1
LIQUIDITY FINANCIAL ADVISORS, INC.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
December 3, 1996
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 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.
2
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 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.
-2-
3
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
-3-
4
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
-4-
5
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;
-5-
6
iv. the Advisor, together with its Affiliates and Associates,
is not the beneficial owner of any 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
-6-
7
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.
-7-
8
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
-8-
9
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.
-9-
10
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
-10-
