-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OcrWmei4bTRJ4RqHnsCmxzKbrsKr1Yr/9ZwyfYMKvhBPyNweNgYDUgTCd8Lilc1o /mPvqRbZuIU9OaYqLwJEjA== 0000891836-99-000645.txt : 19990818 0000891836-99-000645.hdr.sgml : 19990818 ACCESSION NUMBER: 0000891836-99-000645 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19990817 GROUP MEMBERS: GOLDMAN SACHS GROUP INC GROUP MEMBERS: GOLDMAN, SACHS & CO. GROUP MEMBERS: THE GOLDMAN SACHS GROUP, INC. GROUP MEMBERS: WH ADVISORS, L.L.C. XI GROUP MEMBERS: WHITEHALL STREET REAL ESTATE L.P. XI GROUP MEMBERS: WXI/MCN REALTY L.L.C. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND XXVII LP CENTRAL INDEX KEY: 0000810481 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE DEALERS (FOR THEIR OWN ACCOUNT) [6532] IRS NUMBER: 330214387 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-41314 FILM NUMBER: 99694142 BUSINESS ADDRESS: STREET 1: 13760 NOEL ROAD STREET 2: SUITE 700 LB70 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 9724485800 MAIL ADDRESS: STREET 1: 13760 NOEL ROAD SUITE 700 LB 70 STREET 2: 13760 NOEL ROAD SUITE 700 LB 70 CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHMARK PRIME PLUS L P DATE OF NAME CHANGE: 19920413 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GOLDMAN SACHS GROUP INC CENTRAL INDEX KEY: 0000886982 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 133501777 FISCAL YEAR END: 1126 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 85 BROAD ST CITY: NEW YORK STATE: NY ZIP: 10004 BUSINESS PHONE: 2129021000 MAIL ADDRESS: STREET 1: 85 BROAD ST CITY: NEW YORK STATE: NY ZIP: 10004 SC 13D 1 SCHEDULE 13D ------------------------- OMB APPROVAL ------------------------- OMB Number: 3235-0145 Expires: August 31, 1999 Estimated average burden hours per form.....14.90 ------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ______________)* MCNEIL REAL ESTATE FUND XXVII, L.P. - -------------------------------------------------------------------------------- (Name of Issuer) Units of Limited Partnership Interests - -------------------------------------------------------------------------------- (Title of Class of Securities) Not Applicable ------------------------------------------------------- (CUSIP Number) David J. Greenwald, Esq. Goldman, Sachs & Co. 85 Broad Street, New York, New York 10004 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 24, 1999 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box |_|. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedules, including all exhibits. See ss.240.13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ------------------------- --------------------- CUSIP NO. Not Applicable PAGE 2 OF 25 PAGES - ------------------------- --------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) WXI/McN Realty L.L.C. - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (See Instructions) (b) [X] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS (See Instructions) 00 - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF -0- SHARES ----------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY -0- EACH ----------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -0- WITH ----------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON -0- - -------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON (See Instructions) 00 - -------------------------------------------------------------------------------- - ------------------------- --------------------- CUSIP NO. Not Applicable PAGE 3 OF 25 PAGES - ------------------------- --------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Whitehall Street Real Estate Limited Partnership XI - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (See Instructions) (b) [X] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS (See Instructions) 00 - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF -0- SHARES ----------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY -0- EACH ----------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -0- WITH ----------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON -0- - -------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON (See Instructions) 00 - -------------------------------------------------------------------------------- - ------------------------- --------------------- CUSIP NO. Not Applicable PAGE 4 OF 25 PAGES - ------------------------- --------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) WH Advisors, L.L.C. XI - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (See Instructions) (b) [X] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS (See Instructions) 00 - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF -0- SHARES ----------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY -0- EACH ----------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -0- WITH ----------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON -0- - -------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON (See Instructions) 00 - -------------------------------------------------------------------------------- - ------------------------- --------------------- CUSIP NO. Not Applicable PAGE 5 OF 25 PAGES - ------------------------- --------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) The Goldman Sachs Group, Inc. - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (See Instructions) (b) [X] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS (See Instructions) 00 - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF -0- SHARES ----------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY -0- EACH ----------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -0- WITH ----------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON -0- - -------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON (See Instructions) HC/CO - -------------------------------------------------------------------------------- - ------------------------- --------------------- CUSIP NO. Not Applicable PAGE 6 OF 25 PAGES - ------------------------- --------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Goldman, Sachs & Co. - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (See Instructions) (b) [X] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS (See Instructions) 00 - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION New York - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF -0- SHARES ----------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY -0- EACH ----------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -0- WITH ----------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON -0- - -------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON (See Instructions) PN/BD/IA - -------------------------------------------------------------------------------- CUSIP No. Not Applicable PAGE 7 OF 25 PAGES Item 1. Security and Issuer. ------------------- The title of the class of equity securities to which this statement relates is the Units of Limited Partnership Interests (the "Partnership Units") of McNeil Real Estate Fund XXVII, L.P., a California limited partnership (the "Partnership"). The principal executive offices of the Partnership are located at 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240. Item 2. Identity and Background. ----------------------- This statement is being filed by WXI/McN Realty L.L.C. ("WXI/McN"), Whitehall Street Real Estate Limited Partnership XI ("Whitehall"), WH Advisors, L.L.C. XI ("WH Advisors, L.L.C."), Goldman, Sachs & Co. ("GS&Co.") and The Goldman Sachs Group, Inc. ("GS Group", and, together with WXI/McN, Whitehall, WH Advisors, L.L.C. and GS&Co., the "Reporting Persons").* As described in Items 3 and 4 below, on June 24, 1999, the Partnership, McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., Fairfax Associates II, Ltd., Hearth Hallow Associates, L.P., McNeil Midwest Properties I, L.P., Regency North Associates, L.P., McNeil - -------- * Neither the present filing nor anything contained herein shall be construed as an admission that WXI/McN, Whitehall, WH Advisors, L.L.C., GS&Co. or GS Group constitute a "person" for any purpose other than Section 13(d) of the Securities Exchange Act of 1934. 7 CUSIP No. Not Applicable PAGE 8 OF 25 PAGES Summerhill I, L.P., (collectively, the "McNeil Partnerships"), McNeil Partners, L.P., the general partner of the Partnership ("McNeil Partners"), McNeil Investors, Inc., the general partner of McNeil Partners ("McNeil Investors"), McNeil Real Estate Management, Inc. ("McREMI"), McNeil Summerhill, Inc. and Robert A. McNeil, entered into a definitive acquisition agreement (the "Master Agreement") with WXI/McN which provides for WXI/McN and its subsidiaries to acquire the McNeil Partnerships and certain assets of McREMI. As a result of the execution and delivery of the Master Agreement, WXI/McN McNeil Partners, McNeil Investors, Robert A. McNeil, Carole J. McNeil and Opal Partners, L.P., a California limited partnership ("Opal"), may be deemed to constitute a "group" within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended.* McNeil Partners, McNeil Investors, Robert A. McNeil, and Carole J. McNeil are sometimes referred to in this Schedule 13D collectively as the "McNeil Persons". Pursuant to Rule 13(d)-1(k)(2), the Reporting Persons are filing individually. The business address of each Reporting Person other than WXI/McN is 85 Broad Street, New York, New York 10004; the business address of WXI/McN is 100 Crescent Court, Suite 1000, Dallas, Texas 75201. WXI/McN is a Delaware limited liability company formed in connection with the transactions that are the subject of this Section 13D and is a 99% owned subsidiary of Whitehall. - -------- * Neither the present filing nor anything contained herein shall be construed as an admission that the Reporting Persons together with the McNeil Persons and Opal constitute a "person" or "group" for any purpose. Neither the present filing nor anything contained herein shall be construed as an admission that WXI/McN and Whitehall together with the McNeil Persons and Opal constitute a "person" or "group" for any purpose other than what they may be deemed to constitute under Section 13(d) of the Securities Exchange Act of 1934. 8 CUSIP No. Not Applicable PAGE 9 OF 25 PAGES Whitehall is a Delaware limited partnership that was formed for the purpose of investing in debt and equity interests in real estate assets and businesses. WH Advisors, L.L.C., a Delaware limited liability company, acts as the sole general partner of Whitehall. GS&Co., a New York limited partnership, is an investment banking firm and a member of the New York Stock Exchange, Inc. and other national exchanges. GS&Co. is an indirect wholly-owned subsidiary of GS Group. GS Group is a Delaware corporation and holding company that (directly or indirectly through subsidiaries or affiliated companies or both) is a leading investment banking organization. The name, residence or business address, present principal occupation or employment, and the name, principal business and address of any corporation or other organization in which such employment is conducted and the citizenship of (i) each director of GS Group are set forth on Schedule I hereto and are incorporated herein by reference, (ii) each manager and executive officer of WH Advisors, L.L.C. are set forth on Schedule II hereto and are incorporated herein by reference and (iii) each manager and executive officer of WXI/McN are set forth on Schedule III hereto and are incorporated herein by reference. To the knowledge of the Reporting Persons, the business address of each of McNeil Partners and McNeil Investors is 13760 Noel Road, Suite 600, LB 70, Dallas, Texas 75201, and the business address of each of Robert A. McNeil, Carole J. McNeil and Opal is Four Embarcadero Center, Suite 3250, San Francisco, California 94111. To the knowledge of the Reporting Persons: McNeil Partners is a California limited partnership whose principal business is serving as the general partner of certain limited partnerships, 9 CUSIP No. Not Applicable PAGE 10 OF 25 PAGES including the Partnership, engaged in the business of investing in, holding, managing and disposing of real estate and real estate-related investments; and McNeil Investors is the sole general partner of McNeil Partners. To the knowledge of the Reporting Persons: McNeil Investors is a California corporation whose principal business is serving as the general partner of McNeil Partners; and Robert A. McNeil and Carole J. McNeil serve as the co-chairmen of McNeil Investors. To the knowledge of the Reporting Persons: Opal is a California limited partnership whose principal business is investing in real estate limited partnerships; the general partner of Opal is DDC&R, Inc., a California corporation ("DDC&R"), and the principal business of DDC&R is serving as the general partner of Opal; and the sole director, sole executive officer and sole stockholder of DDC&R is Carole J. McNeil. To the knowledge of the Reporting Persons: Robert A. McNeil is a citizen of the United States whose principal business is serving as Co-Chairman of the Board of Directors of McNeil Investors and investing in other real estate investments; and Carole J. McNeil is a citizen of the United States whose principal business is serving as Co-Chairman of the Board of Directors of McNeil Investors and investing in other real estate investments. None of the Reporting Persons, or to the best knowledge and belief of the Reporting Persons, any of the individuals listed in Schedule I, Schedule II or Schedule III has, during the past five years, been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or 10 CUSIP No. Not Applicable PAGE 11 OF 25 PAGES final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. This Item 2 is qualified in its entirety by reference to Schedule I, Schedule II and Schedule III which are attached hereto and incorporated into this Item by reference. Item 3. Source and Amount of Funds or Other Consideration. ------------------------------------------------- The total amount of funds required by WXI/McN Realty in connection with the consummation of the transaction, assuming all McNeil Partnerships participate in the transaction, is estimated to be approximately $644,439,803. Such amount includes the amounts estimated to be required to pay the cash merger consideration to the limited partners of the McNeil Partnerships, to repay certain mortgage debt of the McNeil Partnerships and certain prepayment fees payable in connection therewith, to pay the amount of