Exhibit 10.10
WAIVER AND STANDSTILL AGREEMENT
This Waiver and Standstill Agreement (this "AGREEMENT"), dated as of
August 22, 2002, is made by and among Xxxxx Government Income Trust, a
Massachusetts Business Trust ("GIT"), Xxxxx Government Income Trust II, a
Massachusetts Business Trust ("GIT 2" and, collectively with GIT, the "TRUSTS"),
Berkshire Income Realty, Inc. ("BIR"), Berkshire Income Realty-OP, L.P.
("BIR-OP" and, collectively with BIR, the "PURCHASERS").
WHEREAS, the Declaration of Trust of each of the Trusts, as presently
in effect (collectively, the "DECLARATIONS OF TRUST"), among other things,
prohibits the Ownership by a Person (as those terms are defined herein and
therein) of more than 9.8% of the outstanding shares of such Trust (the "EXCESS
SHARE PROVISION"); and
WHEREAS, each of the Declarations of Trust further provides that the
trustees of such Trust (the "TRUSTEES") may in their discretion waive the Excess
Share Provision provided that certain conditions are met relating to the effect
of such waiver (the "EXCESS SHARE WAIVER") on the applicable Trust's status
under the Internal Revenue Code as a real estate investment trust (a "REIT");
and
WHEREAS, the Purchasers have proposed to acquire up to 55% of the
outstanding shares of each of the Trusts in exchange for the Series A preferred
stock of BIR in connection with the formation of a REIT whose primary goal will
be to acquire, own and operate multi-family residential properties (the
"EXCHANGE OFFER"); and
WHEREAS, in connection with the Exchange Offer, the Purchasers have
requested that the Trustees of each of the Trusts grant an Excess Share Waiver
to each of the Purchasers pursuant to Article XII.1(G) of each of the
Declarations of Trust; and
WHEREAS, the Trustees of each of the Trusts have determined to grant
such Excess Share Waivers on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings
set forth below:
1.1. "ACTION" means any claim, action, cause of action or suit (whether
in contract or tort or otherwise), litigation (whether at law or in equity,
whether civil or criminal), controversy, assessment, arbitration, investigation,
hearing, charge, complaint, demand, notice or proceeding to, from, by or before
any United States federal, state or local or any foreign government, or
political subdivision thereof, or any multinational organization or authority or
any authority, agency or commission entitled to exercise any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power, any court or tribunal (or any department, bureau or division thereof), or
any arbitrator or arbitral body.
-1-
1.2. "AFFILIATE" shall have the meaning given it in Rule 12b-2 under
the Exchange Act. For the avoidance of doubt, the Trusts shall not be deemed to
be an Affiliate of the Purchaser.
1.3. "AGREEMENT" shall have the meaning set forth in the preamble.
1.4. "ASSOCIATE" shall have the meaning given it in Rule 12b-2 under
the Exchange Act. For the avoidance of doubt, the Trusts shall not be deemed to
be an Associate of the Purchaser.
1.5. "BIR" shall have the meaning set forth in the preamble.
1.6. "BIR-OP" shall have the meaning set forth in the preamble.
