
----
ARTICLE 4 LIABILITY; INDEMNIFICATION ................................... 21
4.1 Limited Liability of Members ................................. 21
4.2 Qualification ................................................ 22
4.3 Liability to Members ......................................... 22
4.4 Indemnification .............................................. 22
ARTICLE 5 CONSENTS; VOTING; MEETINGS ................................... 24
5.1 Method of Giving Consent ..................................... 24
5.2 Meetings ..................................................... 24
5.3 Quarterly Meetings ........................................... 24
ARTICLE 6 REPORTS TO MEMBERS; CONFIDENTIALITY .......................... 24
6.1 Books of Account ............................................. 24
6.2 Reports ...................................................... 25
6.3 Accounting Basis ............................................. 25
6.4 Tax Matters .................................................. 25
6.5 Confidentiality .............................................. 25
ARTICLE 7 ADDITIONAL MEMBERS; TRANSFER;
WITHDRAWAL ................................................... 26
7.1 Additional Members ........................................... 26
7.2 Transfer ..................................................... 26
7.3 Death, Incompetence, Bankruptcy or Liquidation of an
Additional Member ............................................ 27
7.4 Withdrawals .................................................. 27
7.5 Continuation ................................................. 27
ARTICLE 8 DISSOLUTION; WINDING UP; TERMINATION ......................... 27
8.1 Dissolution .................................................. 27
8.2 Winding Up and Termination ................................... 28
8.3 Assets Reserved and Pending Claims ........................... 30
ARTICLE 9 AMENDMENTS; WAIVER; POWER OF ATTORNEY ........................ 31
9.1 Amendments; Waiver ........................................... 31
9.2 Power of Attorney ............................................ 32
ARTICLE 10 MISCELLANEOUS ................................................ 33
10.1 Investment Representations ................................... 33
10.2 Successors and Assigns ....................................... 34
10.3 No Waiver .................................................... 34
10.4 Survival of Certain Provisions ............................... 34
ii
10.5 Notices ...................................................... 34
10.6 Severability ................................................. 35
10.7 Counterparts ................................................. 35
10.8 Headings, Etc. ............................................... 35
10.9 Gender ....................................................... 35
10.10 No Right to Partition ........................................ 35
10.11 No Third Party Rights ........................................ 35
10.12 Entire Agreement ............................................. 35
10.13 Rule of Construction ......................................... 35
10.14 Authority .................................................... 36
10.15 Reliance ..................................................... 36
10.16 Applicable Law ............................................... 36
EXHIBITS
Exhibit A Members of KRF3 Acquisition Company, L.L.C.
iii
EXHIBIT A
---------
KRF3 ACQUISITION COMPANY, L.L.C.
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"Agreement"), dated as of [________], 2000 of KRF3 ACQUISITION COMPANY, L.L.C.
(the "Company") by and among KRF Company, L.L.C., a Delaware limited liability
company, as the managing member of the Company (the "Managing Member"), and
those Persons (as defined herein) who have executed this Agreement as additional
members of the Company (each, an "Additional Member" and together with the
Managing Member, the "Members").
WHEREAS, the Company has heretofore been formed as a limited liability
company under the Delaware Act (as defined herein) by the filing by the Managing
Member of a Certificate of Formation on behalf of the Company (the
"Certificate") with the Secretary of State of the State of Delaware on May 10,
1999;
WHEREAS, the Managing Member entered into a limited liability company
agreement for the Company dated as of May 10, 1999 (the "Initial Agreement");
and
WHEREAS, the Persons listed on Exhibit A hereto under the heading
"Additional Members" will be admitted to the Company as Additional Members as of
the date hereof and the Members wish to amend and restate the Initial Agreement
in its entirety;
NOW, THEREFORE, the Managing Member and the Additional Members, in
consideration of their mutual covenants contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, mutually covenant and agree as follows:
ARTICLE 1
GENERAL PROVISIONS
1.1 Definitions. For the purpose of this Agreement, the following terms
shall have the following meanings:
"Additional Cash Determination" shall have the meaning set forth in
Section 3.1(b)(ii) (Additional Capital Contributions).
"Additional Members" shall mean each Person whose name is listed on
Exhibit A hereto under the heading "Additional Members," and any Additional
Members and any substituted Members admitted to the Company in accordance with
Section 7.1 (Additional Members) and 7.2(a) (Conditions to Transfer).
"Affiliate" shall mean, with respect to any Person, (i) any other
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person,
(ii) any Person that is an officer of, member of, partner in, or trustee of, or
serves in a similar capacity with respect to, the specified Person or of which
the specified Person is an officer, member, partner or trustee, or with respect
to which the specified Person serves in a similar capacity, (iii) any Person
that, directly or indirectly, is the beneficial owner of 10% or more of any
class of equity securities of, or otherwise has a substantial beneficial
interest in, the specified Person or of which the specified Person is directly
or indirectly the owner of 10% or more of any class of equity securities or in
which the specified Person has a substantial beneficial interest, (iv) any
Immediate Family Member of the specified Person and (v) any Affiliate of a
Person described in subsections (i)-(iv). For the purposes of this definition,
"control" shall mean, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Amended and Restated Limited Liability
Company Agreement, as amended from time to time.
"Available Cash" shall mean, for any quarterly period or such other
period for which computation may be appropriate, the excess, if any, of:
(a) the sum of
(i) the amount of all of the cash receipts of the Company
during such period from whatever source; and
(ii) any cash reserves of the Company existing at the start of
such period;
reduced by
(b) the sum of
(i) all cash amounts paid or payable (without duplication) in
such period on account of expenses and capital expenditures incurred in
connection with the Company's business and approved in accordance with
the
2
provisions of this Agreement (including, without limitation, general
operating expenses, taxes, amortization or interest on any debt of the
Company; and
(ii) such cash reserves as may be required for capital
expenditures, working capital and future needs of the Company in an
amount reasonably determined by the Managing Member.
"Bankruptcy" shall mean the occurrence of any event specified in
Section 8.1(g) (Dissolution) with respect to the Managing Member.
"Capital Account" shall have the meaning set forth in Section 3.2(a)
(Maintenance of Capital Accounts).
"Capital Contribution" shall mean, with respect to each Member, the
amount of cash or other property contributed (or deemed to be contributed) by
such Member to the capital of the Company from time to time pursuant to Section
3.1 (Capital Contributions).
"Certificate" shall have the meaning set forth in the recitals.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Company" shall mean KRF3 Acquisition Company, L.L.C., a Delaware
limited liability company.
"Company Minimum Gain" shall mean "partnership minimum gain" as such
term is defined in Regulation section 1.704-2(b)(2) and 1.704-2(d).
"Confidential Information" shall have the meaning set forth in Section
6.5 (Confidentiality).
"Consenting Member" shall have the meaning set forth in Section 5.1(a)
(Written Approval).
"Delaware Act" shall mean the Delaware Limited Liability Company Act
(Del. Code Xxx. tit. 6ss. 18-101 et seq.), as amended from time to time, and any
successor to such Act.
"Depreciation" shall mean, with respect to any Fiscal Year, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for U.S. federal income tax purposes, except
that if the Gross Asset
3
Value of the asset differs from its adjusted tax basis, Depreciation shall be
determined in accordance with the methods used for U.S. federal income tax
purposes and shall equal the amount that bears the same ratio to the Gross Asset
Value of such asset as the depreciation, amortization or other cost recovery
deduction computed for U.S. federal income tax purposes with respect to such
asset bears to the adjusted U.S. federal income tax basis of such asset;
provided, however, that if any such asset that is depreciable or amortizable has
an adjusted tax basis of zero, the rate of Depreciation shall be as determined
by the Managing Member.
"Dissolution Event" shall have the meaning set forth in Section 8.1
(Dissolution).
"Existing Managing Member Contribution" shall have the meaning set
forth in Section 3.1(a).
"Financing" shall mean the loan facilities available to the Company,
obtained by the Managing Member or its Affiliates, in the amount necessary to
finance, together with the Capital Contributions of the Members hereto, the
Merger contemplated by the Merger Agreement and to refinance the indebtedness of
Fund III.
"Fiscal Year" shall mean each fiscal year of the Company (or portion
thereof), which shall end on December 31; provided, however, that upon
Termination of the Company, "Fiscal Year" shall mean the period from the January
1 immediately preceding such Termination to the date of such Termination.
"Fund III" shall have the meaning set forth in Section 1.6 (Purpose and
Power).
"Fund III Agreement" shall mean the Amended Agreement of Limited
Partnership of Fund III, dated as of June 1, 1982, as amended from time to time.
"Gross Asset Value" shall mean, with respect to any asset, the asset's
adjusted basis for U.S. federal income tax purposes, except that
(i) the Gross Asset Value of any asset contributed to the
Company shall be its gross fair market value (as determined by the
Managing Member) at the time such asset is contributed or deemed
contributed for purposes of computing Capital Accounts;
(ii) upon a contribution of money or other property to the
Company by a new or existing Member as consideration for an interest in
the Company and upon a distribution of money or other property to a
retiring or
4
continuing Member as consideration for an interest in the Company, the
Gross Asset Value of all of the assets of the Company shall be adjusted
to equal their respective gross fair market values (as determined by
the Managing Member), to the extent such adjustment is determined by
the Managing Member to be necessary or appropriate to reflect the
Members' relative Interests in the Company;
(iii) the Gross Asset Value of any asset distributed in kind
to any Member shall be the gross fair market value of such asset (as
determined by the Managing Member) on the date of such distribution;
and
(iv) the Gross Asset Value of any asset determined pursuant to
clauses (i) or (ii) above shall thereafter be adjusted from time to
time by the Depreciation taken into account with respect to such asset
for purposes of determining Net Income or Net Loss.
"Immediate Family Member" means with respect to any person, such
person's spouse, parent, parent-in-law, issue, brother, sister, brother-in-law,
sister-in-law, or child-in-law.
"Initial Agreement" shall have the meaning set forth in the preamble to
this Agreement.
"Interest" shall mean, with respect to any Member, as of any date, the
fraction, expressed as a percentage, the numerator of which is such Member's
Capital Contributions and the denominator of which is the sum of the Capital
Contributions of all Members.
"Investment Agreement" shall mean the Investment Agreement among the
Company, Equity Resource Fund XVI Limited Partnership, Equity Resource Fund XIX
Limited Partnership, Equity Resource General Fund Limited Partnership, Equity
Resource Cambridge Fund Limited Partnership, Equity Resource Brattle Fund
Limited Partnership, Equity Resource Bridge Fund Limited Partnership and KRF
Company, L.L.C., dated as of January 6, 2000.
"Investor Limited Partner" shall have the meaning set forth in the Fund
III Agreement.
"Liabilities" shall have the meaning set forth in Section 4.4(a)
(Indemnification of Protected Persons).
5
"Managing Member" shall have the meaning set forth in the preamble to
this Agreement.