the shortfall, if any, of the amount of cash on hand held by each of the participating McNeil Partnerships at the time of the closing from the estimated special distribution that each participating McNeil Partnership is expected to make; and to pay certain other expenses expected to be incurred in connection with the transaction and other amounts that WXI/McN Realty is required to pay pursuant to the terms of the Master Agreement. Such amounts would vary in the event that one or more of the McNeil Partnerships are not participating McNeil Partnerships or in the event that the amount of special distributions, expenses or other amounts vary from the estimated amounts included above. It is expected that the transactions contemplated by the Master Agreement and described in Item 4 would be funded through a combination of equity and debt financing. Pursuant to the terms 11 CUSIP No. Not Applicable PAGE 12 OF 25 PAGES of the limited liability company agreement of WXI/McN that will be executed in connection with the closing of the transactions contemplated by the Master Agreement (the "WXI/McN LLC Agreement"), the sole managing member of WXI/McN, which is 99% owned by Whitehall, has agreed to contribute to WXI/McN an amount in cash equal to the amounts described above, and pursuant to the terms of an equity commitment letter from Whitehall to WXI/McN, Whitehall has agreed to provide, or to cause one or more of its affiliates to provide, a cash capital contribution to WXI/McN Realty in an amount equal to such amounts. The funds to be used by Whitehall to meet its funding commitments are expected to come from capital contributions from the partners in Whitehall. The WXI/McN LLC Agreement also provides that McNeil Partners will, immediately prior to the consummation of the transactions contemplated by the Master Agreement, contribute certain assets, including certain management assets currently held by McREMI and the general partnership interests in the McNeil Partnerships, to WXI/McN or its affiliates in exchange for membership units in WXI/McN. It is also expected that WXI/McN will obtain third party mortgage or other financing that will provide a portion of the amount of required funds described above, although WXI/McN has not, as of the date of this Schedule 13D, entered into any agreements with respect to any such financing. The transactions contemplated by the Master Agreement and the WXI/McN LLC Agreement are subject to a number of terms and conditions set forth therein, including, among others, the execution of mutually acceptable documentation and the satisfaction of the conditions set forth in the Master Agreement. 12 CUSIP No. Not Applicable PAGE 13 OF 25 PAGES None of the Reporting Persons nor any of the persons listed on Schedule I, Schedule II or Schedule III has contributed any funds or other consideration towards the purchase of the securities of the Partnership reported in this statement. The information set forth in response to this Item 3 is qualified in its entirety by reference to the Master Agreement and the WXI/McN LLC Agreement, which are expressly incorporated herein by reference. Item 4. Purpose of Transaction. ---------------------- Based on information provided by Opal and the McNeil Persons, Opal originally acquired the Partnership Units which are beneficially owned by it for investment purposes. As of the date of this statement, none of the Reporting Persons, or to the knowledge and belief of the Reporting Persons, any of the individuals listed on Schedule I, Schedule II or Schedule III, has any present plan or intention which relates to or would result in any of the actions set forth in parts (a) through (j) of Item 4 of Schedule 13D, other than the following: On June 24, 1999, the McNeil Partnerships, including the Partnership, McNeil Partners, McNeil Investors, McREMI, and Robert A. McNeil entered into the Master Agreement, which provides for WXI/McN and its subsidiaries to acquire the McNeil Partnerships and certain assets of McREMI. Pursuant to the terms of the Master Agreement, the general partner interest in the Partnership will be contributed by McNeil Partners to a subsidiary of WXI/McN, such subsidiary of WXI/McN will become the substituted general partner of the Partnership and the Partnership will be merged (the "Merger") with a separate subsidiary of WXI/McN. As a result of the Merger, all 13 CUSIP No. Not Applicable PAGE 14 OF 25 PAGES outstanding Partnership Units will be converted into cash. In addition, prior to the consummation of the Merger, the Partnership will declare a special distribution to its limited partners on the closing date of the Merger equal to its then positive net working capital balance, if any, determined in accordance with the terms of the Master Agreement. The Master Agreement provides that on the closing date of the Merger and the other transactions contemplated by the Master Agreement, McNeil Partners will receive an equity interest in WXI/McN in exchange for its contribution to WXI/McN of the general partnership interests in the McNeil Partnerships, the limited partnership interests in Fairfax and Summerhill and the assets of McREMI related to the McNeil Partnerships. The Partnership's participation in the transaction is subject to a number of conditions, including the approval by a majority of the limited partners of the Partnership of the transactions contemplated by the Master Agreement and the substitution of a subsidiary of WXI/McN as the general partner of the Partnership. The information set forth in response to this Item 4 is qualified in its entirety by reference to the Master Agreement and the WXI/McN LLC Agreement, which are expressly incorporated herein by reference. Item 5. Interests in Securities of the Issuer. ------------------------------------- (a) Based on information provided by Opal to the Reporting Persons, as of June 24, 1999, 670,634 Partnership Units were beneficially owned by Opal, representing approximately 13.0% of 14 CUSIP No. Not Applicable PAGE 15 OF 25 PAGES the outstanding Partnership Units.* Each of WXI/McN, Whitehall, WH Advisors, L.L.C., GS&Co. and GS Group disclaims beneficial ownership of all of such Partnership Units. Based on information provided by McNeil Partners, McNeil Investors, Robert A. McNeil and Carole J. McNeil, as of June 24, 1999, none of McNeil Partners, McNeil Investors, Robert A. McNeil and Carole J. McNeil beneficially owned any Partnership Units (other than the Partnership Units owned by Opal which may be deemed to be beneficially owned by Carole J. McNeil). As of August 3, 1999, no Partnership Units were beneficially owned by WXI/McN, Whitehall, WH Advisors, L.L.C., GS&Co. or GS Group. None of the Reporting Persons, and to the knowledge of the Reporting Persons, none of the persons listed on Schedule I, Schedule II or Schedule III hereto, beneficially owns any Partnership Units other than as set forth herein. (b) Not applicable. (c) None of the Reporting Persons, and based on information provided by the McNeil Persons and Opal and the persons listed on Schedule I, Schedule II or Schedule III hereto to the Reporting Persons, none of the persons listed on Schedule I, Schedule II or Schedule III hereto, the McNeil Persons or Opal, has been a party to any transaction in the Partnership Units during the period commencing on April 25, 1999 and ending on August 3, 1999. - -------- * All percentages of Partnership Units set forth in this Item 5 are based upon the number of Partnership Units reported to be outstanding on May 18, 1999 as disclosed in the Partnership's Form 10-Q/A filed with the Securities and Exchange Commission. 15 CUSIP No. Not Applicable PAGE 16 OF 25 PAGES (d) No other person has the right to receive or the power to direct the receipt of the dividends from, or the proceeds from the sale of, any Partnership Units that may be deemed to be beneficially owned by the Reporting Persons. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. --------------------------- Except as disclosed in Items 3, 4 and 5 and the Joint Filing Agreement, dated as of August 16, 1999, among the Reporting Persons (attached hereto as Exhibit 3), none of the Reporting Persons is a party to any contracts, arrangements, understandings or relationships with respect to any securities of the Partnership, including but not limited to the transfer or voting of any securities, finder's fees, joint ventures, loan or option agreements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Item 7. Material to be Filed as Exhibits. Exhibit No. Exhibit - ----------- ------- 1. Master Agreement, dated as of June 24,1999, by and among WXI/McN Realty, L.L.C., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIII, L. P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P., McNeil Real Estate Fund XXVII, L.P., Fairfax Associates II, Ltd., Hearth Hallow Associates, 16 CUSIP No. Not Applicable PAGE 17 OF 25 PAGES L.P., McNeil Midwest Properties I, L.P., Regency North Associates, L.P., McNeil Summerhill I, L.P., McNeil Partners, L.P., McNeil Investors, Inc, and Robert A., McNeil. 2. Form of First Amended and Restated Limited Liability Company Operating Agreement of WXI/McN Realty L.L.C. (to be executed upon consummation of the transaction contemplated by the Master Agreement). 3. Joint Filing Agreement. CUSIP No. Not Applicable PAGE 18 OF 25 PAGES SIGNATURE After reasonable inquiry and to our best knowledge and belief, we certify that the information set forth in this statement is true complete and correct. Dated: Auugst 16, 1999 WXI/McN REALTY L.L.C. By: WXI/McN Real Estate, L.L.C., its Managing Member By: Whitehall Street Real Estate Limited Partnership XI, its Managing Member By: WH Advisors, L.L.C. XI, its General Partner By: /s/ Roger S. Begelman ----------------------------------- Name: Roger S. Begelman Title: Attorney-in-Fact WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP XI By: WH Advisors, L.L.C. XI, its general partner By: /s/ Roger S. Begelman ------------------------------------------------- Name: Roger S. Begelman Title: Attorney-in-Fact WH ADVISORS, L.L.C. XI By: /s/ Roger S. Begelman ------------------------------------------------- Name: Roger S. Begelman Title: Attorney-in-Fact 18 CUSIP No. Not Applicable PAGE 19 OF 25 PAGES THE GOLDMAN SACHS GROUP, INC. By: /s/ Roger S. Begelman ------------------------------------------------- Name: Roger S. Begelman Title: Attorney-in-Fact GOLDMAN, SACHS & CO. By: /s/ Roger S. Begelman ------------------------------------------------- Name: Roger S. Begelman Title: Attorney-in-Fact 19 CUSIP No. Not Applicable PAGE 19 OF 25 PAGES SCHEDULE I ---------- The name of each director of The Goldman Sachs Group, Inc. is set forth below. The business address of each person listed below except John L. Thornton, Sir John Browne and James A. Johnson is 85 Broad Street, New York, NY 10004. The business address of John L. Thornton is 133 Fleet Street, London EC4A 2BB, England. The business address of Sir John Browne is BP Amoco plc, Brittanic House, 1 Finsbury Circus, London EC2M, England. The business address of James A. Johnson is Fannie Mae, 3900 Wisconsin Avenue NW, Washington, D.C. 20016. Each person is a citizen of the United States of America except for Sir John Browne, who is a citizen of the United Kingdom. The present principal occupation or employment of each of the listed persons is set forth below. NAME PRESENT PRINCIPAL OCCUPATION - ---- ---------------------------- Henry M. Paulson, Jr. Chairman and Chief Executive Officer of The Goldman Sachs Group, Inc. Robert J. Hurst Vice Chairman of The Goldman Sachs Group, Inc. John A. Thain President and Co-chief Operating Officer of The Goldman Sachs Group, Inc. John L. Thornton President and Co-chief Operating Officer of The Goldman Sachs Group, Inc. Sir John Browne Group Chief Executive of BP Amoco plc James A. Johnson Chairman of the Executive Committee of the Board of Fannie Mae John L. Weinberg Senior Chairman of The Goldman Sachs Group, Inc. 20 CUSIP No. Not Applicable PAGE 21 OF 25 PAGES SCHEDULE II ----------- The name, position and present principal occupation of each manager and executive officer of WH Advisors, L.L.C. XI, which is the sole general partner of Whitehall, the sole managing member of WXI/MNL Real Estate, L.L.C., are set forth below. The business address of all the executive officers and managers listed below except G. Douglas Gunn, Todd A. Williams, Angie D. Madison, Edward M. Siskind, Paul R. Milosevich, Elizabeth A. O'Brien, Zubin P. Irani and Eli Muraidekh is 85 Broad Street, New York, New York 10004. The business address of G. Douglas Gunn, Todd A. Williams, Angie D. Madison and Paul R. Milosevich is 100 Crescent Court, Suite 1000, Dallas, TX 75201. The business address of Edward M. Siskind, Zubin P. Irani and Eli Muraidekh is 133 Fleet Street, London EC4A 2BB, England. The business address of Elizabeth A. O'Brien is 3 Garden Road, Central, Hong Kong. Except for Brahm S. Cramer, who is a Canadian citizen, all executive officers and managers listed below are United States citizens. Name Position Present Principal Occupation - ---- -------- ---------------------------- Rothenberg, Stuart M. Manager/Vice President Managing Director of Goldman, Sachs & Co. Neidich, Daniel M. Manager/President Managing Director of Goldman, Sachs & Co. O'Brien, Elizabeth A. Vice President/Assistant Vice President of Secretary Goldman Sachs (Asia) L.L.C. Weil, David M. Vice President Managing Director of Goldman, Sachs & Co. Rosenberg, Ralph F. Manager/Vice President/ Managing Director of Assistant Secretary Goldman, Sachs & Co. Williams, Todd A. Vice President/Assistant Managing Director of Secretary/Assistant Goldman, Sachs & Co. Treasurer Naughton, Kevin D. Vice President/Secretary/ Vice President of Treasurer Goldman, Sachs & Co. 21 CUSIP No. Not Applicable PAGE 22 OF 25 PAGES Siskind, Edward M. Vice President/Assistant Managing Director of Treasurer Goldman International Klingher, Michael K. Vice President Managing Director of Goldman, Sachs & Co. Gunn, G. Douglas Vice President/Assistant Vice President of Secretary Goldman, Sachs & Co. Lahey, Brian J. Vice President/Treasurer Vice President of Goldman, Sachs & Co. Kava, Alan S. Vice President Vice President of Goldman, Sachs & Co. Feldman, Steven M. Vice President Managing Director of Goldman, Sachs & Co. Madison, Angie D. Vice President/Assistant Vice President of Secretary Goldman, Sachs & Co. Weiss, Mitchell S. Assistant Treasurer Vice President of Goldman, Sachs & Co. Cramer, Brahm S. Vice President Vice President of Goldman, Sachs & Co. Karr, Jerome S. Vice President Vice President of Goldman, Sachs & Co. Lauer, Kate Vice President/Assistant Vice President of Secretary Goldman, Sachs & Co. Milosevich, Paul R. Vice President Vice President of Goldman, Sachs & Co. Mortelliti, Josephine Vice President Vice President of Goldman, Sachs & Co. 22 CUSIP No. Not Applicable PAGE 23 OF 25 PAGES Muraidekh, Eli Vice President Vice President of Goldman Sachs International Sack, Susan L. Vice President/Assistant Vice President of Secretary Goldman, Sachs & Co. Langer, Jonathan A. Vice President/Assistant Vice President of Secretary Goldman, Sachs & Co. Burban, Elizabeth M. Vice President/Assistant Vice President of Secretary Goldman, Sachs & Co. Bernstein, Ronald L. Vice President/ Vice President of Assistant Secretary Goldman, Sachs & Co. Irani, Zubin P. Assistant Vice President/ Vice President of Goldman Secretary Sachs International 23 CUSIP No. Not Applicable PAGE 24 OF 25 PAGES SCHEDULE III ------------ The sole managing member of WXI/McN Realty L.L.C. Is WXI/MNL Real Estate, L.L.C., a Delaware limited liability company. The name, position and present principal occupation of each executive officer of WXI/MNL Real Estate, L.L.C. are set forth below. Whitehall is the sole managing member of WXI/MNL Real Estate, L.L.C. The business address of all the executive officers and managers listed below except Edward M. Siskind, G. Douglas Gunn, Todd A. Williams and Angie D. Madison is 85 Broad Street, New York, New York 10004. The business address of Edward M. Siskind is 133 Fleet Street, London EC4A 2BB, England. The business address of G. Douglas Gunn, Todd A. Williams and Angie Madison is 100 Crescent Court, Suite 1000, Dallas, Texas 75201. Name Position Present Principal Occupation - ---- -------- ---------------------------- Rothenberg, Stuart M. Vice President Managing Director of Goldman, Sachs & Co. Neidich, Daniel M. President Managing Director of Goldman, Sachs & Co. Weil, David M. Vice President Managing Director of Goldman, Sachs & Co. Rosenberg, Ralph F. Vice President/ Managing Director of Assistant Secretary Goldman, Sachs & Co. Williams, Todd A. Vice President/Assistant Managing Director of Secretary/Assistant Goldman, Sachs & Co. Treasurer Naughton, Kevin D. Vice President/Secretary/ Vice President of Treasurer Goldman, Sachs & Co. Siskind, Edward M. Vice President/Assistant Managing Director of Treasurer Goldman International Klingher, Michael K. Vice President Managing Director of Goldman, Sachs & Co. 24 CUSIP No. Not Applicable PAGE 25 OF 25 PAGES Kava, Alan S. Vice President Vice President of Goldman, Sachs & Co. Feldman, Steven M. Vice President Managing Director of Goldman, Sachs & Co. Lauer, Kate Vice President/Assistant Vice President of Secretary Goldman, Sachs & Co. Langer, Jonathan A. Vice President/Assistant Vice President of Secretary Goldman, Sachs & Co. Sack, Susan L. Vice President/Assistant Vice President of Secretary Goldman, Sachs & Co. Burban, Elizabeth M. Vice President/Assistant Vice President of Secretary Goldman, Sachs & Co. Lahey, Brian J. Vice President Vice President of Goldman, Sachs & Co. Gunn, G. Douglas Vice President Vice President of Goldman, Sachs & Co. Madison, Angie D. Vice President Vice President of Goldman, Sachs & Co. Brooks, Adam Assistant Vice President Associate of Goldman, Sachs & Co. 25 EX-99.1 2 MASTER AGREEMENT ================================================================================ MASTER AGREEMENT by and among WXI/McN Realty L.L.C. THE McNEIL PARTNERSHIPS (as defined herein), McNEIL PARTNERS, L.P., McNEIL INVESTORS, INC., McNEIL REAL ESTATE MANAGEMENT, INC. and ROBERT A. McNEIL Dated as of June 24, 1999. ================================================================================
TABLE OF CONTENTS Page ---- ARTICLE I THE ACQUISITION Section 1.1 The Acquisition; Consideration.................................................4 Section 1.2 Closing........................................................................7 Section 1.3 Allocation of the Aggregate Consideration......................................8 Section 1.4 Additional Consideration.......................................................9 Section 1.5 Indebtedness..................................................................10 Section 1.6 Reservation of Right to Revise Transaction....................................11 ARTICLE II TRANSACTIONS RELATED TO THE MERGERS Section 2.1 Certain Company Acquisition Vehicles..........................................12 Section 2.2 Contributions to MPLP.........................................................13 Section 2.3 Contributions by MPLP.........................................................14 Section 2.4 Pre-Closing Distribution......................................................17 ARTICLE III THE MERGERS Section 3.1 The Mergers...................................................................23 Section 3.2 Effective Time................................................................23 Section 3.3 Effects of the Mergers; LLC Agreement.........................................24 Section 3.4 Conversion of Partnership Interests...........................................24 Section 3.5 Payment of Merger Consideration...............................................25 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS Section 4.1 Organization, Standing and Power..............................................30 Section 4.2 Capital Structure; Title and Ownership of McREMI Assets..............................................................32 Section 4.3 Authority; Noncontravention; Consents.........................................35 Section 4.4 Compliance with Laws..........................................................38 Section 4.5 SEC Documents; Financial Statements; Undisclosed Liabilities.......................................................39 Section 4.6 Absence of Certain Changes....................................................42 Section 4.7 Litigation....................................................................44
Page ---- Section 4.8 Properties....................................................................45 Section 4.9 Environmental Matters.........................................................53 Section 4.10 Taxes.........................................................................54 Section 4.11 No Payments to Employees, Officers or Directors..................................................................56 Section 4.12 Related Party Transactions....................................................56 Section 4.13 Employee Benefits.............................................................56 Section 4.14 Employee Matters..............................................................58 Section 4.15 Contracts; Debt Instruments...................................................59 Section 4.16 Brokers.......................................................................62 Section 4.17 Management Agreements.........................................................62 Section 4.18 INTENTIONALLY OMITTED.........................................................62 Section 4.19 State Takeover Statutes.......................................................62 Section 4.20 Investment Company Act of 1940................................................62 Section 4.21 Insurance.....................................................................63 Section 4.22 Year 2000.....................................................................63 Section 4.23 Books and Records.............................................................63 Section 4.24 Personal Property.............................................................63 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY Section 5.1 Organization, Standing and Power of the Company, the Company LLCs and the Transitory Partnerships...................................................64 Section 5.2 Capital Structure.............................................................66 Section 5.3 Authority; Noncontravention; Consents.........................................67 Section 5.4 Compliance with Laws..........................................................70 Section 5.5 Litigation....................................................................71 Section 5.6 Brokers.......................................................................71 Section 5.7 Investment Company Act of 1940................................................72 Section 5.8 Financing.....................................................................72
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Page ---- ARTICLE VI CONDUCT OF BUSINESS PENDING MERGER Section 6.1 Conduct of Business of Sellers Prior to the Effective Time................................................................73 Section 6.2 Conduct of Business of the Company, the Transitory Partnerships and the Company LLCs Prior to the Effective Time..............................................78 Section 6.3 Reimbursable Proposals........................................................82 ARTICLE VII ADDITIONAL COVENANTS Section 7.1 Preparation of the Proxy Statement; Recommendation of Mergers.....................................................84 Section 7.2 Acquisition Proposals.........................................................87 Section 7.3 Access to Information; Confidentiality........................................89 Section 7.4 Reasonable Best Efforts; Notification.........................................90 Section 7.5 Public Announcements..........................................................92 Section 7.6 Benefit Plans and Other Employee Arrangements.................................93 Section 7.7 Ancillary Agreements..........................................................98 Section 7.8 Support Agreements; Financing.................................................98 Section 7.9 Fees and Expenses.............................................................99 Section 7.10 Allocations..................................................................100 Section 7.11 Related Party Transactions...................................................101 Section 7.12 Stanger Reports..............................................................101 Section 7.13 Estoppels....................................................................102 Section 7.14 Harbour Club.................................................................103 Section 7.15 Material Encumbrances........................................................105 Section 7.16 Additional Seller Tax Covenant...............................................106 Section 7.17 Title Deliveries.............................................................106 ARTICLE VIII CONDITIONS Section 8.1 Conditions to Each Party's Obligation to Effect the Mergers...........................................................107 Section 8.2 Conditions to Obligations of the Company.....................................109 Section 8.3 Conditions to Obligations of Sellers.........................................113 Section 8.4 Certain Exclusions from Conditions to Closing................................115
iii
Page ---- Section 8.5 Removal Notices..............................................................116 ARTICLE IX TERMINATION Section 9.1 Termination of this Agreement Prior to the Effective Time...............................................................118 Section 9.2 Effect of Termination Pursuant to Section 9.1..................................................................119 Section 9.3 Termination of Certain Rights and Obligations Prior to the Effective Time......................................120 Section 9.4 Effect of Termination Pursuant to Section 9.3................................123 Section 9.5 Payment of Break-Up Fee......................................................124 Section 9.6 Reimbursement of Expenses....................................................126 ARTICLE X CERTAIN DEFINITIONS; OTHER MATTERS Section 10.1 Definitions..................................................................128 Section 10.2 Seller Disclosure Letter.....................................................141 Section 10.3 Interpretation...............................................................141 ARTICLE XI GENERAL PROVISIONS Section 11.1 Nonsurvival of Representations, Warranties and Covenants................................................................142 Section 11.2 Non-Recourse.................................................................142 Section 11.3 Amendment....................................................................144 Section 11.4 Extension; Waiver............................................................144 Section 11.5 Notices......................................................................145 Section 11.6 Counterparts.................................................................146 Section 11.7 Entire Agreement; No Third Party Beneficiaries................................................................146 SECTION 11.8 GOVERNING LAW................................................................146 Section 11.9 Assignment...................................................................147 Section 11.10 Consent to Jurisdiction......................................................147 Section 11.11 Severability.................................................................147 Section 11.12 Arbitration..................................................................148
