Exhibit 7
LIQUIDITY FINANCIAL ADVISORS, INC.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
February 20, 1997
Krescent Partners L.L.C.
1301 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Mr. W. Xxxxxx Xxxxxxx
Gentlemen:
When signed by Liquidity Financial Advisors, Inc. ("Advisor") and
countersigned by Krescent Partners L.L.C. (the "Bidder") this letter shall
constitute an agreement with respect to the Bidder's engagement of the Advisor
to act as its financial advisor in connection with its proposed acquisition of
Depositary Receipts representing units of investor limited partnership interests
("Units") in Xxxxx Cash Plus-II Limited Partnership, a Massachusetts limited
partnership (the "Partnership").
1. Certain Definitions. Capitalized words and phrases used in this letter
agreement have the following meanings:
a. "Acquisition" means, directly or indirectly, through one
transaction or a series of transactions, (1) the
acquisition of record and beneficial ownership of more than
1% of the outstanding Units in the Partnership by the
Bidder and/or one of its Affiliates by means of a merger,
consolidation, reorganization or other business combination
pursuant to which the Bidder and/or one of its Affiliates
is merged or otherwise combined with the Partnership; (2)
the acquisition by the Bidder and/or one of its Affiliates
by assignment of an economic interest consisting of, or of
record and beneficial ownership of, more than 1% of the
outstanding Units in the Partnership by means of a tender
or exchange offer, negotiated purchase or otherwise; or (3)
the acquisition by the Bidder and/or one of its Affiliates
of title to, or control over, all or substantially all of
the assets of the Partnership.
b. "Acquisition Equity" with respect to a Person means the
amount of such Person's equity capital invested in an
Acquisition Transaction or Affiliate Acquisition
Transaction as of the ninetieth day after the consummation
of such Acquisition Transaction or Affiliate Acquisition
Transaction.
c. "Acquisition Fee" shall have the meaning set forth in
paragraph 4(a).
d. "Acquisition Transaction" means the proposed Acquisition by
the Bidder of the Units.
e. "Advisor" means Liquidity Financial Advisors, Inc., a
California corporation.
f. "Affiliate" with respect to any Person has the meaning set
forth in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as amended.
g. "Affiliate Acquisition Transaction" means the Acquisition
Transaction and any Acquisition by an Affiliate of the
Bidder of limited partnership interests in a real estate
limited partnership in connection with which the Advisor
was engaged to act as financial advisor for such Affiliate.
h. "Anticipated Acquisition Equity" shall have the meaning set
forth in paragraph 4(b).
i. "Apollo Affiliate Investors" means AP-GP Prom Partners,
Inc., Apollo Real Estate Investment Fund II, L.P. and any
of their Affiliates that invest in an Affiliate Acquisition
Transaction.
j. "Associate" with respect to any Person has the meaning set
forth in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as amended.
k. "Bidder" means Krescent Partners L.L.C., a Delaware limited
liability company.
l. "Business Day" means a day other than a Saturday, a Sunday
or a day on which banking institutions in the City of New
York are authorized or obligated by law or executive order
to close.
m. "Cash Flow Fee" shall have the meaning set forth in
paragraph 5(a).
n. "Depositary Receipt" means an instrument evidencing a Unit
or Units.
o. "Indemnified Party" shall have the meaning set forth in
paragraphs 7(a) and (b).
p. "Invested Capital" with respect to any Person means the
amounts contributed from time to time by such Person to the
capital of another Person.
q. "LF Partnership" shall have the meaning set forth in
paragraph 7.
r. "Partnership" means Xxxxx Cash Plus-II Limited Partnership,
a Massachusetts limited partnership.
s. "Person" means an individual, a corporation, a partnership,
a joint venture, a limited liability company, a trust, or
any other entity.
t. "Term" shall have the meaning set forth in paragraph 2(a).
u. "Units" means Depositary Receipts representing units of
investor limited partnership interests in the Partnership.
2. Term; Services.
a. The term ("Term") of the engagement by the Bidder of the
Advisor hereunder shall be two years beginning on the date
of this letter agreement. During the Term, the Advisor will
assist the Bidder on an exclusive basis in analyzing,
structuring, negotiating and effecting the Acquisition
Transaction on the terms and conditions set forth in this
letter agreement.