"Member Nonrecourse Debt" shall mean "partner nonrecourse debt" as such
term is defined in Regulation section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" shall mean an amount with
respect to each Member Nonrecourse Debt equal to the Company Minimum Gain that
would result if such Member Nonrecourse Debt were treated as a nonrecourse
liability (as defined in Regulation section 1.752-1(a)(2)) determined in
accordance with Regulation section 1.704-2(i)(3).
"Member Nonrecourse Deduction" shall mean "partner nonrecourse
deduction" as such term is defined in Regulation section 1.704-2(i)(2).
"Members" shall mean the Managing Member and the Additional Members,
and "Member" shall mean any of the Members.
"Merger" shall mean the merger of the Company and Fund III under the
Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger to be
executed by the Company and Fund III substantially in the form of Exhibit C to
the Investment Agreement.
"Net Income" or "Net Loss" shall mean, for any Fiscal Year (or portion
thereof), the net income, gain or loss of the Company during such Fiscal Year
(or portion thereof), as determined for United States federal income tax
purposes, with the following adjustments:
(i) Such taxable income or loss shall be increased by the
amount, if any, of tax-exempt income received or accrued by the
Company;
(ii) Such taxable income or loss shall be reduced by the
amount, if any, of all expenditures of the Company described in Section
705(a)(2)(B) of the Code, including expenditures treated as described
therein under Regulations section 1.704(b)(2)(iv)(i);
(iii) If the Gross Asset Value of any asset is adjusted
pursuant to clause (ii) or (iii) of the definition of Gross Asset
Value, the amount of such adjustment shall be taken into account,
immediately prior to the event giving
6
rise to such adjustment, as gain or loss from the disposition of such
asset for purposes of computing Net Income or Net Loss;
(iv) Gain or loss resulting from any disposition of any asset
with respect to which gain or loss is recognized for U.S. federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the asset disposed of, notwithstanding that such Gross Asset
Value differs from the adjusted tax basis of such asset; and
(v) In lieu of the depreciation, amortization, or other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal
Year.
"Nonrecourse Deductions" shall have the meaning set forth in Regulation
section 1.704-2(b).
"Person" shall mean an individual, a corporation, a company, a
voluntary association, a partnership, a joint venture, a limited liability
company, a trust, an estate, an unincorporated organization, a governmental
authority or other entity.
"Prime Rate" shall mean the rate of interest published from time to
time in The Wall Street Journal, Eastern Edition and designated as the prime
rate.
"Properties" means any real estate, buildings, improvements, fixtures
and related personal property acquired by the Company in connection with the
Merger or otherwise.
"Property Management Agreement" shall mean the Property Management
Agreements in effect on the date hereof between Fund III and BRI OP Limited
Partnership.
"Proposed Transfer" shall have the meaning set forth in Section 6.5
(Confidentiality).
"Protected Person" shall mean: (i) the Managing Member, any Additional
Member and their respective members, board members and officers; (ii) any
officer, director, partner, member, employee, stockholder or Specified Agent of
the Managing Member or any Additional Member; and (iii) any Person who serves at
the request of the Managing Member hereunder on behalf of the Company as an
officer, director, partner, member or employee of any other Person.
7
"Rate of Return" shall mean, with respect to any interest in the
Company held by any Member, a cumulative, semiannually compounded return on all
Capital Contributions made or deemed to have been made by such Member with
respect to such Member's interest in the Company (and accrued but unpaid return
at the specified rate outstanding from time to time) at a rate per annum as
specified. A Member shall be deemed to have received a specified Rate of Return
with respect to such Member's interest in the Company when such Member has
received an amount equal to an annual return on the total Capital Contributions
made from time to time by such Member in respect of such Member's interest in
the Company equal to the specified percentage calculated commencing on the date
such Capital Contributions are made or are deemed to have been made and
compounded semiannually to the extent not paid on a current basis, taking into
account the timing and amounts of all previous distributions by the Company to
such Member. For purposes of computing such Rate of Return, distributed amounts
shall be applied in accordance with Section 3.3(a)(ii) (Distributions --
General).
"Regulations" shall mean the regulations promulgated under the Code.
"Regulatory Allocations" shall have the meaning set forth in Section
3.5(g)(i) (Curative Allocations).
"Representatives" shall have the meaning set forth in Section 6.5
(Confidentiality).
"Required Additional Members" shall mean Additional Members holding at
least 51% of the aggregate Interests held by all Additional Members.
"Securities Act" shall have the meaning set forth in Section 10.1
(Investment Representations).
"Specified Agent" shall mean any agent of any Person that is designated
in writing by the Managing Member as a "Specified Agent" of the Company entitled
to the protection of Sections 4.3 (Liability to Members) and 4.4
(Indemnification).
"Termination" shall mean the date of the cancellation or withdrawal of
the Certificate following the end of the Winding Up Period by the filing of a
Certificate of Cancellation of the Company in the Office of the Secretary of
State of the State of Delaware.
"Transfer" shall have the meaning set forth in Section 7.2(a).
"Units" shall mean investor limited partnership interests in Fund III.
8
"Winding Up Period" shall mean the period from the Dissolution Event to
the Termination of the Company.
"Withholding Advances" shall have the meaning set forth in Section
3.6(b) (Withholding Advances--General).
1.2 Name. The name of the Company is "KRF3 Acquisition Company, L.L.C."
The Company's business may be conducted under any other name or names deemed
advisable by the Managing Member; provided, however, that (a) the words "Limited
Liability Company" or the abbreviation "L.L.C." or "LLC" shall be included in
the name where necessary to comply with the laws of any jurisdiction that so
requires and (b) the name shall not contain any word or phrase indicating or
implying that it is organized other than for a purpose stated herein. The
Managing Member shall give prompt notice of any name change to each Additional
Member.
1.3 Principal Office. The principal office of the Company is at Xxx
Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxxxxxxx, 00000, or such other place in
the United States as may from time to time be designated by the Managing Member.
The Company shall keep its books and records at its principal office. The
Managing Member shall give prompt notice to each Additional Member of any change
in the location of the Company's principal office.
1.4 Registered Office and Registered Agent. The street address of the
registered office of the Company in the State of Delaware is at 0000 Xxxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000 or such other place in the State of Delaware as
may from time to time be designated by the Managing Member in accordance with
the Delaware Act, and the Company's registered agent at such address is
Corporation Service Company.
1.5 Term. The Company was formed on May 10, 1999 and shall continue its
regular business activities until the occurrence of a Dissolution Event as
described in Section 8.1 (Dissolution).
1.6 Purpose and Power.
(a) Purpose. The Company is organized for the purposes of (i)
merging with Xxxxx Realty Fund Ltd.-III, a Massachusetts limited partnership
("Fund III"); (ii) investing in, maintaining, operating, leasing, improving,
holding, encumbering, selling, managing and otherwise dealing with the
Properties; (iii) sharing the profits and losses therefrom; (iv) engaging in
activities incidental or ancillary thereto; and (v) carrying on any lawful
business, purpose or activity permitted under the Delaware Act. Without the
consent of all the Members, the Company shall not engage in any business other
than those described in clauses (i), (ii), (iii) and (iv) above.
9
(b) Power. The Company shall have the power to do any and all
acts necessary, appropriate, proper, advisable, incidental or convenient to or
for the furtherance of the purposes and business described herein and for the
protection and benefit of the Company, and shall have, without limitation, any
and all of the powers that may be exercised on behalf of the Company by the
Managing Member pursuant to this Agreement, including, without limitation, those
powers set forth in Section 2.1 (Rights and Duties of the Managing Member). The
Company, or the Managing Member on behalf of the Company, may enter into and
perform agreements relating to the organization of the Company, without any
further act, vote or approval of any Additional Member, notwithstanding any
other provision of this Agreement.
ARTICLE 2
MANAGEMENT; LIABILITY OF MEMBERS; EXPENSES
2.1 Rights and Duties of the Managing Member. Except as otherwise
expressly provided herein, the management and operation of the Company shall be
vested exclusively in the Managing Member, who shall have the power on behalf of
and in the name of the Company to carry out any and all of the purposes of the
Company and to perform all acts and enter into and perform all contracts and
other undertakings that it may deem necessary, appropriate, proper, advisable,
incidental or convenient thereto. Except as otherwise expressly provided herein,
the Managing Member shall have, and shall have full authority in its discretion
to exercise, on behalf of and in the name of the Company, all rights and powers
of a manager of a limited liability company under the Delaware Act necessary or
convenient to carry out the purposes of the Company. Without limiting the
foregoing, and except as otherwise expressly provided in this Agreement, the
Managing Member is hereby authorized and empowered in the name of and on behalf
of the Company:
(a) to acquire, improve, mortgage, hold, sell, exchange,
divide, combine and otherwise transact business with respect to the Properties
and to engage in activities incidental or ancillary to such transactions; and to
execute and deliver in the name of the Company any and all instruments necessary
or desirable to effectuate such transactions;
(b) to make temporary investments of the funds of the Company
in all types of securities, including, without limitation, United States
government and agency securities, interest-bearing deposits in United States
banks, certificates of deposit, securities issued by or on behalf of states,
municipalities and their instrumentalities (the interest from which is exempt
from federal income tax), prime-grade commercial paper,
10
repurchase agreements with respect to any of the foregoing, prior to long-term
investment or pending cash distributions to the Members;
(c) to employ, retain or consult, or terminate the services
of, such Persons as it shall deem advisable, including, without limitation,
brokers, attorneys, accountants, actuaries or specialists in any field of
endeavor whatsoever, including, without limitation, engineers, contractors,
appraisers, consultants, advisors, artisans and workmen;
(d) to deposit and withdraw the funds of the Company in the
name of the Company in any bank or trust company and to entrust to such bank or
trust company any of the investments, monies, documents and papers belonging to
or relating to the Company; to deposit in and entrust to any brokerage firm that
is a member of any national securities exchange any of said funds, investments,
monies, documents and papers belonging to or relating to the Company; or to
enter into custodial arrangements with any Person with respect to the assets of
the Company;
(e) to invest, pay, retain and distribute the Company's funds
in a manner consistent with the provisions of this Agreement, including, without
limitation, to make distributions to the Members in cash, in kind or otherwise;
(f) to borrow monies and incur liabilities on behalf of the
Company to the extent permitted by this Agreement (including, without
limitation, pursuant to 3.1(b) hereof) and in connection therewith to issue,
accept, endorse and execute promissory notes, guarantees, drafts, bills of
exchange, warrants, bonds, debentures and other negotiable or non-negotiable
instruments and evidences of indebted ness, and to secure the payment of any of
the foregoing by pledge, conveyance or assignment in trust of the whole or any
part of the property of the Company whether at the time owned or thereafter
acquired, and to pay or prepay any such obligations;
(g) to set aside funds for reasonable reserves, reasonably
anticipated contingencies and reasonable working capital, including, without
limitation, for normal repairs and replacements related to the Properties;
(h) to make such elections under the Code and other relevant
tax laws as to the treatment of items of Company income, gain, loss and
deduction, and as to all other relevant matters, as the Managing Member deems
necessary, appropriate or advisable, including, without limitation, elections
referred to in Section 754 of the Code, determination of which items of cash
outlay are to be capitalized or treated as current expenses, and selection of
the method of accounting and bookkeeping procedures to be used by the Company;
11
(i) to xxx, prosecute, settle or compromise all claims against
third parties, to compromise, settle or accept judgment in respect of claims
against the Company and to execute all documents and make all representations,
admissions and waivers in connection therewith;
(j) to enter into, make and perform all contracts, agreements,
instruments, including the Merger Agreement, and other undertakings as the
Managing Member may determine to be necessary, advisable or incidental to the
carrying out of the foregoing objects and purposes, including, without
limitation, deeds, mortgages, leases and other documents of title or conveyance;
(k) to admit Additional Members to the Company in accordance
with Section 7.1 (Additional Members); and
(l) to take all actions that may be necessary or appropriate
in furtherance of any of the foregoing or for the continuation of the Company's
valid existence as a limited liability company under the Delaware Act and of
each other jurisdiction in which such action is necessary to protect the limited
liability of the Additional Members or to enable the Company to conduct the
business in which it is engaged.