iv SELLER DISCLOSURE LETTER The Seller Disclosure Letter is subject, inter alia, to Section 10.2 of the Master Agreement. Schedule 1.5 Existing Loans Schedule 4.1(c) Organization, Standing and Power Schedule 4.2(a) Capital Structure Schedule 4.2(b) Capital Structure Schedule 4.2(c) Capital Structure Schedule 4.2(e) Capital Structure Schedule 4.2(f) Capital Structure Schedule 4.3(b) Authority; Noncontravention; Consents Schedule 4.4 Compliance with Laws Schedule 4.5(a) SEC Documents; Financial Statements; Undisclosed Liabilities Schedule 4.5(d) SEC Documents; Financial Statements; Undisclosed Liabilities Schedule 4.6 Absence of Certain Changes or Events Schedule 4.7 Litigation Schedule 4.8(a) Properties Schedule 4.8(b) Properties Schedule 4.8(c) Properties Schedule 4.8(e) Properties Schedule 4.8(f) Properties Schedule 4.8(g) Properties Schedule 4.8(h) Properties Schedule 4.8(i) Properties Schedule 4.8(m) Properties Schedule 4.8(n) Properties Schedule 4.8(o) Properties Schedule 4.8(q) Properties Schedule 4.9 Environmental Matters Schedule 4.10 Taxes Schedule 4.11 No Payments to Employees, Officers or Directors Schedule 4.12 Related Party Transactions Schedule 4.13 Employee Benefits Schedule 4.14(a) Employee Policies Schedule 4.14(b) Employee Policies Schedule 4.15(a) Contracts; Debt Instruments Schedule 4.15(b) Contracts; Debt Instruments Schedule 4.15(d) Contracts; Debt Instruments Schedule 4.15(e) Contracts; Debt Instruments Schedule 4.15(f) Contracts; Debt Instruments Schedule 4.15(g) Contracts; Debt Instruments v Schedule 4.15(h) Contracts; Debt Instruments Schedule 4.15(i) Contracts; Debt Instruments Schedule 4.17 Management Agreements Schedule 4.21(a) Insurance Schedule 4.21(b) Insurance Schedule 6.1 Conduct of Business Pending Merger Schedule 6.3 Reimbursable Proposals Schedule 8.2(d)(i) Consents Schedule 8.2(f)(i) Estoppels Schedule 8.2(h) Minimum NOI Amount Schedule 10.1(a) Definition of Knowledge of Sellers Schedule 10.1(b) Net Operating Income Schedule 10.1(c) Partnership Percentages LIST OF ANNEXES Annex A. Tranche A Terminated Loans Annex B. Tranche B Terminated Loans Annex C. Certain Non-Terminated Loans Annex D. Form of Preliminary Excess Cash Balance Schedule Annex E. McNeil Partnerships Annex F. Subsidiary Corporations Annex G. Subsidiary Partnerships Annex H. McREMI Assets LIST OF EXHIBITS Exhibit A. Form of Consent and Estoppel Certificate (Lender) Exhibit B. Form of Consent (Seller MAE) Exhibit C. Form of SASM&F Opinion Exhibit D. Form of Estoppel (Commercial Tenant) Exhibit E. Form of Estoppel (Ground Lessor) Exhibit F. Form of Indemnification and Pledge Agreement Exhibit G. Form of First Amended and Restated Limited Liability Company Agreement of the Company Exhibit H. Instrument of Assignment vi
INDEX OF DEFINED TERMS Section ------- 1940 Act...........................................................................4.20 Acquisition Proposal...............................................................10.1 Additional McNeil Contribution......................................................2.3 Affected Employee...................................................................7.6 affiliate..........................................................................10.1 Aggregate Consideration............................................................10.1 Agreement.......................................................................Heading Allocated McNeil Value.............................................................10.1 Allocation Analysis................................................................10.1 Allocations........................................................................10.1 Ancillary Agreements...............................................................10.1 Appraisals.........................................................................10.1 Archon..............................................................................7.7 Assignment Agreement...............................................................10.1 Assumption Fees.....................................................................1.5 Audit Date..........................................................................4.6 Board of Managers...................................................................7.9 business day.......................................................................10.1 Buyer Plans.........................................................................7.6 California Partnerships............................................................10.1 Capital Expenditure Reimbursement...................................................6.3 Capital Expenditure Reimbursement Amount............................................6.3 Capitalized McNeil Expenses.........................................................7.9 Certificates........................................................................3.5 Closing.............................................................................1.2 Closing Date........................................................................1.2 COBRA...............................................................................7.6 Code...............................................................................4.10 Commercial Leases...................................................................4.8 Commercial Tenants..................................................................4.8 Commitment Letter...................................................................5.8 Company.........................................................................Heading Company Interests...................................................................1.1 Company LLCs........................................................................2.1 Company Person.....................................................................10.1 Company Reimbursable Expenses......................................................10.1 Completed Amount....................................................................6.3 Confidentiality Agreement...........................................................7.3 Construction Contracts.............................................................4.15 Contributing Partners..............................................................10.1 Corporate Employees................................................................10.1 Corporate Listed Employees..........................................................7.6
vii
Section ------- CPA Firm............................................................................2.4 CRLPA..............................................................................10.1 Designated Partnership Matters......................................................8.5 Designated Partnership Properties...................................................8.5 Discretionary Closing Conditions...................................................10.1 DLLCA..............................................................................10.1 DRULPA.............................................................................10.1 Eastdil............................................................................10.1 Eastdil Engagement Letter..........................................................10.1 Eastdil Opinions...................................................................10.1 Effective Time......................................................................3.2 Employment List.....................................................................7.6 Encumbrance Notice.................................................................7.15 Encumbrances........................................................................4.8 Environmental Complaints............................................................4.9 Environmental Law...................................................................4.9 ERISA..............................................................................4.13 Estoppel............................................................................8.2 Excess Cash Balance.................................................................2.4 Excess Cash Balance Schedule........................................................2.4 Exchange Act........................................................................4.5 Excluded McNeil Partnership.........................................................9.3 Excluded McREMI Assets.............................................................10.1 Excluded MPLP Assets...............................................................10.1 Existing Loans......................................................................1.5 Existing Support Agreements........................................................10.1 Expiration Time....................................................................7.15 Fairfax.........................................................................Heading First McNeil Threshold.............................................................10.1 FRULPA.............................................................................10.1 GAAP................................................................................2.4 Governing Laws ....................................................................10.1 Governmental Entity.................................................................4.3 GP Allocation Amount................................................................1.3 GP Interest........................................................................10.1 Ground Leases.......................................................................4.8 Guarantee...........................................................................5.8 Harbour Club I ....................................................................7.14 Hazardous Material..................................................................4.9 Hearth Hollow...................................................................Heading Higher Acquisition Proposal........................................................10.1 HSR Act.............................................................................4.3 Included McNeil Partnership.........................................................8.5
viii
Section ------- Included Partnership Matter.........................................................8.5 Indebtedness.......................................................................4.15 Indemnification Agreement..........................................................10.1 Insurance Policies.................................................................4.21 Knowledge of Sellers...............................................................10.1 Knowledge of the Company...........................................................10.1 Known Defects......................................................................10.1 KRULPA.............................................................................10.1 laws................................................................................4.3 Leases..............................................................................4.8 Liens..............................................................................10.1 Listed Employee.....................................................................7.6 LLC Agreement......................................................................10.1 LP Allocation Amount................................................................1.3 LP Interest........................................................................10.1 Management Agreements..............................................................4.17 Management LLC......................................................................2.1 Managing Member.....................................................................5.2 Material Contract..................................................................4.15 Material Encumbrance...............................................................7.15 Matter Removal Notice...............................................................8.5 Matter Removal Notice Date..........................................................8.5 Matter Removal Notice Time..........................................................8.5 McNeil Cash Contribution............................................................2.3 McNeil Limited Partner Meeting......................................................7.1 McNeil Partnership Properties.......................................................4.8 McNeil Partnership Statements.......................................................4.5 McNeil Partnerships.............................................................Heading McNeil Person......................................................................10.1 McREMI..........................................................................Heading McREMI Assets......................................................................10.1 McREMI ERISA Affiliate.............................................................4.13 McREMI 401(k) Savings Plan..........................................................7.6 McREMI Plans.......................................................................4.13 McREMI Reduction Amount............................................................10.1 McREMI Transaction Expenses........................................................10.1 Merger Certificate..................................................................3.2 Merger Consideration................................................................3.5 Merger Expense Reimbursement........................................................3.5 Merger Fund.........................................................................3.5 Mergers.............................................................................3.1 Merging Partnership................................................................10.1 Merging Private Partnerships.......................................................10.1