1.7. "BUSINESS COMBINATION" shall mean (i) any merger or consolidation
of either Trust with (a) the Purchasers, their Affiliates or Associates, or (b)
any other entity if the merger or consolidation is caused by the Purchasers,
their Affiliates or Associates; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets, in one transaction or a series
of transactions, except proportionally as a holder of Shares, whether as part of
a dissolution or otherwise, by either Trust to the Purchasers, their Affiliates
or Associates; (iii) any transaction which results in the issuance or transfer
by either Trust of any Shares to the Purchasers, their Affiliates or Associates,
except (a) pursuant to the exercise, exchange or conversion of securities
exercisable for, exchangeable for or convertible into Shares, which securities
were outstanding on the date of the Exchange Offer, (b) pursuant to a dividend
paid or made by such Trust from any source in respect of the Shares, or the
exercise, exchange or conversion of securities exercisable for, exchangeable for
or convertible into Shares which securities are distributed PRO RATA to all
holders of Shares, which securities were outstanding on the date of the Exchange
Offer, (c) pursuant to an exchange offer by such Trust to purchase Shares made
on the same terms to all holders of Shares, or (d) the issuance or transfer of
Shares by such Trust; PROVIDED, HOWEVER, that in no case under clauses (b)
through (d) above, inclusive, that there shall be an increase in the Purchasers'
proportionate Ownership of the Shares; (iv) any transaction by either Trust
which has the effect, directly or indirectly, of increasing the proportionate
Ownership of the Shares (or securities convertible into Shares) which are owned
by the Purchasers, except as a result of any purchase or redemption of any
Shares not caused, directly or indirectly, by the Purchasers, their Affiliates
or Associates; or (v) any receipt by the Purchasers, their Affiliates or
Associates of the benefit, directly or indirectly, except proportionately as a
holder of Shares of such Trust, of any loans, advances, guarantees, pledges or
other financial benefits, other than those expressly permitted in subsections
(i) through (iv) above, inclusive, provided by or through such Trust.
1.8. "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.9. "DECLARATIONS OF TRUST" shall have the meaning set forth in the
recitals.
1.10. "EXCESS SHARE PROVISION" shall have the meaning set forth in the
recitals.
1.11. "EXCESS SHARE WAIVER" shall have the meaning set forth in the
recitals.
1.12. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
-2-
1.13. "EXCHANGE OFFER" shall have the meaning set forth in the
recitals.
1.14. "INDEPENDENT TRUSTEE" shall mean a Trustee of one or both of the
Trusts who (i) is not an Affiliate, directly or indirectly, of the Xxxxx
Mortgage Advisors Limited Partnership (together with any successors, the
"Advisor"), whether by ownership of, ownership interest in, employment by, any
material business or professional relationship with, or services as an officer
or director of, the Advisor or its Affiliates, (ii) does not serve as a director
or trustee for more than two other REITs organized by the Advisor or its
Affiliates, and (iii) performs no other services for the Trust, except as a
Trustee. For this purpose, an indirect relationship shall include circumstances
in which an immediate family member of a Trustee has one of the foregoing
relationships with the Advisor or the Trust.
1.15. "INDIVIDUAL" shall have the meaning given it in Section 542(a)(2)
of the Code, as modified by Section 856(h) of the Code.
1.16. "GIT" and "GIT 2" shall have the meanings set forth in the
preamble.
1.17. A Person shall be considered to "OWN", be the "OWNER" or have
"OWNERSHIP" of equity interests (including without limitation Shares) if such
Person is treated as owner of such equity interests for purposes of Section 542
and Section 544 of the Code as modified by Section 856(h) of the Code.
1.18. "PERSON" shall include an individual, corporation, partnership,
estate, trust, association, joint stock company, unincorporated organization or
other entity and also includes a group as that term is used for purposes of
Section 13(d)(3) of the Exchange Act.
1.19. "PURCHASERS" shall have the meaning set forth in the preamble.
1.20. "REIT" shall have the meaning set forth in the recitals.
1.21. "SHARES" of a Trust shall mean shares of beneficial interest, no
par value, of such Trust.
1.22. "TRUSTEES" shall have the meaning set forth in the recitals.
1.23. "TRUSTS" shall have the meaning set forth in the preamble.
2. EXCESS SHARE WAIVER.
2.1. EXEMPTION FROM EXCESS SHARE PROVISIONS. Subject to the terms and
conditions of this Agreement, each of the Trusts hereby exempts each of the
Purchasers, in respect of the acquisition of Shares of such Trust pursuant to
the Exchange Offer, from the provisions of Article XII.1(A) of each of the
Declarations of Trust regarding a Person becoming an Owner of Shares of such
Trust in excess of 9.8% of the outstanding Shares, but less than 80% of the
outstanding Shares; PROVIDED, that (i) each Trust shall have received
contemporaneously with this grant of such exemption an opinion of counsel from
counsel to the Purchasers in the form attached as EXHIBIT A hereto; (ii) such
opinions shall be reconfirmed as of the consummation of the Exchange Offer;
(iii) each Trust shall have received an opinion of counsel from counsel to
-3-
the Purchasers that this Agreement is enforceable against the Purchasers in
accordance with its terms; and (iv) the Purchasers shall have furnished to each
Trust a copy of the opinion of an independent investment bank, when delivered to
the Purchasers, to the effect that the consideration to be received by the
holder of Shares of the Trusts tendered in the Exchange Offer is fair, from a
financial point of view, to such holder.