2.2 Rights and Duties of the Additional Members.
(a) General. The Additional Members shall have no right to,
and shall not, take part in the management or control of the Company's business
or act for or bind the Company; provided, that the Additional Members shall have
all of the rights, powers and privileges granted to the Additional Members in
this Agreement and, where not inconsistent with the terms of this Agreement,
under the Delaware Act.
(b) Property Management Agreement. The Managing Member shall
not consent to any amendment to the Property Management Agreement that
materially increases the liabilities or obligations of the Company without the
consent of the Required Additional Members.
(c) Right to Force Sale of Properties. Upon the written
request of the Required Additional Members delivered to the Managing Member
during the period commencing on the fifth anniversary of the Merger and ending
on the 180th day after such anniversary, the Managing Member shall use its good
faith efforts to sell all of the Properties then owned by the Company at their
fair market value within a reasonable period of time from receipt of such
request Property.
12
(d) Merger Agreement. Notwithstanding any other provision of
this Agreement, the Additional Members are deemed to have consented to the
Merger Agreement by execution of this Agreement or appropriate supplement.
2.3 Expenses. The Company shall pay or reimburse the Managing Member
for its payment of (i) any and all costs and expenses incurred by the Managing
Member, its members and agents in connection with the management of the Company
and its assets, including, but not limited to, an annual fee of $100,000,
payable in advance, for time devoted to the management of the Company and its
assets by employees of the Managing Member or its Affiliates (such fee to be (A)
equitably adjusted in the event the Properties are sold by the Company and (B)
in addition to all amounts payable under the Property Management Agreement);
(ii) a fee equal to 0.25% of the gross amount of any proceeds from the
financing, refinancing or sale of the Properties or similar extraordinary
transaction; (iii) any and all taxes and governmental charges that may be
incurred or payable by the Company; (iv) any and all insurance premiums or
expenses incurred by the Company in connection with the activities of the
Company; (v) any and all expenses (including legal fees and expenses) incurred
to enable the Company to comply with any law or regulation related to the
activities of the Company or incurred in connection with any litigation or
governmental inquiry, investigation or proceeding involving the Company,
including the amount of any judgments, settlements or fines paid in connection
therewith, except, however, to the extent such expenses or amounts have been
determined to be excluded from the indemnification provided for in Section 4.4
(Indemnification); and (vi) any and all expenses related to the Company's
indemnification obligations pursuant to Section 4.4 (Indemnification). Nothing
in this Section 2.3 (Expenses) shall require the Managing Member to make any
payment described above on behalf of the Company.
2.4 Officers. The day-to-day operations of the Company shall be the
responsibility of the officers of the Company, who shall be designated and
appointed by, and shall have the powers delegated to it by, the Managing Member.
ARTICLE 3
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;
DISTRIBUTIONS; ALLOCATIONS
3.1 Capital Contributions.
(a) Initial Capital Contribution. As of the date hereof, the
Managing Member has caused to be contributed 10,826 Units, constituting all of
the Units owned by the Company (the "Existing Managing Member Contribution") to
the capital of the Company. On the date hereof or such later date as determined
by the Managing
13
Member, (i) the Managing Member shall have contributed (or shall have caused to
have been contributed) $954,810 in cash to the capital of the Company, or such
lesser amount, when added to the Financing, the Existing Managing Member
Contribution and the Capital Contributions of the Additional Members, as is
sufficient to consummate the Merger and to refinance the indebtedness of Fund
III, and (ii) the Additional Members shall have contributed to the Company all
of the Units owned by them. In the event that an amount in excess of $954,810 is
necessary to consummate the Merger and to refinance the indebtedness of Fund
III, the Managing Member shall have the right, but shall not be required, to
contribute such additional amount. Set forth on Exhibit A opposite each Member's
name as such Member's initial Capital Contribution is (i) in the case of the
Managing Member, (A) the Existing Managing Member Contribution (the value of
which shall be equal to the product of the number of Units previously
contributed by the Managing Member and the per Unit consideration paid to the
holders in the Merger) and (B) the amount of cash to be contributed by the
Managing Member on the date hereof, and (ii) in the case of each Additional
Member, the number of Units to be contributed by such Additional Member on the
date hereof and the contribution value per Unit, which value shall be equal to
the consideration paid to the holders of Units in the Merger.
(b) Additional Capital Contributions; Loans.
(i) The Managing Member shall pay any and all costs
and expenses incurred on behalf of the Company in connection with (A)
the organization of the Company and the preparation of this Agreement
and the Investment Agreement, including, without limitation, fees,
costs and expenses payable to attorneys, accountants, consultants and
custodians; (B) the proxy solicitation; (C) the meeting of Unitholders
to consider the Merger and (D) satisfaction of the Company's
indemnification obligations pursuant to Section 4.4(iv). All such
payments shall constitute additional Capital Contributions of the
Managing Member and the Members' Interests shall be adjusted to reflect
the changes in relative Capital Contributions of the Members resulting
from such payments.
(ii) The Members shall not be obligated to make
additional capital contributions to the Company except as provided in
Section 4.1(b) (Return of Previously Distributed Amounts) and, with
respect to the Managing Member, except as also provided in Section
3.1(b)(i). Upon a determination by the Managing Member that additional
cash is required by the Company for capital improvements to, or
rehabilitation of, the Properties (an "Additional Cash Determination"),
the Managing Member shall use good faith efforts to satisfy such cash
requirements utilizing available cash of the Company and/or with the
proceeds from a refinancing of the Properties. In the event such
actions are not reasonably likely to meet the Company's cash
requirements, each
14
Member shall have the right to make an additional Capital Contribution
in an amount equal to (but not less than) its proportionate share
(determined by reference to the ratio of such Member's Interests to the
Interests of all Members who actually make such additional Capital
Contribution) of any such additional cash requirement. With respect to
each Additional Cash Determination, if any Member declines to make such
an additional Capital Contribution, (A) the other Members may elect to
make a Capital Contribution equal to the unfunded amount (determined on
a pro rata basis) thereof and (B) the Members' Interests shall be
adjusted to reflect the changes in the relative Capital Contributions
of Members resulting from such Capital Contributions.
(iii) With respect to any Additional Cash
Determination not funded pursuant to Section 3.1(b)(ii) above, the
Managing Member may elect to lend funds to the Company in the amount of
such deficiency with the consent of the Required Additional Members
(which consent shall not unreasonably be withheld). Any loans to the
Company pursuant to this Section (b)(iii) shall not constitute a
Capital Contribution to the Company and shall not affect a Member's
Interest in the Company. Any loans to the Company authorized in
accordance with this Section 3.1(b)(iii) shall be evidenced by a
promissory note and shall be payable to the lender at an interest rate
of twelve percent (12%) per annum, compounded quarterly and shall have
such other terms as determined by the Managing Member, in its sole
discretion.
(c) Interests of the Members. The initial Interest of each
Member of the Company shall be the percentage set forth opposite such Member's
name on Exhibit A. Exhibit A shall be promptly amended to reflect changes of
Interests resulting from any additional capital contributions in accordance with
Section 3.1(b) (Additional Capital Contributions) or the admission or
substitution of any Additional Members to the Company in accordance with
Sections 7.1 (Additional Members) and 7.2 (Transfer), respectively.
(d) No Withdrawal; Return of Contributions. Except as
otherwise expressly provided in this Agreement, no Member shall have the right
to withdraw capital from the Company, to receive interest on such Member's
Capital Contributions or to receive any distribution or return of such Member's
Capital Contributions.
3.2 Capital Accounts.
(a) Maintenance of Capital Accounts. The Company shall
maintain a "Capital Account" for each Member on the books of the Company in
accordance with the following provisions:
15
(i) Each Member's Capital Account shall be increased
by the amount of: (A) such Member's Capital Contributions pursuant to
Section 3.1 (Capital Contributions); (B) any Net Income or other item
of income or gain allocated to such Member pursuant to Section 3.4
(Allocations) or Section 3.5 (Special Allocations); and (C) Company
liabilities, if any, assumed by such Member or secured, in whole or in
part, by any Company assets that are distributed to such Member.
(ii) Each Member's Capital Account shall be decreased
by the amount of: (A) cash and the fair market value on the date of
distribution of any other Company property distributed to such Member
pursuant to Section 3.3 (Distributions) and Section 8.2 (Winding Up and
Termination); (B) any Net Loss or other item of loss or deduction
allocated to such Member pursuant to Section 3.4 (Allocations) or
Section 3.5 (Special Allocations); and (C) liabilities, if any, of such
Member assumed by the Company, other than liabilities for which the
Company is required to reimburse such Member hereunder or otherwise.
(b) Succession to Capital Accounts. In the event any Person
becomes a substituted Member in accordance with the provisions of Section 7.2(a)
(Conditions to Transfer), such substituted Member shall succeed to the Capital
Account of the transferor Member to the extent such Capital Account relates to
the transferred interest (or portion thereof).
3.3 Distributions.
(a) General.
(i) Distributions shall be made in cash. The Managing
Member shall establish reserves for working capital, contingencies or
other items and for the satisfaction of liabilities (including
contingent liabilities) of the Company. Subject to such reserves,
distributions of Available Cash (subject to all restrictions in the
definitions of such term) shall be made to the Members by the Managing
Member on behalf of the Company in accordance with clause (ii) below.