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Section ------- Midwest Properties..............................................................Heading MII.............................................................................Heading MPLP............................................................................Heading MPLP Allocation Amount..............................................................1.3 MPLP Contributions..................................................................2.3 MPLP GP Subsidiaries...............................................................10.1 MPLP Interests......................................................................2.2 MPLP Subsidiary Corporation........................................................10.1 MREF IX.........................................................................Heading MREF X..........................................................................Heading MREF XI.........................................................................Heading MREF XII........................................................................Heading MREF XIV........................................................................Heading MREF XV.........................................................................Heading MREF XX.........................................................................Heading MREF XXI........................................................................Heading MREF XXII.......................................................................Heading MREF XXIII......................................................................Heading MREF XXIV.......................................................................Heading MREF XXV........................................................................Heading MREF XXVI.......................................................................Heading MREF XXVII......................................................................Heading MULPL..............................................................................10.1 Negative Excess Cash Balance........................................................2.4 Net McREMI Allocated Value.........................................................10.1 Net Operating Income...............................................................10.1 Net Per Partnership Allocated Value.................................................1.3 New GP LLC..........................................................................2.1 New Preliminary Excess Cash Balance.................................................2.4 New Preliminary Excess Cash Balance Schedule........................................2.4 New Preliminary Pre-Closing Balance Sheet...........................................2.4 Non-Terminated Loans................................................................1.5 NOI Amount.........................................................................10.1 NOI Determination Date..............................................................8.2 Objection Period....................................................................2.4 Objection Statement.................................................................2.4 Option Price.......................................................................7.14 Order...............................................................................8.1 Original LLC Agreement.............................................................10.1 Other Consents.....................................................................7.13 Other Estoppels....................................................................7.13 Other Interests.....................................................................4.2 Other Harbour Club Properties......................................................7.14
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Section ------- Other Items.........................................................................4.8 Paid Assumption Fees................................................................1.5 Partial McREMI Allocated Value......................................................1.3 Participating McNeil Partnership...................................................10.1 Participating Merging Partnership..................................................10.1 Participating Partnership Consideration Amount.....................................10.1 Partnership Break-Up Fee...........................................................10.1 Partnership Percentage.............................................................10.1 Payment Agent.......................................................................3.5 Per Partnership Allocated Value.....................................................1.3 Per Partnership Transaction Expenses...............................................10.1 Per Unit Allocation Amount..........................................................1.3 Per Unit Consideration Amount......................................................10.1 Permitted Restrictions and Encumbrances.............................................4.8 person.............................................................................10.1 Portfolio Advisory Agreement.......................................................10.1 Positive Excess Cash Balance........................................................2.4 Post-Allocation Upstream Amounts...................................................10.1 Post-Allocation Upstream Payables..................................................10.1 Pre-Allocation Upstream Payable....................................................10.1 Pre-Closing Balance Sheet...........................................................2.4 Pre-Closing Removable Partnership...................................................8.5 Preferred Equity Financing.........................................................10.1 Preliminary Excess Cash Balance....................................................10.1 Preliminary Excess Cash Balance Schedule............................................2.4 Preliminary Pre-Closing Balance Sheet...............................................2.4 Prepayment Fees.....................................................................1.5 Private McNeil Partnership.........................................................10.1 Property Employees.................................................................10.1 Property Listed Employees...........................................................7.6 Property Restrictions...............................................................4.8 Proxy Statement.....................................................................7.1 Proxy Mailing Date..................................................................7.6 Public McNeil Partnership Statements................................................4.5 Public McNeil Partnerships..........................................................4.5 Regency North...................................................................Heading Reimbursable Proposal...............................................................6.3 Reimbursable Proposal Amount........................................................6.3 Related Party Transaction..........................................................10.1 Removable Partnership...............................................................8.5 Pre-Closing Removal Notice..........................................................8.5 Pre-Closing Removal Notice Date.....................................................8.5 Pre-Closing Removal Notice Time.....................................................9.3
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Section ------- Rent Roll...........................................................................4.8 Replacement Support Agreements......................................................7.8 Residential Leases..................................................................4.8 Resolution Period...................................................................2.4 SNDA Agreements....................................................................7.13 Schedule 13E-3 .....................................................................7.1 SEC.................................................................................4.3 Second McREMI Allocated Value.......................................................1.3 Securities Act......................................................................4.5 Seller Disclosure Letter.....................................................Article IV Seller Material Adverse Effect.....................................................10.1 Seller Reimbursable Expenses.......................................................10.1 Seller SEC Documents................................................................4.5 Seller Statements...................................................................4.5 Seller Subsidiaries................................................................10.1 Sellers.........................................................................Heading Severance Obligations..............................................................4.11 Shortfall Agreement................................................................10.1 Stanger........................................................................Recitals Stanger Determination Date.........................................................10.1 Stanger Engagement Letter..........................................................10.1 Stanger Opinions...................................................................10.1 Sub LLC.............................................................................2.1 subsidiary.........................................................................10.1 Subsidiary Corporations............................................................10.1 Subsidiary Financial Statements.....................................................4.5 Subsidiary Partnerships............................................................10.1 Summerhill......................................................................Heading Summerhill GP...................................................................Heading Summerhill Note....................................................................7.11 Superior Acquisition Proposal......................................................10.1 Support Agreements.................................................................10.1 Survey Materials...................................................................7.15 Surviving Partnership...............................................................3.1 Takeover Statute...................................................................4.19 Taxes..............................................................................4.10 Terminated Employees................................................................7.6 Terminated Loans....................................................................1.5 Termination Date....................................................................9.1 Threshold Amount....................................................................7.6 Title Commitments...................................................................4.8 Title Insurance Policies............................................................4.8 Title Policies......................................................................8.2
xii
Section ------- Total Allocated Partnership Value...................................................1.3 Total McREMI Allocated Value........................................................1.3 Tranche A Terminated Loans..........................................................1.5 Tranche B Terminated Loans..........................................................1.5 Transaction Documents..............................................................10.1 Transaction Expenses...............................................................10.1 Transitory Partnership..............................................................2.1 TRLPA..............................................................................10.1 Underbudgeted Amount................................................................6.3 Upstream Payables..................................................................10.1 Waiver Letter......................................................................10.1 Whitehall..........................................................................5.2
xiii MASTER AGREEMENT MASTER AGREEMENT (this "Agreement"), dated as of June 24, 1999, by and among WXI/McN Realty L.L.C., a Delaware limited liability company (the "Company"), McNeil Real Estate Fund IX, Ltd., a California limited partnership ("MREF IX"), McNeil Real Estate Fund X, Ltd., a California limited partnership ("MREF X"), McNeil Real Estate Fund XI, Ltd., a California limited partnership ("MREF XI"), McNeil Real Estate Fund XII, Ltd., a California limited partnership ("MREF XII"), McNeil Real Estate Fund XIV, Ltd., a California limited partnership ("MREF XIV"), McNeil Real Estate Fund XV, Ltd., a California limited partnership ("MREF XV"), McNeil Real Estate Fund XX, L.P., a California limited partnership ("MREF XX"), McNeil Real Estate Fund XXI, L.P., a California limited partnership ("MREF XXI"), McNeil Real Estate Fund XXII, L.P., a California limited partnership ("MREF XXII"), McNeil Real Estate Fund XXIII, L.P., a California limited partnership ("MREF XXIII"), McNeil Real Estate Fund XXIV, L.P., a California limited partnership ("MREF XXIV"), McNeil Real Estate Fund XXV, L.P., a California limited partnership ("MREF XXV"), McNeil Real Estate Fund XXVI, L.P., a California limited partnership ("MREF XXVI"), McNeil Real Estate Fund XXVII, L.P., a Delaware limited partnership ("MREF XXVII"), Fairfax Associates II, Ltd., a Florida limited partnership ("Fairfax"), Hearth Hollow Associates, L.P., a Kansas limited partnership ("Hearth Hollow"), McNeil Midwest Properties I, L.P., a Missouri limited partnership ("Midwest Properties"), Regency North Associates, L.P., a Missouri limited partnership ("Regency North"), McNeil Summerhill I, L.P., a Texas limited partnership ("Summerhill" and, together with MREF IX, MREF X, MREF XI, MREF XII, MREF XIV, MREF XV, MREF XX, MREF XXI, MREF XXII, MREF XXIII, MREF XXIV, MREF XXV, MREF XXVI, MREF XXVII, Fairfax, Hearth Hollow, Midwest Properties and Regency North, the "McNeil Partnerships"), McNeil Partners, L.P., a Delaware limited partnership ("MPLP"), McNeil Investors, Inc., a Delaware corporation ("MII"), McNeil Real Estate Management, Inc., a Delaware corporation ("McREMI"), McNeil Summerhill, Inc., a Texas corporation ("Summerhill GP" and, together with MII, MPLP, McREMI and the McNeil Partnerships, "Sellers") and Robert A. McNeil. Certain capitalized and uncapitalized terms used in this Agreement shall have the meanings ascribed to such terms in Section 10.1 hereof. W I T N E S S E T H: WHEREAS, the governing body of each of the parties to this Agreement which are legal entities has determined that it is in the best interests of such party's partners, limited partners, stockholders or members, as the case may be, to enter into this Agreement and the Ancillary Agreements to which it is a party; WHEREAS, subject to the terms and conditions of this Agreement, in respect of each Participating Merging Partnership, (i) the Company or, at the direction of the Company, a subsidiary of the Company will acquire all of the LP Interests in such Participating Merging Partnership in consideration for (A) cash equal to the Participating Partnership Consideration Amount for such Participating Merging Partnership, (B) the Company's repayment of the Tranche A Terminated Loans and the Tranche B Terminated Loans of such Participating Merging Partnership and the Company's payment of certain related fees in accordance with Section 1.5 hereof