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In this connection, during the Term, exclusively on the
Bidder's behalf, the Advisor will, as requested by the
Bidder:
i. perform financial analysis of the Partnership in
the context of the Acquisition Transaction;
ii. assist the Bidder in its determination of the
appropriate price to be paid in the Acquisition
Transaction for the Units;
iii. advise the Bidder as to the structure and form
of the Acquisition Transaction;
iv. furnish the Bidder with such publicly-available
due diligence material as may reasonably be
requested by the Bidder;
v. furnish the Bidder with a current list of the
limited partners of the Partnership (or holders
of Units) and their addresses; and
vi. render such other financial advisory services as
may from time to time be reasonably requested by
the Bidder in connection with the Acquisition
Transaction.
b. The Advisor represents and warrants that neither it nor its
Affiliates or Associates have furnished to any Person
except the Bidder, and covenants and agrees that during the
Term it will not, and will cause its Affiliates and
Associates not to furnish, to any Person (other than
counsel for the Advisor) (i) the due diligence materials
provided to the Bidder hereunder, (ii) any list of the
limited partners of the Partnership (or holders of Units)
or (iii) any financial analysis of the Partnership prepared
for the Bidder, unless (I) it has first (A) furnished the
Bidder with a written notice setting forth its intention to
do so, the identity of each intended recipient of such
material and a description of any proposed or contemplated
Acquisition or other transaction involving such recipients
and (B) offered the Bidder the exclusive opportunity to
engage the Advisor in connection with such Acquisition or
other transaction, (II) the Bidder has failed to so engage
the Advisor within 10 Business Days after receipt of such
written notice and (III) the Bidder has consented in
writing to the proposed action of the Advisor, which
consent shall not unreasonably be withheld; provided,
however, that the Advisor will not, and will cause its
Affiliates and Associates not to, disclose to any Person in
violation of any agreement between the Advisor or any
Affiliate or Associate of the Advisor and the Partnership
or a general partner of the Partnership any list of the
limited partners of the Partnership (or holders of Units)
or take any other action in violation of any such
agreement.
c. The Advisor (i) represents and warrants that it has
heretofore disclosed in writing to the Bidder the identity
of any Person that holds or has a beneficial interest in
Units for whom the Advisor or its Affiliates serve as
general partners or advisors or to whom the Advisor or its
Affiliates owe any fiduciary duty or other obligation and
(ii) covenants and agrees that during the Term it will not
serve as a general partner or advisor for such a Person
(other than a Person specified in (i) above) or advise or
otherwise assist any Person (other than a Person specified
in (i) above or the Bidder) in acquiring a beneficial
interest in Units, unless (I) the Advisor has first (A)
furnished the Bidder with a written notice setting forth
its intention to do so, the identity of each Person
involved and a description of any
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proposed or contemplated Acquisition or other transaction
involving such Persons and the Units or the Partnership and
(B) offered the Bidder the exclusive opportunity to engage
the Advisor in connection with such Acquisition or other
transaction, (II) the Bidder has failed to so engage the
Advisor within 10 Business Days after receipt of such
written notice and (III) the Bidder has consented in
writing to the proposed action of the Advisor, which
consent shall not unreasonably be withheld.
d. The Advisor covenants and agrees that without the written
consent of the Bidder it will not, and will cause its
Affiliates and Associates not to, request any additional or
updated list of investors in the Partnership or any of its
Affiliates.
3. Expense Reimbursement. The Bidder will reimburse the Advisor for its
reasonable actual out-of- pocket expenses incurred in connection
with the Acquisition Transaction upon submission of substantiating
documentation.