(ii) Available Cash to be distributed to the Members
pursuant to this Section 3.3(a)(ii) (Distributions -- General) shall be
apportioned among the Members in accordance with their respective
Interests. Amounts so apportioned to the Managing Member shall be
distributed to the Managing Member. Amounts so apportioned to each
Additional Member shall be allocated between such Additional Member and
the Managing Member and distributed as follows (and the calculations
described in the following clauses shall be made as of
16
the date of each distribution, on a cumulative basis), subject to the
other terms of this Article 3:
(A) First, to such Additional Member until such
Member has received, taking into account the amount and timing
of all prior distributions under this Section 3.3(a)(ii)
(Distributions -- General) and all prior Capital Contributions
made pursuant to Section 3.1 (Capital Contributions) by such
Additional Member, a Rate of Return on its aggregate Capital
Contributions compounded semiannually to the extent not paid
on a semiannual basis, equal to twelve percent (12%) per
annum;
(B) Next, to such Additional Member until such
Additional Member has received an amount equal to its
aggregate Capital Contributions; and
(C) Thereafter, twenty percent (20%) to the Managing
Member and eighty percent (80%) to such Additional Member.
(b) Timing. Distributions shall be made within 45 days after
the completion of the first half of each Fiscal Year. Within 90 days after the
end of each Fiscal Year, the Company's profits/income for the year shall be
determined and after giving effect to the amount of profits/income previously
distributed, the remainder will then be distributed in accordance with Section
3.3(a) (Distributions -- General) above.
(c) Distributions to Persons on Company Records. Any
distribution by the Company pursuant to the terms of this Section 3.3 or Section
8.2 (Winding Up and Termination) to the Person shown on the Company's records as
a Member or to its legal representatives, or to the assignee to the right to
receive such distributions as provided herein, shall acquit the Company and the
Managing Member of all liability to any other Person who may be interested in
such distribution by reason of any other assignment or transfer of such Member's
interest in the Company for any reason (including an assignment or transfer
thereof by reason of death, incompetence, bankruptcy or liquidation of such
Member).
3.4 Allocations.
(a) Net Income. Net Income for each Fiscal Year (or portion
thereof) shall be allocated among the Members (after giving effect to the
allocations contained in Sections 3.4(c) (Tax Allocations) and 3.5(c) (Gross
Income Allocation) first to the extent Net Loss has been allocated to the
Members pursuant to Section 3.4(b) (Net Loss) and thereafter as nearly as
possible in the manner that distributions would be made pursuant to Section
3.3(a) (Distributions -- General) (other than returns of capital)).
17
(b) Net Loss. The Company shall allocate Net Loss first to
offset previous allocations of Net Income in respect of income that has not yet
been distributed, and then among the Members in accordance with their respective
Interests.
(c) Tax Allocations. For United States federal, state and
local income tax purposes, items of income, gain, loss, deduction and credit
shall be allocated to the Members in accordance with the allocations of the
corresponding items for Capital Account purposes under Sections 3.4
(Allocations) and 3.5 (Special Allocations), except that items with respect to
which there is a difference between tax and book basis will be allocated in
accordance with section 704(c) of the Code, the Regulations thereunder and
Regulation section 1.704-1(b)(4)(i).
3.5 Special Allocations.
(a) Minimum Gain Chargeback. Notwithstanding any other
provision of Section 3.4 (Allocations), if there is a net decrease in Company
Minimum Gain or Member Nonrecourse Debt Minimum Gain (determined in accordance
with the principles of Regulation sections 1.704-2(d) and 1.704-2(i)) during any
Company taxable year, the Members shall be specially allocated items of Company
income and gain for such year (and, if necessary, subsequent years) in an amount
equal to their respective shares of such net decrease during such year,
determined pursuant to Regulation sections 1.704-2(g) and 1.704-2(i)(5). The
items to be so allocated shall be determined in accordance with Regulation
section 1.704-2(f). This Section 3.5(a) is intended to comply with the minimum
gain chargeback requirements in such Regulation sections and shall be
interpreted consistently therewith; including that no chargeback shall be
required to the extent of the exceptions provided in Regulation sections
1.704-2(f) and 1.704- 2(i)(4).
(b) Qualified Income Offset. In the event any Member
unexpectedly received any adjustments, allocations, or distributions described
in Regulation section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company
income and gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate the deficit balance in its Capital Account in
excess of the sum of (i) the amount such Member is obligated to restore, if any,
pursuant to any provision of this Agreement, and (ii) the amount such Member is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulation sections 1.704-2(g)(1) and 1.704-2(i)(5) created by such adjustments,
allocations or distributions as promptly as possible. This Section 3.5(b) is
intended to comply with the "qualified income offset" requirement in such
Regulation section and shall be interpreted consistently therewith.
(c) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year which is in excess of the
sum of (i) the amount such Member is obligated to restore, if any, pursuant to
any provision of
18
this Agreement, and (ii) the amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulation section
1.704-2(g)(1) and 1.704- 2(i)(5), each such Member shall be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 3.5(c) shall be
made only if and to the extent that a Member would have a deficit Capital
Account in excess of such sum after all other allocations provided for in
Section 3.4 (Allocations) and this Section 3.5 have been tentatively made as if
Section 3.5(b) (Qualified Income Offset) and this Section 3.5(c) were not in
this Agreement.
(d) Nonrecourse Deductions. Nonrecourse Deductions shall be
allocated to the Members in proportion to their Interests.
(e) Member Nonrecourse Deductions. Member Nonrecourse
Deductions for any taxable period shall be allocated to the Member who bears the
economic risk of loss with respect to the liability to which such Member
Nonrecourse Deductions are attributable in accordance with Regulation section
1.704-2(j).
(f) Regulatory Compliance. The provisions of Sections 3.2
(Capital Accounts), 3.3 (Distributions), 3.4 (Allocations), this Section 3.5 and
the other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Regulation section 1.704-1(b) and shall be
interpreted and applied in a manner consistent with such Regulation. The
Managing Member shall be authorized to make appropriate amendments to the
allocations of items pursuant to Section 3.4 (Allocations) if necessary in order
to comply with Section 704 of the Code or applicable Regulations thereunder;
provided, that no such change shall have an adverse effect upon the amount
distributable to any Member pursuant to this Agreement.
(g) Curative Allocations.
(i) The allocations set forth in Sections 3.5(a)
(Minimum Gain Chargeback), 3.5(b) (Qualified Income Offset), 3.5(c)
(Gross Income Allocation), 3.5(d) (Nonrecourse Deductions) and 3.5(e)
(Member Nonrecourse Deductions) of this Agreement (the "Regulatory
Allocations") are intended to comply with certain requirements of the
Regulations. The Managing Member is authorized to offset all Regulatory
Allocations either with other Regulatory Allocations or with special
allocations of income, gain, loss or deductions pursuant to this
Section 3.5(g) in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Member's Capital
Account balance is, to the extent possible, equal to the Capital
Account balance such Member would have had if the Regulatory
Allocations were not part of this Agreement and all items of income,
gain, loss or deduction were allocated pursuant to Section 3.4
19
(Allocations). In exercising its discretion under this Section 3.5(g),
the Managing Member shall take into account future Regulatory
Allocations under Section 3.5(a) (Minimum Gain Chargeback) that,
although not yet made, are likely to offset other Regulatory
Allocations made under Sections 3.5(d) (Nonrecourse Deductions) and
3.5(e) (Member Nonrecourse Deductions).
(ii) In the event that there are any changes after
the date of this Agreement in applicable tax law, regulations or
interpretation, or any errors, ambiguities, inconsistencies or
omissions in this Agreement with respect to allocations to be made to
Capital Accounts, which would, individually or in the aggregate, cause
the Members not to achieve in any material respect the economic
objectives underlying this Agreement, the Managing Member may in its
discretion make appropriate adjustments to such allocations in order to
achieve or approximate such economic objectives.
(h) Adjustments of Capital Accounts. The Capital Accounts of
the Members may at the discretion of the Managing Member, be adjusted in
accordance with Regulation section 1.704-1(b)(2)(iv)(f), and thereafter
maintained in accordance with Regulation section 1.704-1(b)(2)(iv)(g), to
reflect the fair market value of Company property whenever an interest in the
Company is relinquished to the Company, whenever an Additional Member is
admitted to the Company and the amount of capital contributed by such Member
upon its admission is more than de minimis and reflects changes in the value of
Company assets, and upon a liquidation of the Company, and shall be adjusted in
accordance with Regulation section 1.704-1(b)(2)(iv)(e) in the case of a
distribution of more than a de minimis amount of property (other than cash).
3.6 Tax Withholding; Withholding Advances.
(a) Tax Withholding. If requested by the Managing Member, each
Additional Member shall, if able to do so, deliver to the Company: (i) an
affidavit in form satisfactory to the Managing Member that the applicable
Additional Member is not subject to withholding under the provisions of any
federal, state, local, foreign or other law; (ii) any certificate that the
Managing Member may reasonably request with respect to any such laws; (iii) any
other form or instrument reasonably requested by the Managing Member relating to
any Additional Member's status under such law; and/or (iv) a copy of any tax
return or similar document of the applicable Additional Member that the Managing
Member may reasonably request with respect to any such law. In the event that an
Additional Member fails or is unable to deliver to the Managing Member an
affidavit described in clause (i) of this Section 3.6(a), the Managing Member
may withhold amounts from such Additional Member in accordance with Section
3.6(b) (Withholding Advances -- General).
20
(b) Withholding Advances--General. To the extent the Company
is required by law to withhold or to make tax payments on behalf of or with
respect to any Member (e.g., backup withholding), the Managing Member may
withhold such ---- amounts and make such tax payments as so required. Tax
payments shall constitute "Withholding Advances" to the extent such tax payments
are not satisfied from amounts otherwise distributable to such Member at the
time such tax payment is made.
(c) Repayment of Withholding Advances. All Withholding
Advances made on behalf of a Member, plus interest thereon (unless waived by the
Managing Member) at a rate equal to the Prime Rate as of the date of such
Withholding Advances plus 2.0% per annum, shall (i) be paid on demand by the
Member on whose behalf such Withholding Advances were made (it being understood
that no such payment shall increase such Member's Capital Contribution), or (ii)
with the consent of the Managing Member, in its discretion, be repaid by
reducing the amount of the current or next succeeding distribution or
distributions which would otherwise have been made to such Member or, if such
distributions are not sufficient for that purpose, by so reducing the proceeds
of liquidation otherwise payable to such Member. Whenever repayment of a
Withholding Advance by a Member is made as described in clause (ii) above, for
all other purposes of this Agreement such Member shall be treated as having
received all distributions (whether before or upon Termination) unreduced by the
amount of such Withholding Advance and interest thereon.
(d) Reimbursement of Liabilities. Each Member hereby agrees to
reimburse the Company and the Managing Member for any liability with respect to
Withholding Advances (including interest thereon) required or made on behalf of
or with respect to such Member (including penalties imposed with respect
thereto).
ARTICLE 4
LIABILITY; INDEMNIFICATION
4.1 Limited Liability of Members.
(a) Limited Liability of Members. The liability of the Members
shall be limited as provided in the Delaware Act and as set forth in this
Agreement. Neither the Managing Member nor any Additional Member shall be
obligated to restore by way of capital contribution or otherwise any deficits in
its Capital Account or the Capital Account of any other Member (if such deficits
occur).