and (C) the Company's indirect assumption of the Non-Terminated Loans to which the properties of such Participating Merging Partnership are subject, and (ii) a subsidiary of the Company, at the direction of the Company, will acquire all of the GP Interests in such Participating Merging Partnership and certain assets of MPLP relating to such Participating Merging Partnership (including, without limitation, all of the GP Interests and shares of capital stock owned by MPLP in any Seller Subsidiaries of such Participating Merging Partnership) in consideration for the Company's issuance of Company Interests to MPLP (or another designee of the Contributing Partners), and MPLP (or another designee of the Contributing Partners) will receive credit for a capital contribution to the Company in an amount equal to the GP Allocation Amount for such Participating Merging Partnership in accordance with Section 1.1 hereof; WHEREAS, subject to the terms and conditions of this Agreement, if Fairfax or Summerhill or both are a 2 Participating McNeil Partnership, (i) the Company or, at the direction of the Company, a subsidiary of the Company will acquire all of the LP Interests in such Participating McNeil Partnership in consideration for the Company's issuance of Company Interests to MPLP (or another designee of the Contributing Partners), and MPLP (or another designee of the Contributing Partners) will receive credit for a capital contribution to the Company in an amount equal to the LP Allocation Amount for such Participating McNeil Partnership in accordance with Section 1.1 hereof and (ii) a subsidiary of the Company, at the direction of the Company, will acquire all of the GP Interests in such Participating McNeil Partnership and certain assets of MPLP relating to such Participating McNeil Partnership (including, without limitation, all of the GP Interests and shares of capital stock owned by MPLP in any Seller Subsidiaries of such Participating McNeil Partnership) in consideration for the Company's issuance of Company Interests to MPLP (or another designee of the Contributing Partners), and MPLP (or another designee of the Contributing Partners) will receive credit for a capital contribution to the Company in an amount equal to the GP Allocation Amount for such Participating McNeil Partnership in accordance with Section 1.1 hereof; WHEREAS, subject to the terms and conditions of this Agreement, a subsidiary of the Company, at the direction of the Company, will acquire the McREMI Assets in consideration for the Company's issuance of Company Interests to MPLP (or another designee of the Contributing Partners), and MPLP (or another designee of the Contributing Partners) will receive credit for a capital contribution to the Company in an amount equal to the Net McREMI Allocated Value in accordance with Section 1.1 hereof; WHEREAS, subject to the terms and conditions of this Agreement, immediately prior to the Effective Time, in consideration for certain cash contributions (if any) to the Company and certain expenses incurred by Sellers, the Company will issue Company Interests to MPLP (or another designee of the Contributing Partners) in accordance with Section 1.4 hereof, and MPLP (or another designee of the Contributing Partners) will receive credit for a capital contribution to the Company in an amount 3 equal to the sum of the McNeil Cash Contribution (if any), the Capitalized McNeil Expenses and the Additional McNeil Contribution (if any); WHEREAS, subject to the terms and conditions of this Agreement, on the Closing Date and immediately prior to the Effective Time, a distribution will be declared to the limited partners in each Participating McNeil Partnership in an amount in cash equal to the Positive Excess Cash Balance (if any) for such Participating McNeil Partnership; WHEREAS, subject to the terms and conditions of this Agreement, after the date of this Agreement and prior to the Effective Time, Robert A. Stanger & Co., Inc. ("Stanger") will allocate the Aggregate Consideration in accordance with Section 1.3 hereof; and WHEREAS, the consideration being paid by the Company for the LP Interests, the Allocations and certain related matters will be the subject of "fairness" opinions by Stanger confirming that the Aggregate Consideration, the Allocations and such matters are fair from a financial point of view to the limited partners of each of the McNeil Partnerships. NOW, THEREFORE, for and in consideration of the mutual representations, warranties, covenants, agreements and undertakings set forth below, the parties to this Agreement, intending to be legally bound hereby, agree as follows: ARTICLE I THE ACQUISITION Section 1.1 The Acquisition; Consideration. Upon the terms and subject to the conditions set forth in this Agreement, the parties hereto agree that: (a) With respect to each Participating Merging Partnership, subsidiaries of the Company, at the direction of the Company, shall acquire all of the GP Interests in such Participating Merging Partnership, and the Company 4 or, at the direction of the Company, one or more of its subsidiaries shall acquire all of the LP Interests in such Participating Merging Partnership and certain assets of MPLP relating to such Participating Merging Partnership (including without limitation all of the GP Interests and shares of capital stock owned by MPLP in any Seller Subsidiaries of such Participating Merging Partnership). In consideration for all of the GP Interests and all of the LP Interests in such Participating Merging Partnership and such MPLP assets, the Company shall: (i) at the Effective Time, in accordance with Section 3.5 hereof, deliver to the Payment Agent cash in an amount equal to the Participating Partnership Consideration Amount for such Participating Merging Partnership; (ii) immediately prior to the Effective Time, in accordance with Section 2.3 hereof and Section 6.1 of the LLC Agreement, issue to MPLP (or another designee of the Contributing Partners) membership interests in the Company (the "Company Interests"), and MPLP (or another designee of the Contributing Partners) shall receive credit for a capital contribution to the Company in an amount equal to the GP Allocation Amount for such Participating Merging Partnership. Such Company Interests shall upon issuance be duly authorized, validly issued, fully paid and nonassessable and free and clear of all Liens (except as provided in the Indemnification Agreement, the LLC Agreement or the DLLCA), and shall be issued to MPLP (or another designee of the Contributing Partners); and (iii) at the Effective Time, in accordance with Sections 1.5(b) and 1.5(c) hereof, pay all Tranche A Terminated Loans secured by McNeil Partnership Properties of such Participating Merging Partnership and all Prepayment Fees relating thereto and pay all Tranche B Terminated Loans secured by McNeil Partnership Properties of such Participating Merging Partnership. (b) If Fairfax or Summerhill or both are a Participating McNeil Partnership, with respect to each 5 such Participating McNeil Partnership, subsidiaries of the Company, at the direction of the Company, shall acquire all of the GP Interests in such Participating McNeil Partnership, and the Company or, at the direction of the Company, one or more of its subsidiaries shall acquire all of the LP Interests in such Participating McNeil Partnership and certain assets of MPLP relating to such Participating McNeil Partnership (including without limitation all of the GP Interests and shares of capital stock owned by MPLP in any Seller Subsidiaries of such Participating McNeil Partnership). In consideration for all of the GP Interests and all of the LP Interests in such Participating McNeil Partnership and such MPLP assets, the Company shall: (i) immediately prior to the Effective Time, in accordance with Section 2.3 hereof and Section 6.1 of the LLC Agreement, issue to MPLP (or another designee of the Contributing Partners) Company Interests, and MPLP (or another designee of the Contributing Partners) shall receive credit for a capital contribution to the Company in an amount equal to the Participating Partnership Consideration Amount for such Participating McNeil Partnership. Such Company Interests shall upon issuance be duly authorized, validly issued, fully paid and nonassessable and free and clear of all Liens (except as provided in the Indemnification Agreement, the LLC Agreement or the DLLCA), and shall be issued to MPLP (or another designee of the Contributing Partners); (ii) immediately prior to the Effective Time, in accordance with Section 2.3 hereof and Section 6.1 of the LLC Agreement, issue to MPLP (or another designee of the Contributing Partners) Company Interests, and MPLP (or another designee of the Contributing Partners) shall receive credit for a capital contribution to the Company in an amount equal to the GP Allocation Amount for such Participating McNeil Partnership. Such Company Interests shall upon issuance be duly authorized, validly issued, fully paid and nonassessable and free and clear of all Liens (except as provided in the Indemnification Agreement, the LLC Agreement or the 6 DLLCA), and shall be issued to MPLP (or another designee of the Contributing Partners); and (iii) at the Effective Time, in accordance with Sections 1.5(b) and 1.5(c) hereof, pay all Tranche A Terminated Loans secured by McNeil Partnership Properties of such Participating McNeil Partnership and all Prepayment Fees relating thereto and pay all Tranche B Terminated Loans secured by McNeil Partnership Properties of such Participating McNeil Partnership. (c) A subsidiary of the Company, at the direction of the Company, shall acquire all of the McREMI Assets. In consideration for the McREMI Assets, the Company shall issue to MPLP (or another designee of the Contributing Partners) Company Interests, and MPLP (or another designee of the Contributing Partners) shall receive credit for a capital contribution to the Company in an amount equal to the Net McREMI Allocated Value. Such Company Interests shall upon issuance be duly authorized, validly issued, fully paid and nonassessable and free and clear of all Liens (except as provided in the Indemnification Agreement, the LLC Agreement or the DLLCA), and shall be issued to MPLP (or another designee of the Contributing Partners). Section 1.2 Closing. The closing of the Mergers and the other transactions contemplated by this Agreement to take place at the Effective Time (the "Closing") shall take place at a time and on a date (the "Closing Date") to be specified by the parties hereto, which shall be no later than the fifth business day after the later of (i) the date upon which the last unsatisfied or unwaived condition to Closing set forth in Sections 8.1, 8.2 and 8.3 hereof is satisfied or waived and (ii) the Pre-Closing Removal Notice Date, at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, unless another time, date or place is agreed to in writing by Sellers and the Company. 7 Section 1.3 Allocation of the Aggregate Consideration. (a) As promptly as practicable following the date hereof and prior to the Effective Time, Sellers shall cause Stanger to allocate the Aggregate Consideration between (i) certain assets of McREMI, taken as a whole (the "Partial McREMI Allocated Value"), and (ii) all of the McNeil Partnerships, taken as a whole, including certain other assets of MPLP (assuming the contributions in Section 2.2 hereof have been consummated)(the matters in this clause (ii), collectively, the "Total Allocated Partnership Value"). (b) Upon the completion of the allocation described in Section 1.3(a) hereof, the Total Allocated Partnership Value shall be allocated among the McNeil Partnerships (the portion of the Total Allocated Partnership Value attributable to a McNeil Partnership pursuant to this Section 1.3(b), the "Per Partnership Allocated Value" for such McNeil Partnership), by multiplying, with respect to each McNeil Partnership (i) the Total Allocated Partnership Value by (ii) the Partnership Percentage of such McNeil Partnership. (c) As promptly as practicable following the completion of the allocations described in Sections 1.3(a) and 1.3(b) hereof and assuming that the contributions described in Section 2.2 hereof have been consummated, Sellers shall cause Stanger to allocate the Net Per Partnership Allocated Value of each McNeil Partnership among (i) the GP Interests, taken as a whole, in such McNeil Partnership and certain other assets of MPLP (for each McNeil Partnership, the "MPLP Allocation Amount" for such McNeil Partnership) and (ii) each class of LP Interests, taken as a whole, in such McNeil Partnership (for each class of LP Interests in each McNeil Partnership, the "LP Allocation Amount" for such class of LP Interests in such McNeil Partnership). For purposes of this Agreement, "Net Per Partnership Allocated Value" of a McNeil Partnership means an amount equal to the difference determined by subtracting (i) the aggregate outstanding principal amount, determined as of the Stanger Determination Date, of all Existing Loans of such McNeil 8 Partnership from (ii) the Per Partnership Allocated Value of such McNeil Partnership. (d) As promptly as practicable following the completion of the allocations described in Sections 1.3(a), 1.3(b) and 1.3(c) hereof, (i) Sellers shall cause Stanger to render a per unit allocation of the LP Allocation Amount for each LP Interest for each class of LP Interests in each McNeil Partnership (the "Per Unit Allocation Amount" for such LP Interest) and (ii) Sellers shall cause Stanger to allocate the MPLP Allocation Amount for each McNeil Partnership among (1) certain McREMI Assets (the "Second McREMI Allocated Value") and (2) the GP Interests, taken as a whole, in such McNeil Partnership (the "GP Allocation Amount" for such McNeil Partnership). For purposes of this Agreement, the "Total McREMI Allocated Value" shall equal the sum of the Partial McREMI Allocated Value and the aggregate of the Second McREMI Allocated Values. (e) Each party to this Agreement agrees to be unconditionally and irrevocably bound by the Allocations, except for manifest error in the allocation described in Section 1.3(d) hereof. Section 1.4 Additional Consideration. Immediately prior to the Effective Time, in accordance with Sections 2.3 and 7.9(b) hereof and Section 6.1 of the LLC Agreement, the Company shall issue to MPLP (or another designee of the Contributing Partners) Company Interests, and MPLP (or another designee of the Contributing Partners) shall receive credit for a capital contribution to the Company in an amount equal to the sum of (A) the McNeil Cash Contribution (if any), (B) the Capitalized McNeil Expenses and (C) the Additional McNeil Contribution (if any). Such Company Interests shall upon issuance be duly authorized, validly issued, fully paid and nonassessable and free and clear of all Liens (except as provided in the Indemnification Agreement, the LLC Agreement or the DLLCA), and shall be issued to MPLP (or another designee of the Contributing Partners). Nothing in this Section 1.4 shall offset, or affect in any manner, the Company Interests being issued to MPLP (or another designee of the Contributing Partners) pursuant to Section 1.1 hereof. 