2.2. LIMITATION ON OWNERSHIP OF TRUSTS. Each of the Trusts will use its
best efforts to prevent any Person (other than the Purchasers and Persons
treated as Owners of the outstanding Shares of each Trust through their
Ownership of the Purchasers) from becoming the Owner of more than 4.9% of the
outstanding Shares of such Trust, including by utilizing any redemption
provisions of the Trust and all available powers under the Declaration of Trust
to prevent or refuse to permit the transfer of Shares in order to preserve the
status of the Trust as a REIT under the Code; PROVIDED, HOWEVER, that if any
court of competent jurisdiction shall determine any such action is ineffective
or unauthorized in any instance, the Trust shall have no liability to the
Purchasers and the Purchasers shall promptly exercise their rights described in
Section 3.1.2 of this Agreement to protect and preserve the status of the Trust
as a REIT.
2.3. TERM. The exemption granted by Section 2.1 above shall expire if
the Purchasers have not acquired more than 9.8% of the outstanding Shares of a
Trust pursuant to the Exchange Offer by March 31, 2003. The provisions of
Section 2.2 above shall expire at such time as the Purchasers Own 9.8% or less
of the outstanding Shares of such Trust.
2.4. COMPLIANCE WITH REGULATIONS. Each of the Trusts will comply with
the procedures imposed by the regulations promulgated under Section 857(f) of
the Code for purposes of determining the Ownership of the outstanding Shares of
the Trust and shall furnish to the Purchasers copies of all information provided
by the holders of Shares of such Trust in accordance with such procedures.
2.5. PROHIBITED ACTIONS. The Trusts will not, without the prior written
consent of the Purchasers, take, or fail to take, any action that causes any
Shares of the Trusts acquired by the Purchasers pursuant to the Exchange Offer
to be deemed "Excess Shares" under the Declarations of Trust; PROVIDED, HOWEVER,
that nothing in this Agreement shall require the Trusts to take any such actions
to preclude the application of the Excess Share Provisions of the Declarations
of Trust to any other transaction not expressly permitted under this Agreement,
whether involving the Purchasers or any Person treated as an Owner of the Shares
of any Trust as a consequence of such Person's direct or indirect interest in
any Purchaser.
3. STANDSTILL PROVISIONS.
3.1. GENERAL STANDSTILL.
3.1.1. LIMITATION ON OWNERSHIP BY THE PURCHASERS. The Purchasers
shall not Own, or offer, propose or agree to Own, in the aggregate,
directly or indirectly, any Shares of either of the Trusts in excess of
fifty-five (55%) percent of the outstanding Shares of such Trust.
-4-
3.1.2. LIMITATION ON OWNERSHIP BY INDIVIDUALS. Each Purchaser
shall by the provisions of its organizational instruments and by
agreement with its shareholders and partners secure effective and
enforceable rights to prevent, and shall prohibit, the acquisition or
retention of shares or partnership interests in such Purchaser by any
Person to the extent necessary so that (i) no Individual shall Own more
than 23.0% (by value) of the outstanding Shares of either Trust; (ii)
no two Individuals shall collectively Own more than 30% (by value) of
the outstanding Shares of such Trust; (iii) no three Individuals shall
collectively Own more than 36.5% (by value) of the outstanding Shares
of such Trust; (iv) no four Individuals shall collectively Own more
than 43.0% (by value) of the outstanding Shares of such Trust; (v) no
five Individuals shall collectively Own more than 49.5% (by value) of
the outstanding Shares of such Trust; and (vi) no Individual not taken
into account in the immediately preceding clauses shall, as a
consequence of such Person's Ownership of shares of BIR, Own more than
1.75% (by value) of the outstanding Shares of either Trust. Without
limiting the generality of the foregoing, the Purchasers agree that
they shall make distributions of available cash, dispose of Shares of
either Trust, or take any other reasonable action necessary or
appropriate to maintain the foregoing limitations on Ownership of the
Trusts.