(b) Return of Previously Distributed Amounts. In accordance
with the Delaware Act, a member of a limited liability company may, under
certain
21
circumstances, be required to return to such limited liability company, for the
benefit of limited liability company creditors, amounts previously distributed
to such member. To the extent that an Additional Member may be required to
return capital to the Company under the Delaware Act, it is the intent of the
Managing Member that any obligation to return any such distributions pursuant to
Section 3.3 (Distributions) or Article 8 (Dissolution; Winding Up; Termination)
shall be deemed to be compromised by the consent of all Members and the
Additional Member to whom any money or property is distributed shall not be
required to return any such money or property to the Company or any creditor of
the Company. However, if any court of competent jurisdiction or regulatory body
with jurisdiction over the matter holds that, notwithstanding the provisions of
this Agreement, any Additional Member is obligated to return to the Company any
amounts previously distributed to such Additional Member, such obligation shall
be the obligation of such Additional Member and not of the Managing Member.
4.2 Qualification. The Managing Member shall use its reasonable efforts
to qualify the Company to do business or become licensed in each jurisdiction
where the activities of the Company make such qualification or licensing
necessary or where failure to so qualify or become licensed would have an
adverse effect on the limited liability of the Additional Members.
4.3 Liability to Members. No Protected Person shall be liable to the
Company or any Member for any action taken or omitted to be taken by it or by
any other Member or other Person with respect to the Company, including, without
limitation, any negligent act or failure to act, except in the case of a
liability resulting from such Protected Person's own fraud, gross negligence,
willful malfeasance, intentional and material breach of this Agreement or
conduct that is the subject of a criminal proceeding (where such Protected
Person has a reasonable cause to believe that such conduct was unlawful). Any
Protected Person may consult with legal counsel and accountants with respect to
Company affairs (including interpretations of this Agreement) and shall be fully
protected and justified in any action or inaction which is taken or omitted in
good faith, in reliance upon and in accordance with the opinion or advice of
such counsel or accountants. In determining whether a Protected Person acted
with the requisite degree of care, such Protected Person shall be entitled to
rely on written or oral reports, opinions, certificates and other statements of
the directors, officers, employees, consultants, attorneys, accountants and
professional advisors of the Company or the Managing Member selected and
monitored with reasonable care; provided, that no such Protected Person may rely
upon such statements if it believed that such statements were materially false.
22
4.4 Indemnification.
(a) Indemnification of Protected Persons. To the fullest
extent permitted by law, the Company shall indemnify, hold harmless, protect and
defend each Protected Person against any losses, claims, damages or liabilities,
including without limitation reasonable legal fees or other expenses incurred in
investigating or defending against any such losses, claims, damages or
liabilities, and any amounts expended in settlement of any claims approved by
the Managing Member (collectively, "Liabilities"), to which any Protected Person
may become subject:
(i) by reason of any act or omission or alleged act
or omission (even if negligent) performed or omitted to be performed in
connection with the activities of the Company;
(ii) by reason of the fact that it is or was acting
in connection with the activities of the Company in any capacity or
that it is or was serving at the request of the Company as a partner,
stockholder, member, director, officer, employee or Specified Agent of
any Person;
(iii) by reason of any other act or omission or
alleged act or omission (even if negligent) arising out of or in
connection with the activities of the Company; or
(iv) based upon or arising out of any litigation
commenced by or on behalf of Unitholders relating to the Merger and the
transactions contemplated hereby.
unless such Liability results from such Protected Person's own fraud, gross
negligence, willful malfeasance, intentional and material breach of this
Agreement or conduct that is the subject of a criminal proceeding (where such
Protected Person has a reasonable cause to believe that such conduct was
unlawful).
(b) Reimbursement of Expenses. The Company shall promptly
reimburse (and/or advance to the extent reasonably required) each Protected
Person for reasonable legal or other expenses (as incurred) of each Protected
Person in connection with investigating, preparing to defend or defending any
claim, lawsuit or other proceeding relating to any Liabilities for which the
Protected Person may be indemnified pursuant to this Section 4.4; provided, that
such Protected Person executes a written undertaking to repay the Company for
such reimbursed or advanced expenses if it is finally judicially determined that
such Protected Person is not entitled to the indemnification provided by this
Section 4.4.
23
(c) Survival of Protection. The provisions of this Section 4.4
shall continue to afford protection to each Protected Person regardless of
whether such Protected Person remains in the position or capacity pursuant to
which such Protected Person became entitled to indemnification under this
Section 4.4 and regardless of any subsequent amendment to this Agreement;
provided, that no such amendment shall reduce or restrict the extent to which
these indemnification provisions apply to actions taken or omissions made prior
to the date of such amendment.
(d) Limitation on Recovery. Any indemnification under this
Section 4.4 or otherwise shall be paid out of and to the extent of the Company's
assets only.
ARTICLE 5
CONSENTS; VOTING; MEETINGS
5.1 Method of Giving Consent. Any approval required by this Agreement
may be given as follows:
(a) Written Approval. By a written approval given by the
Member whose approval is solicited and obtained (the "Consenting Member") prior
to or after the doing of the act or thing for which the approval is solicited;
or
(b) Approval at Meeting. By the affirmative vote of the
Consenting Member to the doing of the act or thing for which the approval is
solicited or obtained at any meeting called and held to consider the doing of
such act or thing; provided, that, if a proxy is obtained from a Consenting
Member prior to any meeting, such proxy may be revoked at a meeting held to
consider the doing of such act or thing.
5.2 Meetings. Any matter requiring the approval of any or all of the
Members pursuant to this Agreement may be considered at a meeting of Members.
Meetings of the Members may be held by telephone or other electronic device.
5.3 Quarterly Meetings. Upon the written request of the Required
Additional Members, the Managing Member shall cause a meeting of the Members to
be held, provided, that no meeting of the Company shall be required to be held
more than once each fiscal quarter.
24
ARTICLE 6
REPORTS TO MEMBERS; CONFIDENTIALITY
6.1 Books of Account. Appropriate records and books of account of the
Company shall be kept by the Company at the principal place of business of the
Managing Member of the Company. Such records and books of account shall be
subject to inspection and copying by any Member at the reasonable request, and
at the expense, of such Member during normal business hours, upon reasonable
notice to the Company.
6.2 Reports.
(a) Reports to Members. The Company shall furnish to each
Member financial statements of the Company for each calendar quarter during the
term of the Company, commencing with the first full calendar quarter following
the date hereof.
(b) Tax Information. Within 120 days after the end of each
Fiscal Year, or as soon as reasonably practicable thereafter, the Managing
Member shall furnish to each Member such information regarding the amount of
such Member's share in the Company's taxable income or loss for such year, in
sufficient detail to enable such Member to prepare its United States federal,
state and other tax returns.
6.3 Accounting Basis. The books and records and financial statements
and reports of the Company shall be kept on an accrual basis. Additional
determinations with respect to accounting principles shall be made by the
Managing Member.
6.4 Tax Matters. Unless otherwise required by law, the Managing Member
shall be the "tax matters partner" of the Company within the meaning of Section
6231(a)(7) of the Code. Prompt notice shall be given to the Members upon receipt
of advice that the Internal Revenue Service or other taxing authority intends to
examine any income tax return or record or books of the Company.
6.5 Confidentiality. Each of the Additional Members shall, and shall
direct those of its attorneys, accountants, consultants and advisors (the
"Representatives") who have access to Confidential Information to keep
confidential and not disclose any Confidential Information without the express
consent, in the case of Confidential Information acquired from the Company, of
the Company or, in the case of Confidential Information acquired from another
Additional Member or the Managing Member, such Member, unless (subject in all
cases to any more stringent restrictions imposed on the Company) (a) such
disclosure shall be required by applicable law, governmental rule or regulation,
court order, administrative or arbitral proceeding, (b) such disclosure is
reasonably required in connection with any litigation against or involving the
Company,
25
the Managing Member or any Additional Member, or (c) such disclosure is
reasonably required in connection with any proposed assignment, sale or other
disposition of all or any part of an Additional Member's interest or a
participation in the Company (a "Proposed Transfer"); provided, that with
respect to the use of any Confidential Information in any Proposed Transfer, the
consent of the Managing Member, in its sole discretion, shall be necessary prior
to such use and the Managing Member may require any Proposed Transferee to enter
into a confidentiality agreement with terms substantially similar to the terms
of this Section 6.5. "Confidential Information" shall mean information
concerning the Managing Member, its members, board members and officers and any
information, including the identity of any Additional Member, that an Additional
Member may acquire from the Company, or as a consequence of being an Additional
Member of the Company, from another Additional Member other than information
that (i) is already available through publicly available sources of information
(other than as a result of disclosure by such Additional Member), (ii) was
available to an Additional Member on a non-confidential basis prior to its
disclosure to such Additional Member by the Company, or (iii) becomes available
to an Additional Member on a non-confidential basis from a third party, provided
such third party is not known by such Additional Member to be bound by this
Agreement or another confidentiality agreement with the Company. Notwithstanding
the foregoing, the Managing Member may disclose the identity of the Additional
Members to the extent reasonably calculated to advance or protect the interests
of the Company.
ARTICLE 7
ADDITIONAL MEMBERS; TRANSFER; WITHDRAWAL
7.1 Additional Members. The Managing Member, with the consent of the
Required Additional Members (which consent shall not be unreasonably withheld),
may admit Additional Members to the Company; provided, that each such Additional
Member shall execute such instruments as the Managing Member may reasonably deem
necessary or desirable to admit such party as an Additional Member, pursuant to
which such Additional Member shall agree to be bound by and comply with all of
the terms and provisions hereof.
7.2 Transfer.
(a) Conditions to Transfer. No direct or indirect sale,
exchange, transfer, assignment or other disposition (collectively referred to as
a "Transfer") of all or any fraction of an Additional Member's interest in the
Company may be made without the prior written consent of the Managing Member,
which consent shall not be unreasonably withheld. A Person shall be deemed
admitted as a Member at the time that such Person: (i) executes an amendment,
counterpart or supplement to this Agreement and
26
such other instruments as the Managing Member may reasonably deem necessary or
desirable to evidence such Person's agreement to be bound by and to comply with
the terms and provisions hereof; and (ii) is named on the books and records of
the Company.
(b) Null and Void Transfer. Unless waived by the Managing
Member, any purported Transfer by any Additional Member (including transferees
thereof or substituted members therefor) of any interest in the Company not made
strictly in accordance with the provisions of this Section 7.2 or otherwise not
permitted by this Agreement shall be entirely null and void.