9 Section 1.5 Indebtedness. (a) Schedule 1.5 of the Seller Disclosure Letter sets forth all of the indebtedness of each of the McNeil Partnerships, which indebtedness is secured by the McNeil Partnership Properties (the "Existing Loans"), the outstanding principal balance thereof, all accrued and unpaid interest thereon, the interest rate thereof and the remaining term thereof, in each case, as of the date specified on such Schedule 1.5. (b) Notwithstanding anything to the contrary in this Agreement, the Company shall repay at the Effective Time (including all accrued but unpaid interest thereon through to the Effective Time) all of the Existing Loans set forth on Annex A hereto which are secured by McNeil Partnership Properties of the Participating McNeil Partnerships (the "Tranche A Terminated Loans"). Notwithstanding anything to the contrary in this Agreement, the Company shall pay at the Effective Time all Prepayment Fees relating to the Tranche A Terminated Loans. For purposes of this Agreement, the term "Prepayment Fees" means any fees, costs and premiums charged by the lender of an Existing Loan in connection with its prepayment. (c) Notwithstanding anything to the contrary in this Agreement, the Company shall repay at the Effective Time (including all accrued but unpaid interest thereon through to the Effective Time) all of the Existing Loans set forth on Annex B hereto which are secured by McNeil Partnership Properties of the Participating McNeil Partnerships (the "Tranche B Terminated Loans" and, together with the Tranche A Terminated Loans, the "Terminated Loans"). Notwithstanding anything to the contrary in this Agreement, each Participating McNeil Partnership shall pay at the Effective Time all Prepayment Fees relating to the Tranche B Terminated Loans secured by McNeil Partnership Properties of such Participating McNeil Partnership. (d) Other than the Terminated Loans, all Existing Loans outstanding immediately prior to the Effective Time shall continue to remain outstanding at and 10 after the Effective Time until their expiration or prepayment (all Existing Loans other than the Terminated Loans, the "Non-Terminated Loans"). (e) Notwithstanding anything to the contrary in this Agreement, each Participating McNeil Partnership shall pay at the Effective Time all Assumption Fees relating to those Non-Terminated Loans set forth on Annex C hereto which are secured by McNeil Partnership Properties of such Participating McNeil Partnership in an amount with respect to each such Non-Terminated Loan (the aggregate amount of all Assumption Fees payable in respect of all such Non-Terminated Loans, the "Paid Assumption Fees") equal to the lesser of (1) the Assumption Fees for such Non-Terminated Loan and (2) the Prepayment Fees for such Non-Terminated Loan; provided, however, that the Company shall pay a portion of such Assumption Fees equal to the lesser of (1) one-half of the Paid Assumption Fees and (2) two hundred fifty thousand dollars ($250,000). For purposes of this Agreement, the term "Assumption Fees" means any fees, costs and premiums charged by the lender of a Non-Terminated Loan as a result of the change of control of the GP Interests of any Participating McNeil Partnership, the change in the ownership of a majority of the LP Interests in any Participating McNeil Partnership, the change (or change in control) of the management company for the properties of any Participating McNeil Partnership, the Merger in respect of such Participating McNeil Partnership or the other transactions expressly contemplated by this Agreement with respect to such Participating McNeil Partnership. Section 1.6 Reservation of Right to Revise Transaction. If Sellers and the Company agree in writing, the method of effecting the business combination between any one or more Sellers and the Company may be changed, and each party hereto shall cooperate in such efforts, including to provide for different forms of merger; provided, however, that no such change shall (i) alter or change the amount or kind of consideration to be received by holders of LP Interests and holders of GP Interests in the Participating McNeil Partnerships, (ii) adversely affect the proposed tax treatment to holders of LP Interests and holders of GP Interests in the Participating McNeil Partnerships or (iii) materially delay the 11 consummation of any of the Mergers or the other transactions contemplated by this Agreement. ARTICLE II TRANSACTIONS RELATED TO THE MERGERS Section 2.1 Certain Company Acquisition Vehicles. (a) Prior to the consummation of any of the transactions contemplated by Section 2.3(a) hereof, the Company shall (or, in only the case of clause (i) below, may) form or cause to be formed the following entities: (i) a single Delaware limited liability company (the "Sub LLC") which prior to the Effective Time shall have as its sole member the Company and at and after the Effective Time shall have as its members the Company and after the Effective Time may have as its members one or more third persons; (ii) separate Delaware limited liability companies (each, a "New GP LLC") each of which shall have as its sole member the Company or the Sub LLC; and, a New GP LLC shall be the sole general partner, together with the Company or the Sub LLC as the sole limited partner, of the Transitory Partnership for each Participating Merging Partnership; (iii) for each Participating Merging Partnership, a separate limited partnership (each, a "Transitory Partnership") formed in the state of formation of such Participating Merging Partnership, as set forth on Schedule 4.1(c) of the Seller Disclosure Letter, for which its corresponding New GP LLC shall be its sole general partner and for which the Company or the Sub LLC shall be its sole limited partner; and (iv) an additional single Delaware limited liability company (the "Management LLC" and, together with the Sub LLC (if the Sub LLC is formed) and the 12 New GP LLCs, the "Company LLCs") which shall have as its sole member the Company or the Sub LLC. (b) On or prior to the Effective Time, no person shall have any interest in the Company, any Company LLC or any Transitory Partnership except as expressly provided in this Agreement or, in the case of the Sub LLC, except as expressly provided in the limited liability company operating agreement of the Sub LLC. Section 2.2 Contributions to MPLP. Following the Allocations of the Aggregate Consideration pursuant to Section 1.3 hereof and following the holding of all of the McNeil Limited Partner Meetings, but prior to the Effective Time: (a) if Fairfax is a Participating McNeil Partnership, then Robert A. McNeil shall contribute, transfer and assign to MPLP, free and clear of all Liens, (i) all of the GP Interests in Fairfax owned by him and (ii) all of the LP Interests in Fairfax owned by him (which shall not include any rights to receive any Positive Excess Cash Balance). In consideration of the contribution of such GP Interests and such LP Interests, MPLP shall issue LP Interests in MPLP ("MPLP Interests") in such names and denominations as Robert A. McNeil may request. Such MPLP Interests shall upon issuance be duly authorized, validly issued, fully paid and nonassessable and free and clear of all Liens; (b) if Regency North is a Participating McNeil Partnership, then Robert A. McNeil shall contribute, transfer and assign to MPLP, free and clear of all Liens, all of the GP Interests in Regency North owned by him. In consideration of the contribution of such GP Interests, MPLP shall issue MPLP Interests in such names and denominations as Robert A. McNeil may request. Such MPLP Interests shall upon issuance be duly authorized, validly issued, fully paid and nonassessable and free and clear of all Liens; (c) if Summerhill is a Participating McNeil Partnership, then (i) Summerhill GP shall contribute, transfer and assign to MPLP, free and clear of all Liens, all of the GP Interests in Summerhill owned by Summerhill 13 GP, and (ii) Robert A. McNeil and Carole J. McNeil shall contribute, transfer and assign to MPLP, free and clear of all Liens, all of the LP Interests in Summerhill (which shall not include any rights to receive any Positive Excess Cash Balance). In consideration of the contribution of such GP Interests and such LP Interests, MPLP shall issue MPLP Interests in such names and denominations as Robert A. McNeil and Carole J. McNeil may request. Such MPLP Interests shall upon issuance be duly authorized, validly issued, fully paid and nonassessable and free and clear of all Liens; and (d) McREMI shall contribute, transfer and assign to MPLP, free and clear of all Liens, the McREMI Assets. In consideration of the contribution of the McREMI Assets, MPLP shall issue MPLP Interests in such names and denominations as McREMI may request. Such MPLP Interests shall upon issuance be duly authorized, validly issued, fully paid and nonassessable and free and clear of all Liens. (e) All contributions, transfers and assignments described in this Section 2.2 shall be effected pursuant to an instrument of assignment in the form of the Assignment Agreement. Section 2.3 Contributions by MPLP. (a) Following the contributions described in Section 2.2 hereof: (i) immediately prior to the Effective Time, at the direction of the Company, MPLP shall contribute, transfer and assign to the applicable New GP LLC, free and clear of all Liens, with the delivery of any applicable certificate or power of transfer (A) all of the GP Interests owned by MPLP in the Participating McNeil Partnership corresponding to such New GP LLC, (B) all of the GP Interests and shares of capital stock owned by MPLP in any Seller Subsidiaries of the Participating McNeil Partnership corresponding to such New GP LLC, (C) all rights of MPLP related to the GP Interests in the Participating McNeil Partnership corresponding to such New GP LLC (other than the Excluded MPLP Assets and the McREMI 14 Assets) and (D) all of MPLP's rights, title and interest in and to the other assets of MPLP (other than the Excluded MPLP Assets and the McREMI Assets) (clauses (A) through (D), collectively, the "MPLP Contributions"). In consideration of the contribution, transfer and assignment of the MPLP Contributions, the Company shall issue Company Interests to MPLP (or another designee of the Contributing Partners) in accordance with Section 1.1 hereof; (ii) immediately prior to the Effective Time, at the direction of the Company, MPLP shall contribute, transfer and assign to the Company or the Sub LLC, free and clear of all Liens, (A) all of the LP Interests owned by MPLP in Fairfax if Fairfax is a Participating McNeil Partnership and (B) all of the LP Interests owned by MPLP in Summerhill if Summerhill is a Participating McNeil Partnership. In consideration of the contribution, transfer and assignment of such LP Interests, the Company shall issue Company Interests to MPLP (or another designee of the Contributing Partners) in accordance with Section 1.1 hereof; (iii) immediately prior to the Effective Time, at the direction of the Company, MPLP shall contribute, transfer and assign to Management LLC, free and clear of all Liens, the McREMI Assets. In consideration of the contribution, transfer and assignment of the McREMI Assets to Management LLC, the Company shall issue Company Interests to MPLP (or another designee of the Contributing Partners) in accordance with Section 1.1 hereof; (iv) at the Effective Time, in the event that the Allocated McNeil Value is less than the First McNeil Threshold, MPLP (or another designee of the Contributing Partners) shall contribute to the Company cash in an amount equal to the difference (such difference, the "McNeil Cash Contribution") determined by subtracting the Allocated McNeil Value from the First McNeil Threshold. In consideration of the contribution of the McNeil Cash Contribution, the Company shall issue Company Interests to MPLP (or 15 another designee of the Contributing Partners) in accordance with Section 1.4 hereof; and (v) at the Effective Time, in the event that the sum of the Allocated McNeil Value and the McNeil Cash Contribution is less than one hundred million dollars ($100,000,000), MPLP (or another designee of the Contributing Partners) shall have the right, in its sole discretion, but not the obligation, to contribute to the Company, upon at least thirty (30) days notice to the Company prior to the estimated Closing Date, additional cash (the "Additional McNeil Contribution") in an aggregate amount not to exceed the difference determined by subtracting (i) an amount equal to the sum of the Allocated McNeil Value and the McNeil Cash Contribution (if any) from (ii) one hundred million dollars ($100,000,000). In consideration of the contribution of the Additional McNeil Contribution, the Company shall issue Company Interests to MPLP (or another designee of the Contributing Partners) in accordance with Section 1.4 hereof. (b) Immediately following the MPLP Contributions, each applicable New GP LLC shall be the sole general partner of its corresponding Participating McNeil Partnership, and, immediately following the contributions, transfers and assignments described in Section 2.3(a)(ii) hereof, the Company or the Sub LLC shall be the sole limited partner of each of Fairfax and Summerhill. Immediately following the contributions, transfers and assignments described in Section 2.3(a) hereof, none of McREMI, MII, MPLP, Summerhill GP, Robert A. McNeil or Carole J. McNeil shall have any interest as a partner, stockholder or other equity holder in any Participating McNeil Partnership or any Seller Subsidiary of a Participating McNeil Partnership, other than as holders of LP Interests in the Participating Merging Partnerships and other than as a