4. Acquisition Fee.
a. If, during the Term, an Acquisition Transaction is
consummated, the Bidder agrees to pay Advisor an
acquisition fee ("Acquisition Fee") calculated as follows:
i. 2.0 percent of the Acquisition Equity of the
Bidder in such Acquisition Transaction until the
aggregate Acquisition Equity of the Bidder and/or
its Affiliates in all Affiliate Acquisition
Transactions theretofore consummated together
with the Acquisition Equity of the Bidder in the
Acquisition Transaction itself equals
$15,000,000; then
ii. 1.0 percent of the Acquisition Equity of the
Bidder in such Acquisition Transaction until the
aggregate Acquisition Equity of the Bidder and/or
its Affiliates in all Affiliate Acquisition
Transactions theretofore consummated together
with the Acquisition Equity of the Bidder in the
Acquisition Transaction itself equals
$45,000,000; then
iii. 0.5 percent of the Acquisition Equity of the
Bidder in such Acquisition Transaction until the
aggregate Acquisition Equity of the Bidder and/or
its Affiliates in all Affiliate Acquisition
Transactions theretofore consummated together
with the Acquisition Equity of the Bidder in the
Acquisition Transaction itself equals
$70,000,000; and then
iv. 0.25 percent of the Acquisition Equity of the
Bidder in such Acquisition Transaction after the
aggregate Acquisition Equity of the Bidder and/or
its Affiliates in all Affiliate Acquisition
Transactions theretofore consummated together
with the Acquisition Equity of the Bidder in the
Acquisition Transaction itself exceeds
$70,000,000.
b. At or prior to the closing of the Acquisition Transaction,
the Bidder will notify the Advisor in writing of the amount
of the Bidder's anticipated Acquisition Equity (the
"Anticipated Acquisition Equity") in such Acquisition
Transaction as of the ninetieth date after such closing and
at closing the Bidder will pay to the Advisor an
Acquisition Fee
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based on the amount of such Anticipated Acquisition Equity.
Within 10 days after the ninetieth day following the
closing of such Acquisition Transaction, a final
determination of the Bidder's Acquisition Equity in such
Acquisition Transaction as of the ninetieth day after the
closing date of the Acquisition Transaction will be made
the Bidder and the Advisor. Within 10 days after such
determination, the Bidder will pay to the Advisor any
additional amount of the Acquisition Fee determined to be
due or the Advisor will repay to the Bidder any amount of
the Acquisition Fee determined to have been overpaid.
5. Cash Flow Fee.
a. In addition to the fee payable pursuant to paragraph 4, the
Bidder will pay the Advisor a fee (the "Cash Flow Fee")
based upon the aggregate cash distributions of the Bidder
in connection with the Acquisition Transaction and the
Bidder's Affiliates in connection with all Affiliate
Acquisition Transactions, calculated and payable as
follows:
i. 100 percent to members of the Bidder and its
Affiliates until such time as the Apollo
Affiliate Investors have received cash
distributions in an amount equal to their
aggregate Invested Capital plus a cumulative
return of 15 percent per annum compounded
quarterly on their unreturned Invested Capital;
then
ii. 95 percent to members of the Bidder and its
Affiliates and 5 percent to the Advisor until
such time as the Apollo Affiliate Investors have
received cash distributions in an amount equal to
their aggregate Invested Capital plus a
cumulative return of 20 percent per annum
compounded quarterly on their unreturned Invested
Capital; and then
iii. 90 percent to members of the Bidder and its
Affiliates and 10 percent to the Advisor.
b. The Advisor covenants and agrees that its interest in the
Cash Flow Fee will not be assigned, pledged, hypothecated
or otherwise transferred to any Person other than its
Affiliates.
6. Representations, Warranties and Covenants.
a. The Advisor hereby represents and warrants to, and
covenants with, the Bidder as follows:
i. the execution and delivery of, and the
performance by the Advisor of its obligations
under, this letter agreement have been duly and
validly authorized by the Advisor, and this
letter agreement has been duly executed and
delivered by the Advisor;
ii. the Advisor is duly registered as an investment
adviser under the Investment Advisers Act of
1940, as amended;
iii. the Advisor does not possess any non-public
information with respect to the operations,
assets, liabilities, financial condition or
prospects of the Partnership;
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iv. the Advisor, together with its Affiliates and
Associates, is the beneficial owner of 1,750
Units and, except as contemplated hereunder or in
the option agreement dated November 21, 1996
between Liquidity Financial Group, L.P. and
Apollo Real Estate Investment Fund II, L.P.,
covenants and agrees that it will not, and will
cause its Affiliates and Associates not to,
acquire, directly or indirectly, a beneficial
interest in any additional Units;
v. the Advisor is not in breach of any covenant or
agreement with the Partnership and will not be
in breach of any covenant or agreement with the
Partnership;
vi. neither the execution, delivery or performance of
this letter agreement by the Advisor, the offer
by the Bidder to acquire the Units nor the
consummation by the Bidder of the Acquisition
Transaction conflicts or will conflict with or
constitutes or will constitute a breach of, or a
default under, any agreement or other instrument
to which the Advisor or any Affiliate or
Associate of the Advisor is a party or by which
any of them may be bound; and
vii. the information supplied or to be supplied by
the Advisor to the Bidder for inclusion in the
Schedule 14D-1 to be filed by the Bidder in
connection with the Acquisition Transaction, the
material to be filed as exhibits thereto and any
amendments thereto does not and will not, to the
Advisor's knowledge after due inquiry, contain
any untrue statement of a material fact or omit
to state any material fact required to be stated
therein or necessary in order to make the
statements made therein, in light of the
circumstances under which they were made, not
misleading.