7.3 Death, Incompetence, Bankruptcy or Liquidation of an Additional
Member. In the event of the death, incompetence or bankruptcy of an Additional
Member, or the bankruptcy, termination, liquidation or dissolution of any
partnership, trust, corporation or other entity which is an Additional Member,
(a) no Dissolution Event and Winding Up Period of the Company shall be effected
thereby and the Company and its business shall be continued until the
Termination of the Company as provided for in this Agreement, and (b) upon
satisfaction of the conditions of Sections 7.2 (Transfer), the estate or
successor in interest in the Company of such deceased, incompetent, bankrupt,
terminated, liquidated or dissolved Additional Member shall succeed to the
interest of such Additional Member and shall be deemed a Member for any and all
purposes hereunder.
7.4 Withdrawals. Prior to the Termination of the Company, except in
connection with a Transfer permitted by Section 7.2 (Transfer), no Member may
withdraw from the Company. Withdrawals by any Member of its Capital Account or
any portion thereof shall not be permitted.
7.5 Continuation. Notwithstanding the provisions of Sections 8.1(e) and
(g) (Dissolution), the Company shall not commence its winding up upon the
dissolution of the Managing Member or the Bankruptcy of the Managing Member if,
within 90 days following such occurrence, the Additional Members shall agree in
writing to the continuation of the Company and to the appointment, effective as
of the date of such occurrence, of a successor to the Managing Member. If such a
successor is appointed prior to or as of such effective date, the business of
the Company shall be continued as a limited liability company, subject to and
upon the terms and conditions set forth in this Agreement and, if required, any
documents necessary to reflect the continued existence of the Company as a
limited liability company shall be executed by the Members.
27
ARTICLE 8
DISSOLUTION; WINDING UP; TERMINATION
8.1 Dissolution. The Company shall commence its winding up upon the
first to occur of the following (the "Dissolution Event"):
(a) at any time after the tenth anniversary of the date
hereof;
(b) the expiration of 60 days after the assignment, sale,
transfer or other disposition of all or all of the assets, properties and
business of the Company;
(c) at the election of the Managing Member with the consent of
the Required Additional Members at any time;
(d) upon the dissolution of the Managing Member (unless the
Company is continued pursuant to Section 7.5 (Continuation));
(e) within 180 days of the execution of this Agreement, if the
Merger has not been consummated; and
(f) unless the Company is continued pursuant to Section 7.5
(Continuation), (i) upon the commencement by the Managing Member of any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its assets; (ii) upon the Managing Member
making a general assignment for the benefit of its creditors; (iii) at such time
as any case, proceeding or other action of a nature referred to in clause (i)
above against the Managing Member results in the entry of an order for relief or
any such adjudication or appointment, or remains undismissed, undischarged or
unbonded for a period of 120 days; (iv) at such time as any case, proceeding or
other action seeking issuance of a warrant of attachment, execution or similar
process against all or any substantial part of the Managing Member's assets
results in the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 120 days from the
entry thereof; (v) upon the Managing Member's consent to, approval of, or
acquiescence in, any of the acts or relief described in clause (i), (ii), (iii)
or (iv) above; or (vi) upon the Managing Member generally not paying, or being
unable to pay, or admitting in writing its inability to pay, its debts as they
become due.
28
The Dissolution Event shall be effective on the day on which such event occurs
and immediately thereafter the Company shall commence the Winding Up Period
during which its affairs shall be wound up in accordance with Sections 8.2
(Winding Up and Termination) and 8.3 (Assets Reserved and Pending Claims).
8.2 Winding Up and Termination.
(a) Winding Up. Upon the occurrence of the Dissolution Event,
the property and business of the Company shall be wound up by the Managing
Member, or, in the event of the unavailability of the Managing Member, by a
Person designated as a liquidating trustee by the Additional Members. Subject to
the requirements of applicable law and the further provisions of this Section
8.2, the Managing Member (or any other Person conducting the winding up of the
Company's affairs) shall have discretion in determining whether to sell or
otherwise dispose of Company assets, except upon a Dissolution Event described
in Section 8.1(c) (Dissolution), or to distribute the same in kind and the
timing and manner of such disposition or distribution. While the Company
continues to hold assets, the Managing Member shall as a general matter seek to
maximize the value of such assets and may in its discretion expend funds,
acquire additional assets and borrow funds. The Managing Member may also
authorize the payment of fees and expenses reasonably required in connection
with the winding up of the Company.
(b) Distributions Upon Winding Up. Within a reasonable period
of time following the occurrence of the Dissolution Event, after allocating all
Net Income, Net Loss and other items of income, gain, loss or deduction pursuant
to Sections 3.4 (Allocation) and 3.5 (Special Allocations), the Company's assets
(except for assets reserved pursuant to Section 8.3 (Assets Reserved and Pending
Claims)) shall be applied and distributed in the following manner and order of
priority:
(i) the claims of all creditors of the Company
(including Members except to the extent not permitted by law) shall be
paid and discharged other than liabilities for which reasonable
provision for payment has been made;
(ii) to the Members in accordance with the positive
balances of their respective Capital Accounts; and
(iii) thereafter, to the Members in accordance with
Section 3.3(a) (Distributions -- General).
Notwithstanding anything to the contrary in this Agreement, liquidating
distributions shall be made no later than the last to occur of (x) 90 days after
the date of disposition (including pursuant to Section 8.3 (Assets Reserved and
Pending Claims)) of the last remaining asset of the Company and (y) the end of
the Company's taxable year in which the disposition
29
referred to in clause (x) above shall occur. This Section 8.2(b) is intended to
comply with, and shall be interpreted consistently with, the requirements of
Regulation section 1.704-1(b)(2)(ii)(b)(2).
(c) Distributions In Kind. The Managing Member, in its sole
discretion, may allocate securities for distribution in kind to the Additional
Members. Notwithstanding any other provision of this Agreement, the amount by
which the fair market value of any property to be distributed in kind to the
Members (including property distributed in liquidation, and property distributed
pursuant to Section 3.3 (Distributions)) exceeds or is less than the adjusted
basis of such property shall, to the extent not otherwise recognized by the
Company, be taken into account in computing income, gains and losses of the
Company for purposes of crediting or charging the Capital Accounts of, and
distributing proceeds to, the Members, pursuant to this Agreement.
(d) Termination. When the Managing Member or a liquidating
trustee appointed pursuant to Section 8.2(a) (Winding Up) has completed the
winding up described in this Section 8.2, the Managing Member or the liquidating
trustee shall cause the Termination of the Company.
8.3 Assets Reserved and Pending Claims.
(a) Assets Reserved. If, upon a Dissolution Event, there are
any assets that, in the judgment of the Managing Member, cannot be sold or
distributed in kind without sacrificing a significant portion of the value
thereof or where such sale or distribution is otherwise impractical at the time
of the Dissolution Event, such assets may be retained by the Company, except
upon a Dissolution Event described in Section 8.1(c) (Dissolution), if the
Managing Member determines that the retention of such assets is in the best
interests of the Additional Members. Upon the sale of such assets or a
determination by the Managing Member that circumstances no longer require their
retention, such assets (at their fair market value) or the proceeds of their
sale shall be taken into account in computing Capital Accounts on winding up and
amounts distributable pursuant to Section 8.2(b) (Distributions Upon Winding
Up), and distributed in accordance with such value.
(b) Pending Claims. If there are any claims or potential
claims (including potential Company expenses in connection therewith) against
the Company (either directly or indirectly, including potential claims for which
the Company might have an indemnification obligation) for which the possible
loss cannot, in the judgment of the Managing Member, be definitively
ascertained, then such claims shall initially be taken into account in computing
Capital Accounts upon winding up and distributions pursuant to Section 8.2(b)
(Distributions Upon Winding Up) at an amount estimated by the Managing Member to
be sufficient to cover any potential loss or liability on account of
30
such claims (including such potential Company expenses), and the Company shall
retain funds (or assets) determined by the Managing Member in its discretion as
a reserve against such potential losses and liabilities, including expenses
associated therewith. The Managing Member may in its discretion obtain insurance
or create escrow accounts or make other similar arrangements with respect to
such losses and liabilities. Upon final settlement of such claims (including
such potential Company expenses) or a determination by the Managing Member that
the probable loss therefrom can be definitively ascertained, such claims
(including such potential Company expenses) shall be taken into account in the
amount at which they were settled or in the amount of the probable loss
therefrom in computing Capital Accounts on winding up and amounts distributable
pursuant to Section 8.2(b) (Distributions Upon Winding Up), and any excess funds
retained shall be distributed.
ARTICLE 9
AMENDMENTS; WAIVER; POWER OF ATTORNEY
9.1 Amendments; Waiver.
(a) Amendment or Waiver by Managing Member and Additional
Members. Except as otherwise expressly provided in this Agreement, any provision
of this Agreement (other than this Section 9.1) may be amended or waived by an
instrument in writing executed by the Managing Member and the Required
Additional Members; provided, however, that:
(i) any amendment to or waiver of any provision of
this Agreement that would increase or reduce the Capital Contributions,
the Interests or otherwise increase the liabilities or obligations of
any Additional Member shall require the written consent of such
Additional Member;
(ii) subject to Section 3.5(g) (Curative
Allocations), any amendment to or waiver of any provision that would
alter the allocations to Capital Accounts, or the distributions from
the Company, shall require the written consent of each Additional
Member who would be adversely affected by such amendment; and
(iii) any amendment to or waiver of any provision
which discriminates against any Additional Member in relation to the
other Additional Members shall require the written consent of such
Additional Member.
31
Notwithstanding the foregoing, the Managing Member, without the consent of any
Additional Member, may amend this Agreement (including Exhibit A hereto) as
necessary to reflect the admission or substitution of Additional Members
admitted to the Company pursuant to Sections 7.1(b) (Additional Members) or 7.2
(Transfer), respectively, or to reflect additional Capital Contributions made
pursuant to Section 3.1(b) (Additional Capital Contributions).
(b) Amendment or Waiver by the Managing Member.
Notwithstanding the foregoing, the Managing Member, without the consent of any
Additional Member, may amend or waive any provision of this Agreement (unless
such amendment or waiver would have a material adverse effect on any of the
Additional Members) to reflect:
(i) a change in the name of the Company or the
location of the principal place of business or the registered office of
the Company;
(ii) a change that is necessary to qualify the
Company as a limited liability company in which the Additional Members
have limited liability under the laws of any jurisdiction or that is
necessary or advisable in the opinion of the Managing Member to ensure
that the Company will not be taxable other than as a partnership under
the Code and Regulations;
(iii) a change that is (x) of an inconsequential
nature or (y) necessary or desirable to satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order,
ruling or regulation of any federal or state agency or contained in any
federal or state statute;
(iv) a change in any provision of this Agreement that
requires any action to be taken by or on behalf of the Managing Member
or the Company pursuant to the requirements of the Delaware Act if the
provisions of the Delaware Act are amended, modified or revoked so that
the taking of such action is no longer required;
(v) a change to add to the duties or obligations of
the Managing Member;
(vi) a change that, in the reasonable opinion of the
Managing Member, does not adversely affect the rights of the Additional
Members in any material respect; and
(vii) a change clarifying any ambiguity, defect or
inconsistency in this Agreement.