3.1.3. VIOLATION. If a Purchaser, or any Person that is treated as
Owning Shares of any Trust as a consequence of such Person's direct or
indirect interest in such Purchaser, Owns, or offers, proposes or
agrees to Own or retain any Shares of either of the Trusts in violation
of this Agreement, such Purchaser shall notify the Trusts and shall
immediately take all such action as necessary to cause such violation
to be corrected in compliance with the provisions of this Agreement,
the organizational documents of the Purchasers, and related agreements
between the Purchasers and their shareholders or partners; PROVIDED,
HOWEVER, that the Trusts may also pursue any other available remedy to
which they may be entitled as a result of such violation.
3.2. COMPLIANCE WITH REGULATIONS. BIR will comply with the procedures
imposed by the regulations promulgated under Section 857(f) of the Code for
purposes of determining the Ownership of the outstanding shares of BIR. BIR-OP
will follow the same procedures as if it were governed by the provisions of
Section 857(f). Each Purchaser shall furnish to the Trusts copies of all
information provided by the shareholders or partners of such Purchaser in
accordance with such procedures and any other procedures adopted by the
Purchasers in order to ensure compliance with the provisions of this Agreement.
3.3. VALUATION REPORTS. For purposes of ensuring compliance with the
provisions of Section 3.1.2 hereof, the Purchasers shall furnish to the Trustees
of each Trust (i) each fiscal quarter, a report setting forth the best judgment
of the General Partner of BIR-OP and of the directors of BIR as to the value of
the different classes of interests in each of the Purchasers and their
determination of the percentage Ownership in the Trusts held by Individuals that
are direct and indirect partners of BIR-OP (provided, however, that for those
Individuals who are indirect partners of BIR-OP solely by reason of the fact
that they Own shares of BIR, it shall be sufficient to represent that no such
Individual Owns more than 1.75% (by value) of the outstanding shares of either
Trust solely by reason of such Individual's Ownership of shares of BIR); and
(ii) annually, an audit by the Purchasers' independent accountants (or such
other experts reasonably acceptable to the Trusts) of the valuation methods and
assumptions used to prepare such reports.
-5-
3.4. FURTHER INFORMATION. Each Purchaser shall promptly provide such
further information regarding the Ownership of its respective equity interests
as the Trustees of the Trusts shall from time to time reasonably request.
3.5. BOARDS OF TRUSTEES. Each Purchaser shall not, and shall cause each
Affiliate and Associate of such Purchaser not to, directly or indirectly seek to
change the composition of the Board of Trustees of either of the Trusts such
that the majority of such Board of Trustees would not be comprised of
Independent Trustees.
3.6. ACTIONS AFFECTING STATUS. Each Purchaser shall not, and shall
cause each Affiliate and Associate of such Purchaser not to, directly or
indirectly take any action to cause either of the Trusts to cease to be a
reporting company under the Exchange Act.
3.7. BUSINESS COMBINATIONS. Each Purchaser shall not, and shall cause
each Affiliate and Associate of such Purchaser not to, alone or in concert with
any Person, directly or indirectly solicit, seek to effect, negotiate with or
provide any information to any other party with the intent of effecting, or make
any statement or proposal, whether written or oral, with the intent of effecting
any Business Combination with either or both of the Trusts that shall not have
been approved by a majority of the Independent Trustees of such Trust.
4. MISCELLANEOUS.
4.1. SUCCESSION AND ASSIGNMENT; NO THIRD-PARTY BENEFICIARY. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, each of which such
successors and permitted assigns shall be deemed to be a party hereto for all
purposes hereof. Except as expressly provided herein, this Agreement is for the
sole benefit of the parties and their permitted successors and assignees and
nothing herein expressed or implied shall give or be construed to give any
Person, other than the Parties and such successors and assignees, any legal or
equitable rights hereunder.