b. The Bidder hereby represents and warrants to the Advisor as
follows:
i. the execution and delivery of, and the
performance by the Bidder of its obligations
under, this letter agreement have been duly and
validly authorized by the Bidder and this letter
agreement has been duly executed and delivered
by the Bidder;
ii. neither the execution, delivery or performance of
this letter agreement by the Advisor, the offer
by the Bidder to acquire the Units nor the
consummation by the Bidder of the Acquisition
Transaction conflicts or will conflict with or
constitutes or will constitute a breach of, or a
default under, any agreement or other instrument
to which the Bidder or any Affiliate or Associate
of the Bidder is a party or by which any of them
may be bound;
iii. the Bidder is not in breach of any covenant or
agreement with the Partnership and will not be
in breach of any covenant or agreement with the
Partnership.
7. Other Relationships. The Bidder understands and acknowledges
that to the extent disclosed pursuant to paragraph 2(c) Advisor
and/or its Affiliates serve as general partners or advisors to
Partnerships ("LF Partnerships") that own Units and,
accordingly, that Advisor and/or its Affiliates have fiduciary
or other obligations to the LF Partnerships, limited partners in
the LF Partnerships, and, depending on the circumstances, the
Partnership and other holders or beneficial owners of the Units.
Notwithstanding any provision of this letter agreement to the
contrary, the
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Bidder understands and agrees that, in providing services to the
Bidder hereunder, Advisor will not be obligated to render any advice
or assistance or provide any information that Advisor believes would
be inconsistent with its obligations to these other Persons. Advisor
may disclose to the LF Partnerships and their limited partners
information concerning this letter agreement and the terms of the
transactions contemplated hereby to the extent Advisor believes the
disclosure of such information is necessary to satisfy its
obligations to the LF Partnerships and their limited partners.
8. Indemnification.
a. The Bidder agrees to indemnify the Advisor and its
Affiliates and their respective partners, directors,
officers, employees, agents and controlling persons (each
such person being an "Indemnified Party") from and against
any and all losses, claims, damages and liabilities, joint
or several, to which such Indemnified Party may become
subject under any applicable federal or state law, or
otherwise related to or arising out of (i) the breach by
the Bidder of any representation, warranty or covenant made
by the Bidder in this letter agreement, (ii) the
Acquisition Transaction or (iii) the engagement of the
Advisor pursuant to, and the performance by the Advisor of
the services contemplated by, this letter agreement and
will reimburse any Indemnified Party for all reasonable
expenses (including reasonable fees and expenses of legal
counsel) as they are incurred in connection with the
investigation of, preparation for or defense of any pending
or threatened claim or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a
party. The Bidder will not be liable under the preceding
sentence to the extent that any loss, claim, damage,
liability or expense relates to (i) a breach of any
representation or warranty made by the Advisor in this
letter agreement or (ii) the Advisor's bad faith, gross
negligence or willful misconduct in the performance by the
Advisor of the services contemplated by this letter
agreement
b. The Advisor agrees to indemnify the Bidder, its members and
their respective Affiliates, partners, directors, officers,
employees, agents and controlling persons (each such person
being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, joint or several,
to which such Indemnified Party may become subject under
any applicable federal or state law, or otherwise related
to or arising out of (i) the breach by the Advisor of any
representation, warranty or covenant made by the Advisor in
this letter agreement, (ii) the breach by the Advisor of
any representation, warranty or covenant made by the
Advisor or any Affiliate or Associate of the Advisor in any
agreement with the Partnership or any general partner of
the Partnership or (iii) the Advisor's bad faith, gross
negligence or willful misconduct in the performance by the
Advisor of the services contemplated by this letter
agreement and will reimburse any Indemnified Party for
reasonable expenses (including reasonable fees and expenses
of legal counsel) as they are incurred in connection with
the investigation of, preparation for or defense of any
pending or threatened claim or any action or proceeding
arising therefrom, whether or not such Indemnified Party is
a party.