32
Within a reasonable period after any change or amendment or waiver in accordance
with the preceding sentence, the Managing Member shall send a written notice to
each Additional Member describing such change or amendment or waiver in
reasonable detail.
9.2 Power of Attorney.
(a) Appointment of Power of Attorney. Each Additional Member
by its execution of this Agreement irrevocably makes, constitutes and appoints
the Managing Member as its true and lawful agent and attorney-in-fact, with full
power and authority in its name, place and stead, to make, execute, sign,
acknowledge, swear to, record and file: (i) any amendment or waiver of any
provision of this Agreement that has been adopted or made as herein provided;
(ii) all certificates and other instruments deemed advisable by the Managing
Member to comply with the provisions of this Agreement and applicable law or to
permit the Company to become or to continue as a limited liability company or
other entity wherein the Additional Members have limited liability in each
jurisdiction where the Company may be doing business; (iii) all instruments that
the Managing Member deems appropriate to reflect a change or modification of
this Agreement or the Company in accordance with this Agreement; (iv) all
conveyances and other instruments or papers deemed advisable by the Managing
Member, to effect the dissolution, winding up and termination of the Company
pursuant to the provisions of this Agreement; (v) all fictitious or assumed name
certificates required or permitted to be filed on behalf of the Company; and
(vi) all other instruments or papers not inconsistent with the terms of this
Agreement which may be required by law to be filed on behalf of the Company.
(b) Nature and Exercise of Power of Attorney. With respect to
each Additional Member, the foregoing power of attorney:
(i) is coupled with an interest, shall be irrevocable
and shall survive the incapacity or bankruptcy of such Additional
Member;
(ii) may be exercised by the Managing Member either
by signing separately as attorney-in-fact for such Additional Member
or, after listing all of the Additional Members executing an
instrument, by a single signature of the Managing Member acting as
attorney-in-fact for all of them; and
(iii) shall survive the delivery of an assignment by
such Additional Member of the whole or any fraction of its interest;
except that, where the assignee of the whole of such Additional
Member's interest has been approved by the Managing Member for
admission to the Company, the power of attorney of the assignor shall
survive the delivery of such assignment for the sole purpose of
33
enabling the Managing Member to execute, swear to, acknowledge and file
any instrument necessary or appropriate to effect such substitution.
ARTICLE 10
MISCELLANEOUS
10.1 Investment Representations. Each Additional Member hereby
represents and warrants to the Company that: (a) the limited liability company
interest of the Additional Member is being acquired for investment purposes only
for its own account and not with a view to or in connection with any
distribution, re-offer, resale, or other disposition not in compliance with the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act") and applicable state securities laws; (b) the Additional
Member possesses such expertise, knowledge, and sophistication in financial and
business matters generally, and in the type of transactions in which the Company
proposes to engage in particular, that it is capable of evaluating the merits
and economic risks of acquiring and holding its limited liability company
interest, and it is able to bear all such economic risks now and in the future;
(c) the Additional Member has had access to all of the information with respect
to its limited liability company interest that it deems necessary to make a
complete evaluation thereof and has had the opportunity to question the Company
concerning such limited liability company interest; (d) the Additional Member's
decision to acquire its limited liability company interest for investment has
been based solely upon the evaluation made by it; (e) the Additional Member is
aware that it must bear the economic risk of its investment in the Company for
an indefinite period of time because limited liability company interests in the
Company (i) have not been registered under the Securities Act or under the
securities laws of various states, and, therefore, cannot be sold unless the
limited liability company interests are subsequently registered under the
Securities Act and any applicable state securities laws or an exemption from
registration is available and (ii) are subject to this Agreement, which
prohibits the transfer of such interests without the consent of the Managing
Member and prohibits the withdrawal of Additional Members; (f) the Additional
Member is aware that the Additional Member's tax liability with respect to such
Additional Member's interest in the Company may exceed any distributions made to
such Additional Member and that the Company is under no obligation to make any
such distributions to such Additional Member to pay any related taxes; and (g)
the Additional Member has not relied upon the Managing Member, or its members,
board members or officers or any other Additional Member or agent or counsel
thereof for any tax or securities law advice with respect to such Additional
Member's interest in the Company.
10.2 Successors and Assigns. This Agreement shall inure to the benefit
of, and shall be binding upon, the successors and permitted assigns of the
Members.
34
10.3 No Waiver. The failure of any Member to seek redress for
violation, or to insist on strict performance, of any covenant or condition of
this Agreement shall not prevent a subsequent act which would have constituted a
violation from having the effect of an original violation.
10.4 Survival of Certain Provisions. Each of the Members agrees that
the covenants and agreements set forth in Sections 4.1 (Liability of Additional
Members), 4.3 (Liability to Members), 4.4 (Indemnification) and 6.5
(Confidentiality) shall survive the Termination of the Company.
10.5 Notices. All notices hereunder shall be in writing and shall be
given by personal delivery, mailed by registered or certified mail, Federal
Express, U.S. overnight mail or international air courier service, or sent by
telecopy or other electronic means, and addressed: if to the Company, at its
principal office and, if to a Member, to such Member at its last known address
as disclosed on the records of the Company. Notices shall be deemed to have been
given as of the date delivered (upon confirmed receipt by the delivery service)
or telecopied (upon confirmed receipt). The Company and any Member may change
the address for notices by delivering or mailing as aforesaid, a notice stating
the change and setting forth the changed address.
10.6 Severability. In case any provision in this Agreement shall be
deemed to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired hereby.
10.7 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
10.8 Headings, Etc. The headings in this Agreement are inserted for
convenience of reference only and shall not affect the interpretation of this
Agreement.
10.9 Gender. As used herein, masculine pronouns shall include the
feminine and neuter, neuter pronouns shall include the masculine and the
feminine, and the singular shall be deemed to include the plural.
10.10 No Right to Partition. The Members, on behalf of themselves and
their shareholders, partners, members, successors and assigns, if any, hereby
specifically renounce, waive and forfeit all rights, whether arising under
contract or statute or by operation of law, except as otherwise expressly
provided in this Agreement, to seek, bring or maintain any action in any court
of law or equity for partition of the Company or any asset of the Company, or
any interest which is considered to be Company property, regardless of the
manner in which title to such property may be held.
35
10.11 No Third Party Rights. Except as expressly provided in this
Agreement, this Agreement is intended solely for the benefit of the parties
hereto and is not intended to confer any benefits upon, or create any rights in
favor of, any Person other than the parties hereto.
10.12 Entire Agreement. This Agreement and the Investment Agreement,
together with the exhibits attached hereto or thereto, are intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. This Agreement
and the Investment Agreement, together with the exhibits attached hereto or
thereto, supersede all prior agreements and understandings between the parties
with respect to such subject matter.
10.13 Rule of Construction. The general rule of construction for
interpreting a contract, which provides that the provisions of a contract should
be construed against the party preparing the contract, is waived by the parties
hereto. Each party acknowledges that such party was represented by separate
legal counsel in this matter who participated in the preparation of this
Agreement or such party had the opportunity to retain counsel to participate in
the preparation of this Agreement but elected not to do so.
10.14 Authority. Whenever in this Agreement or elsewhere it is provided
that consent is required of, or a demand shall be made by, or an act or thing
shall be done by or at the direction of, the Company, or whenever any words of
like import are used, all such consents, demands, acts and things are to be
made, given or done by the consent of the Managing Member or Person acting under
the authority of the Managing Member, unless a contrary intention is expressly
indicated.
10.15 Reliance. No Person dealing with the Company, or its assets,
whether as lender, assignee, purchaser, lessee, grantee, or otherwise, shall be
required to investigate the authority of the Managing Member in dealing with the
Company or any of its assets, nor shall any Person entering into a contract with
the Company or relying on any such contract or agreement be required to inquire
as to whether such contract or agreement was properly approved by the Managing
Member. Any such Person may conclusively rely on a certificate of authority
signed by the Managing Member and may conclusively rely on the due authorization
of any instrument signed by the Managing Member in the name and on behalf of the
Company or the Managing Member.
10.16 Applicable Law. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the conflict of laws principles thereof.
36
(b) Any dispute arising hereunder shall be settled by
arbitration in accordance with the Expedited Procedures of the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA Rules") by a
single arbitrator who is mutually agreeable to the Managing Member and the
Additional Members (who shall be represented by Equity Resources Group,
Incorporated (the "Representative"). If the Managing Member and the
Representative are unable to agree upon an arbitrator, an arbitrator shall be
selected in accordance with the AAA Rules. Any judgment upon the award rendered
by such arbitrator may be entered in any court of competent jurisdiction. All
proceedings in any such arbitration shall be conducted in Boston, Massachusetts.
Jurisdiction of such arbitrator shall be exclusive as to disputes between the
Managing Member and the Representative relating to this Agreement, and the
Managing Member and the Investors agree that this agreement to arbitrate shall
be specifically enforceable under the laws of Delaware. Neither the Managing
Member nor any Additional Member (including the Representative) shall have the
right to appeal the arbitration decision or otherwise to submit a dispute
relating to this Agreement to a court of law. With respect to matters submitted
to arbitration, each of the Managing Member and the Additional Members shall
bear its own respective costs, fees and expenses (including reasonable fees,
expenses and disbursements of attorneys) in connection with such arbitration.
The Managing Member, on the one hand, and the Additional Members, collectively,
on the other hand, shall each pay one-half of the total costs, fees and expenses
of the arbitrator.
[Remainder of Page Intentionally Left Blank]
37
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
MANAGING MEMBER:
KRF COMPANY, L.L.C.
By: The Xxxxx Family Limited Partnership-94,
its sole member
By:
----------------------------------------
Xxxxxxx Xxxxx
General Partner
ADDITIONAL MEMBERS:
EQUITY RESOURCE FUND XVI LIMITED PARTNERSHIP
EQUITY RESOURCE FUND XIX LIMITED PARTNERSHIP
EQUITY RESOURCE GENERAL FUND LIMITED PARTNERSHIP
EQUITY RESOURCE CAMBRIDGE FUND LIMITED PARTNERSHIP
EQUITY RESOURCE BRATTLE FUND LIMITED PARTNERSHIP
EQUITY RESOURCE BRIDGE FUND LIMITED PARTNERSHIP
By: EQUITY RESOURCES GROUP, INCORPORATED
as general partner of each of the foregoing
By:
-----------------------------------
Xxxxxx Dagjartsson
Executive Vice President
38
EXHIBIT A
---------
MEMBERS OF KRF3 ACQUISITION COMPANY, L.L.C.
Capital Contribution Interest
-------------------- --------
Managing Member
---------------
KRF COMPANY, L.L.C.