4.2. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement shall be valid and binding unless the same shall be in writing
and signed by the Trusts and the Purchasers. No waiver by any party of any
breach of any provision hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent breach of any such provision hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence. No delay or omission on the part of any party in exercising any
right, power or remedy under this Agreement shall operate as a waiver thereof.
4.3. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes any and all prior discussions, negotiations, proposals, undertakings,
understandings and agreements, whether written or oral, with respect thereto.
4.4. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument. This Agreement shall
become effective when each party hereto shall have received counterparts hereof
signed by the other parties hereto.
-6-
4.5. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. In the event that any provision hereof
would, under applicable law, be invalid or unenforceable in any respect, each
party hereto intends that such provision shall be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law.
4.6. HEADINGS. The headings contained in this Agreement are for
convenience purposes only and shall not in any way affect the meaning or
interpretation hereof.
4.7. CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The parties intend that each provision
contained herein shall have independent significance.
4.8. GOVERNING LAW. This Agreement, the rights of the parties and all
Actions arising in whole or in part under or in connection herewith shall be
governed by and construed in accordance with the domestic substantive laws of
The Commonwealth of Massachusetts, without giving effect to any choice or
conflict of law provision or rule that would cause the application of the laws
of any other jurisdiction.
4.9. JURISDICTION; VENUE. Each party to this Agreement, by its
execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction
of the state courts of The Commonwealth of Massachusetts or the United States
District Court located in The Commonwealth of Massachusetts for the purpose of
any Action between the parties arising in whole or in part under or in
connection with this Agreement, (b) hereby waives to the extent not prohibited
by applicable law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such Action brought in one of the
above-named courts should be dismissed on grounds of FORUM NON CONVENIENS,
should be transferred or removed to any court other than one of the above-named
courts, or should be stayed by reason of the pendency of some other proceeding
in any other court other than one of the above-named courts, or that this
Agreement or the subject matter hereof may not be enforced in or by such court
and (c) hereby agrees not to commence any such Action other than before one of
the above-named courts.
Each party further agrees that for any Action between the parties
arising in whole or in part under or in connection with this Agreement, such
party bring Actions only in the City of Boston. Each party further waives any
claim and shall not assert that venue should properly lie in any other location
within the selected jurisdiction. Notwithstanding any other provision of this
Agreement, a party may commence an Action in any court and location (a) solely
for the purpose of enforcing an order or judgment issued by one of the courts
specified above and (b) to the extent set forth in Section 6.10.
-7-
4.10. SPECIFIC PERFORMANCE. Each of the parties acknowledges and agrees
that the other parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that,
without posting bond or other undertaking, the other parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any Action instituted in any court of the United States or
any state thereof having jurisdiction over the parties and the matter in
addition to any other remedy to which it may be entitled, at law or in equity.
Each party further agrees that, in the event of any action for specific
performance in respect of such breach, it shall not assert the defense that a
remedy at law would be adequate.
4.11. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW THAT CANNOT BE WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY WILL
NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS
AGREEMENT, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY
OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY
AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE ITS RIGHT TO
TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS
AGREEMENT.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK. SIGNATURES FOLLOW.]
-8-
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
as an agreement under seal as of the date first above written.
The Trusts: XXXXX GOVERNMENT INCOME TRUST
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Name: Xxxxxxx Xxxxx
Title: Chairman
XXXXX GOVERNMENT INCOME TRUST II
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Name: Xxxxxxx Xxxxx
Title: Chairman
The Purchasers: BERKSHIRE INCOME REALTY, INC.
By: /s/ Xxxxx Xxxxx
----------------------------------------
Name: Xxxxx Xxxxx
Title: President
BERKSHIRE INCOME REALTY-OP, L.P.
by: Berkshire Income Realty, Inc.,
its general partner
By: /s/ Xxxxx Xxxxx
----------------------------------------
Name: Xxxxx Xxxxx
Title: President