9. Independent Contractors; No Joint Venture. The parties acknowledge
and agree that the relationship between the Advisor and the Bidder is
that of independent contractors. Nothing in this letter agreement is
intended to create or shall be deemed to create or constitute a joint
venture or partnership between the Advisor and the Bidder.
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10. Assignment; No Third Party Beneficiaries. Neither party may assign
this letter agreement without the prior written consent of the other
party, and any purported assignment in violation of this provision
will be void. The terms and provisions of this letter agreement are
solely for the benefit of the parties hereto and other Indemnified
Parties and their respective successors, permitted assigns, heirs and
personal representatives, and no other person will acquire or have
any right by virtue of this letter agreement.
11. Termination. This letter agreement shall terminate on the later of
March 1, 1997 and the fifteenth day after either party has given
written notice to the other of the termination thereof. The
provisions of this letter agreement relating to the payment of fees
and indemnification as well as the provisions of paragraphs 2(b),
2(c), 6(a)(iv), 6(a)(v) and 6(b)(iii) will survive the termination of
this letter agreement.
12. Notices. All notices or other communications required or permitted
hereunder shall be sufficient if it is in writing and delivered by
hand or sent by prepaid telex, cable or telecopier or sent, postage
prepaid, by registered, certified or express mail, or by recognized
overnight air courier service and shall be deemed given when so
delivered by hand, telex, cable or telecopy or if mailed or sent by
overnight courier service, on the fifth business day after mailing
(one business day in the case of express mail or overnight courier
service) to the parties at the following addresses:
a. If to the Bidder, to:
c/o AP-GP Prom Partners Inc.
Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: W. Xxxxxx Xxxxxxx
Telecopy: (000) 000-0000
and:
c/o AP-GP Prom Partners Inc.
c/o Apollo Real Estate Advisors II, L.P.
1999 Avenue of the Stars
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
with a copy to:
Battle Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx
Telecopy: (000) 000-0000
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b. If to the Advisor to:
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx
Telecopy: (000) 000-0000
13. Paragraph Headings. The paragraph headings contained in this letter
agreement are inserted for reference purposes only and shall not
affect the meaning or interpretation hereof.
14. Governing Law. This letter agreement shall be governed by, and
construed in accordance with, the laws of the State of New York
without regard to conflict of law principles.
15. Waivers. The waiver by any party of the breach of any of the terms
and conditions of, or any right under, this letter agreement shall
not be deemed to constitute the waiver of any other breach of the
same or any other term or condition or of any similar right. No such
waiver shall be binding or effective unless expressed in writing and
signed by the party giving such waiver.
16. Counterparts. This letter agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
17. Entire Agreement. This letter agreement contains, and is intended as,
a complete statement of all of the terms of the arrangements among
the parties with respect to the matters provided for herein and
supersedes any previous agreements and understandings between the
parties with respect to those matters. No amendment or modification
of the terms of this letter agreement shall be binding or effective
unless expressed in writing and signed by each party.
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Please confirm that the foregoing correctly sets forth our agreement
by signing and returning to us the enclosed duplicate copy of this letter
agreement.
Very truly yours,
LIQUIDITY FINANCIAL ADVISORS, INC.
By: /s/ Xxxxx Xxxxxxxxx
-------------------
Name: Xxxxx Xxxxxxxxx
Title: President
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST WRITTEN ABOVE:
KRESCENT PARTNERS L.L.C.
By: AP-GP PROM PARTNERS, INC.,
its Managing Member
By: /s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: Vice President