Existing Managing Member Contribution 10,826 Units @ $____/Unit
Cash Contribution ($______________)
($____________) ______%
Additional Members
------------------
EQUITY RESOURCE CAMBRIDGE FUND 95 Units @ $____/Unit ______%
($______________)
EQUITY RESOURCE BRATTLE FUND 30 Units @ $____/Unit
($______________)
EQUITY RESOURCE GENERAL FUND 40 Units @$____/Unit ______%
($______________)
EQUITY RESOURCE FUND XIX 413 Units @$____/Unit ______%
($______________)
EQUITY RESOURCE FUND XVI 916 Units @$____/Unit
($______________)
EQUITY RESOURCE BRIDGE FUND 30 Units @$____/Unit ______%
($______________)
EQUITY RESOURCE
TOTAL $ 100.00%
================== ======
EXHIBIT B
---------
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of ______________, 2000 by and between KRF3 Acquisition Company,
L.L.C., a Delaware limited liability company (the "Company" or, after the
Effective Time (as defined in Article V hereof), the "Surviving Entity"), and
Xxxxx Realty Fund, Ltd.-III, a Massachusetts limited partnership (the
"Partnership").
W I T N E S S E T H:
-------------------
WHEREAS, the Company is a limited liability company duly formed and
validly existing under the laws of the State of Delaware;
WHEREAS, the Partnership is a limited partnership duly formed and
validly existing under the laws of the Commonwealth of Massachusetts;
WHEREAS, the Massachusetts Revised Uniform Limited Partnership Act,
Mass. Gen. Xxxx Xxx. ch. 109,xx.xx. 1-62 (the "Massachusetts LP Act"), and the
Delaware Limited Liability Company Act, 6 Del. X.xx.xx. 18-101 et seq. (the
"Delaware LLC Act"), each permits a limited partnership formed and existing
under the Massachusetts LP Act to merge with and into a limited liability
company formed and existing under the Delaware LLC Act;
WHEREAS, the members of the Company have authorized and the general
partners and limited partners of the Partnership have duly authorized the merger
of the Partnership with and into the Company pursuant to the terms of this
Agreement; and
WHEREAS, the holders of limited partnership interests of Fund V have
approved an amendment to the Amended Agreement of Limited Partnership, dated
July 27, 1983, authorizing the Partnership to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed that, in accordance
with the applicable statutes of the State of Delaware and the Commonwealth of
Massachusetts, and subject to the conditions precedent contained herein, the
Partnership shall be at the Effective Time, merged with and into the Company
(the "Merger"), with the Company to be the Surviving Entity. The mode of
carrying the Merger into effect shall be as follows:
2
ARTICLE I
MERGER
------
At the Effective Time, the Partnership shall be merged with and into
the Company, the separate existence of the Partnership shall cease, the Company
shall continue in existence and the Merger shall in all respects have the
effects provided for by the Massachusetts LP Act and the Delaware LLC Act.
Prior to the Effective Time, the Company and the Partnership shall take
all such action as shall be necessary or appropriate in order to effectuate the
Merger. If at any time after the Effective Time, the Company shall consider or
be advised that any further assignments, conveyances or assurances in law are
necessary or desirable to carry out the provisions hereof, the proper members,
managers, officers or other agents of the Company, as authorized agents and
attorneys-in-fact for the Partnership (and acting in the name of the Company or
the Partnership), shall execute and deliver any and all proper deeds,
assignments, and assurances in law, and do all such additional things necessary
or proper to carry out the provisions hereof.
ARTICLE II
TERMS OF TRANSACTION
--------------------
At the Effective Time, by virtue of the Merger and without any action
on the part of the holders thereof, (i) the partnership interests in the
Partnership outstanding immediately prior to the Effective Time, held by (a) the
general partners of the Partnership (the "General Partners"), (b) the "Original
Limited Partners" (as defined in the Partnership's Amended Agreement of Limited
Partnership, dated as of June 1, 1982, as amended from time to time (the
"Partnership Agreement")) and (c) the limited partners of the Partnership who
are, at the Effective Time, directly or indirectly controlling, controlled by or
under common control with the Company, Equity Resources Group Incorporated or
the General Partners ("the Affiliate Limited Partners"), shall be canceled and
retired and shall cease to exist, (ii) the partnership interests of limited
partners of the Partnership who are not Affiliate Limited Partners (the
"Unaffiliated Limited Partners") outstanding immediately prior to the Effective
Time shall be canceled and converted into and represent the right to receive in
exchange therefor $[_____] per "Unit" (as defined in the Partnership Agreement),
without interest thereon, payable by the Surviving Entity to the holder of such
Unit (as reflected on the records of the Partnership at the Effective Time) upon
receipt by the Surviving Entity of the Proof of Ownership Form hereto, a
Substitute Form W-9 and any other additional documentation necessary or
desirable to complete the conversion of the Units required which the Surviving
Entity shall reasonably request from the holder, (iii) the limited liability
company interests held by the members of the Company outstanding immediately
prior to the Effective Time shall remain the outstanding limited liability
company interests of such members of the Company, and such members shall
continue as the members of the Surviving Entity.
3
Neither the Surviving Entity nor any other party hereto shall be liable
to a holder of Units for any payments made to a public official pursuant to
applicable abandoned property laws. The Surviving Company shall be entitled to
deduct and withhold from the amounts otherwise payable to a holder of Units
pursuant to the Merger any taxes or other amounts as are required by applicable
law, including without limitation Sections 3406 and 1445 of the Internal Revenue
Code of 1986, as amended. To the extent that amounts are so withheld by the
Surviving Entity, they shall be treated for all purposes of this Agreement as
having been paid to the holder of the Units in respect of which such deduction
and withholding was made.
After the Effective Time, the transfer books of the Partnership shall
be closed and there shall be no further registration of transfers on the records
of the Partnership of the Units that were outstanding immediately prior to the
Effective Time. As of the Effective Time, each holder of a Unit which was
converted into the right to receive cash pursuant to Article II hereof shall be
deemed to have withdrawn as a limited partner and shall have no further interest
in the Partnership or the Surviving Entity or any allocations or distributions
of income, property or otherwise, other than the right to receive the amount as
provided in this Article II.
No appraisal rights shall be available to holders of Units in
connection with the Merger.
ARTICLE III
CERTIFICATE OF FORMATION AND
LIMITED LIABILITY COMPANY AGREEMENT
-----------------------------------
From and after the Effective Time, and until thereafter amended as
provided by law, the Certificate of Formation and Limited Liability Company
Agreement of the Company as in effect immediately prior to the Effective Time
shall be the Certificate of Formation and Limited Liability Company Agreement of
the Surviving Entity.
ARTICLE IV
MANAGERS AND OFFICERS
---------------------
From and after the Effective Time, and until their successors are duly
elected or appointed, or until their earlier death, resignation or removal, the
managers and officers of the Surviving Entity shall be the same as the managers
and officers of the Company immediately prior to the Effective Time.
4
ARTICLE V
EFFECTIVE TIME
--------------
Certificates of merger evidencing the Merger ("Certificates of Merger")
substantially in the form of Exhibit A attached hereto shall be filed by the
General Partners and the Company with the Secretary of State of the State of
Delaware and the Secretary of State of the Commonwealth of Massachusetts
pursuant to the applicable requirements of the Delaware LLC Act and the
Massachusetts LP Act. The Merger shall become effective upon the later of the
filing of the Certificates of Merger with the Secretary of State of the
Commonwealth of Massachusetts and the Secretary of State of the State of
Delaware or such other time as shall be agreed by the parties and set forth in
the Certificates of Merger and in accordance with the Massachusetts LP Act and
the Delaware LLC Act (such time of effectiveness, the "Effective Time").
ARTICLE VI
TERMINATION
-----------
This Agreement may be terminated at any time prior to the Effective
Time:
(i) by mutual written consent of the Company and the General Partners;
(ii) by either the Company or the General Partners if the Merger shall
not have been consummated by [_______________]; provided, however, that the
right to terminate this Agreement pursuant to this clause (ii) of Article VI
shall not be available to any party whose failure to perform any of its
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger to occur on or before such date.
In the event of a termination of this Agreement by either the Company
or the General Partners, as provided in this Article VI, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of the Company or the General Partners or their respective managers or officers,
except with respect to Article IX and this second paragraph of Article VI.
Nothing herein shall relieve any party of liability with respect to any fraud or
intentional breach by any party hereto of this Agreement.
5
ARTICLE VII
AMENDMENTS
----------
At any time prior to the Effective Time, the Company and the General
Partners may amend, modify or supplement this Agreement in such manner as they
jointly may determine; provided, however, that, such amendment must be executed
in writing by all parties hereto and provided further, that no such amendment,
modification, or supplement shall reduce the amount or change the type of
consideration into which each Unit shall be converted upon consummation of the
Merger or alter or change any term of the Certificate of Formation or Limited
Liability Company Agreement of the Surviving Entity.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
----------------------------------------
The respective obligations of each party hereto to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(i) this Agreement shall have been approved and adopted by the partners
of the Partnership in accordance with the Massachusetts LP Act and the
Partnership Agreement;
(ii) this Agreement shall have been approved and adopted by the members
of the Company in accordance with the Delaware LLC Act and the Limited Liability
Company Agreement of the Company;
(iii) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, promulgated or enforced by any governmental
entity, and no action, suit, claim or legal, administrative or arbitral
proceeding or investigation shall be pending before any governmental entity
which seeks to prohibit, restrain, enjoin or restrict the consummation of the
transactions contemplated by this Agreement or which seeks to subject any party
to substantial damages as a result of the consummation of the transactions
contemplated by this Agreement;
(iv) each of the parties shall have obtained the consent, approval or
waiver of each non-governmental person whose consent, approval or waiver shall
be required in order for such party to consummate the transactions contemplated
by this Agreement;
(v) since June 30, 1999, no change or event shall have occurred which
has had or could reasonably be expected to result in a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means any change,
event or effect (a) in, on or relating to the business of the Partnership that
is, or is reasonably
6
likely to be, materially adverse to the business, assets (including intangible
assets), liabilities (contingent or otherwise), condition (financial or
otherwise), prospects or results of operations of the Partnership and its
subsidiaries taken as a whole, or (b) that may prevent or materially delay the
performance of this Agreement by the Company or the Partnership or the
consummation of the transactions contemplated hereby.
ARTICLE IX
GOVERNING LAW
-------------
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Delaware without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
ARTICLE X
MISCELLANEOUS
-------------
This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.
7
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the day and year first above written.
KRF3 ACQUISITION COMPANY, L.L.C.
By: KRF Company, L.L.C.,
its managing member
By: The Xxxxx Family Limited Partnership-94,
its sole member
By:
-----------------------------
Xxxxxxx Xxxxx
General Partner
XXXXX REALTY FUND, LTD.-III
By: The Xxxxx Corporation,
its general partner
By:
-----------------------------
Xxxxxxx Xxxxx
Co-Chairman of the Board of Directors