result of the beneficial ownership of Company Interests by MPLP (or another designee of the Contributing Partners). (c) All contributions, transfers and assignments described in Sections 2.3(a)(i), 2.3(a)(ii) and 2.3(a)(iii) hereof shall be effected pursuant to an 16 instrument of assignment in the form of the Assignment Agreement. Section 2.4 Pre-Closing Distribution. (a) No less than ten (10) business days prior to the estimated Closing Date, MPLP shall cause to be prepared and delivered to the Company an unaudited balance sheet for each McNeil Partnership as of the last day (which shall be a date within forty-five (45) days of the estimated Closing Date) of the most recently completed fiscal month for which an unaudited balance sheet for such McNeil Partnership is available (each, a "Preliminary Pre-Closing Balance Sheet"). The Preliminary Pre-Closing Balance Sheet for each McNeil Partnership shall be prepared in accordance with generally accepted accounting principles ("GAAP") applied consistently with past practice. The Preliminary Pre-Closing Balance Sheet for each McNeil Partnership shall be accompanied by a schedule setting forth the Preliminary Excess Cash Balance for such McNeil Partnership in the form attached as Annex D hereto (the "Preliminary Excess Cash Balance Schedule"), which shall be prepared in accordance with the methodology and principles set forth on Annex D hereto. (b)(i) Within four (4) business days (the "Objection Period") after the delivery by MPLP to the Company of the Preliminary Pre-Closing Balance Sheet and Preliminary Excess Cash Balance Schedule for a McNeil Partnership and all relevant books and records and any work papers (including those of Arthur Andersen LLP, Sellers' accountants) relating to the preparation of such Preliminary Pre-Closing Balance Sheet and such Preliminary Excess Cash Balance Schedule (including unaudited statements of operations and cash flows (prepared in accordance with GAAP applied consistently with past practice), bills, receipts and other written correspondence evidencing any amounts of Transaction Expenses), the Company and its accountants shall complete their review of such Preliminary Pre-Closing Balance Sheet and such Preliminary Excess Cash Balance Schedule. Sellers shall make readily available to the Company, on a timely basis during the Objection Period, all relevant books and records and any work papers 17 (including those of Arthur Andersen LLP, Sellers' accountants) relating to the preparation of the Preliminary Pre-Closing Balance Sheets and the Preliminary Excess Cash Balance Schedules (including unaudited statements of operations and cash flows, bills, receipts and other written correspondence evidencing any amounts of Transaction Expenses) and all other items reasonably requested by the Company. In addition, Sellers and the Company shall make their relevant personnel reasonably available to each other to respond to inquiries relating to any of the materials described in the preceding sentence or any matters raised by the Company. On or before the last day of the Objection Period, the Company shall deliver to MPLP a reasonably detailed written statement of any objections or disagreements, including the reasons therefor, with respect to any Preliminary Pre-Closing Balance Sheet and Preliminary Excess Cash Balance Schedule (the "Objection Statement") (it being understood that neither the inclusion on any Preliminary Excess Cash Balance Schedule of any line item not listed on Annex D hereto nor the exclusion from any Preliminary Excess Cash Balance Schedule of any line item listed on Annex D hereto shall be the subject of any such objection or disagreement). If the Company does not provide MPLP with the Objection Statement with respect to the Preliminary Pre-Closing Balance Sheet or the Preliminary Excess Cash Balance Schedule with respect to a McNeil Partnership within the Objection Period, the parties hereto shall be deemed to have unconditionally accepted and agreed to, and shall be unconditionally bound by, the Preliminary Pre-Closing Balance Sheet, the Preliminary Excess Cash Balance Schedule and the Preliminary Excess Cash Balance set forth on such Preliminary Excess Cash Balance Schedule, in each case, with respect to such McNeil Partnership, other than with respect to the Specified Transaction Expenses which shall be updated to a subsequent date in accordance with Note 17 to the Excess Cash Balance Schedule. (ii) In the event that the Company delivers to MPLP an Objection Statement with respect to a Preliminary Pre-Closing Balance Sheet or the 18 Preliminary Excess Cash Balance Schedule with respect to a McNeil Partnership within the Objection Period, the Company and MPLP shall have two (2) business days (the "Resolution Period") following the receipt by MPLP of such Objection Statement to resolve any disagreements set forth in the Objection Statement. If the Company and MPLP are unable to resolve all of their disagreements set forth in the Objection Statement within the Resolution Period, the Company and MPLP shall, promptly following the Resolution Period, submit their remaining differences to a nationally recognized firm of independent public accountants which shall be chosen by mutual agreement of the Company and MPLP or, in the event the Company and MPLP are unable to agree, a firm chosen jointly by the accountants of each of them (the "CPA Firm"). The CPA Firm, acting as experts and not as arbitrators, shall determine, by applying the methodology and principles set forth on Annex D hereto, and only with respect to the remaining differences so submitted, whether and to what extent, if any, the Preliminary Pre-Closing Balance Sheet or the amounts set forth on the Preliminary Excess Cash Balance Schedule should be revised. The Company and MPLP shall instruct the CPA Firm to deliver its written determination to the Company and MPLP no later than two (2) business days after such remaining differences are referred to the CPA Firm (unless the Company and MPLP agree in writing, upon request of the CPA Firm, to provide the CPA Firm with additional time to make its determination); provided, however, that such determination shall be made no later than the day immediately prior to the estimated Closing Date. The CPA Firm's determination relating to each Preliminary Pre-Closing Balance Sheet and each Preliminary Excess Cash Balance Schedule submitted to it shall be conclusive and binding upon the parties hereto. The fees and disbursements of the CPA Firm shall be shared equally by the Company, on the one hand, and Sellers, on the other hand. Sellers shall make readily available to the CPA Firm, on a timely basis during the period the CPA Firm is making its determination pursuant to this Section 2.4(b)(ii), all relevant books and records and any work papers (including those of Arthur Andersen LLP, Sellers' 19 accountants) relating to the preparation of the Preliminary Pre-Closing Balance Sheets and Preliminary Excess Cash Balance Schedules (including unaudited statements of operations and cash flows, bills, receipts and other written correspondence evidencing any amounts of Transaction Expenses) and all other items reasonably requested by the CPA Firm. In addition, Sellers and the Company shall make their relevant personnel reasonably available to the CPA Firm and each other to respond to any inquiries relating to the disagreements submitted to the CPA Firm. (iii) Each Preliminary Pre-Closing Balance Sheet, Preliminary Excess Cash Balance Schedule and Preliminary Excess Cash Balance set forth on such Preliminary Excess Cash Balance Schedule after having been deemed to be accepted by the parties hereto pursuant to the last sentence of Section 2.4(b)(i) hereof or the CPA Firm's determinations in respect thereof pursuant to Section 2.4(b)(ii) hereof are, respectively, referred to herein as the "Pre-Closing Balance Sheet," "Excess Cash Balance Schedule" and the "Excess Cash Balance." (c) For each Participating McNeil Partnership for which the Excess Cash Balance is greater than zero (a "Positive Excess Cash Balance"), MPLP shall cause such Participating McNeil Partnership, on the Closing Date and immediately prior to the consummation of any of the transactions contemplated by Section 2.3(a) hereof, to irrevocably declare a cash distribution, in an amount equal to the Positive Excess Cash Balance for such Participating McNeil Partnership, to the persons who were limited partners (prior to the consummation of any of the transactions contemplated by Section 2.3(a) hereof) of such Participating McNeil Partnership as a special distribution in accordance with the limited partnership agreement of such Participating McNeil Partnership. For each Participating McNeil Partnership for which the Excess Cash Balance is less than zero, the "Negative Excess Cash Balance" in respect of such Participating McNeil Partnership shall be an amount equal to such negative Excess Cash Balance. The Company and the Participating McNeil Partnerships agree to take such actions as may be 20 necessary to effect the distributions contemplated by this Section 2.4(c) concurrently with the payment of the Merger Consideration to former holders of LP Interests pursuant to Section 3.5 hereof. (d) On and following the date of the Preliminary Pre-Closing Balance Sheet for a McNeil Partnership, such McNeil Partnership shall not declare any distributions with respect to any GP Interest or LP Interest in such McNeil Partnership prior to the Effective Time, except for the distributions contemplated by Section 2.4(c) hereof in the event such McNeil Partnership is a Participating McNeil Partnership and except for Post-Allocation Upstream Payables accruing through to the Closing Date. (e) The parties hereto acknowledge and agree that immediately upon the declaration of the Positive Excess Cash Balance, the amount of such special distribution shall become final and binding upon the parties hereto and shall not be offset against any other amounts due, payable or owing by any person under this Agreement or the Ancillary Agreements (regardless of any subsequent recalculation of the Excess Cash Balance). (f) If the estimated Closing Date is delayed for more than ten (10) business days and such estimated Closing Date falls more than forty-five days after the last date of the fiscal month for which the preceding Preliminary Pre-Closing Balance Sheet and Preliminary Pre-Closing Excess Cash Schedule for a McNeil Partnership were prepared, MPLP and the Company shall each have the right to cause to be reprepared and redelivered, in accordance with Section 2.4(a) hereof, a new Preliminary Pre-Closing Balance Sheet (the "New Preliminary Pre-Closing Balance Sheet") and a new Preliminary Excess Cash Balance Schedule (the "New Preliminary Excess Cash Balance Schedule"), setting forth a new Preliminary Excess Cash Balance (the "New Preliminary Excess Cash Balance"), for such McNeil Partnership. Each such New Preliminary Pre-Closing Balance Sheet, New Preliminary Excess Cash Balance Schedule and New Preliminary Excess Cash Balance shall be subject to the provisions of Sections 2.4(a) through 2.4(e) hereof and shall become final and binding on the parties hereto in accordance with Section 2.4(b) hereof; provided, however, that each party hereto acknowledges and 21 agrees that none of the preparation, delivery, acceptance or resolution of disagreements with respect to any New Preliminary Pre-Closing Balance Sheet, New Preliminary Excess Cash Balance Schedule or New Preliminary Excess Cash Balance shall delay the Closing if the Closing would otherwise be required to occur pursuant to the terms of this Agreement had the preparation and delivery of such items not been requested. If the Closing would otherwise be required to occur, or has otherwise occurred prior to the time at which the New Preliminary Pre-Closing Balance Sheet, New Preliminary Excess Cash Balance Schedule and New Preliminary Excess Cash Balance for a McNeil Partnership becomes final and binding on the parties hereto in accordance with Section 2.4(b) hereof, the parties acknowledge and agree that they shall be bound by the immediately preceding Pre-Closing Balance Sheet, Excess Cash Balance Schedule and Excess Cash Balance for such McNeil Partnership which has become final and binding on the parties hereto in accordance with Section 2.4(b) hereof. Without limiting the foregoing, in the event that prior to the Closing a New Preliminary Pre-Closing Balance Sheet, a New Preliminary Excess Cash Balance Schedule and a New Preliminary Excess Cash Balance for a McNeil Partnership have been deemed to be accepted by all parties hereto pursuant to the last sentence of Section 2.4(b)(i) hereof or all disputes in connection therewith are resolved pursuant to Section 2.4(b)(ii) hereof, respectively, references herein to the "Pre-Closing Balance Sheet," the "Excess Cash Balance Schedule" and the "Excess Cash Balance" for such McNeil Partnership shall be deemed to refer to such New Preliminary Pre-Closing Balance Sheet, such New Excess Cash Balance Schedule and such New Excess Cash Balance, respectively. (g) Notwithstanding anything to the contrary set forth in this Agreement, in connection with the matters contemplated by this Section 2.4, the parties hereto acknowledge and agree that Sellers shall not be required to deliver any work papers of Arthur Andersen LLP if the recipients thereof do not execute a confidentiality agreement substantially comparable to the one entered into by representatives of the Company prior to the date hereof. 22 ARTICLE III THE MERGERS Section 3.1 The Mergers. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the applicable Governing Laws, the Transitory Partnership corresponding to each Participating Merging Partnership shall merge with and into its respective Participating Merging Partnership at the Effective Time. Following the Effective Time, (i) each such Participating Merging Partnership shall be the surviving partnership (the "Surviving Partnership") in such merger and (ii) the applicable New GP LLC that was the general partner of such Participating Merging Partnership immediately following the MPLP Contributions and immediately prior to the Effective Time shall be the sole general partner of its corresponding Surviving Partnership and the Company or the Sub LLC shall be the sole limited partner of each Surviving Partnership. The mergers described in this Section 3.1 are collectively referred to in this Agreement as the "Mergers." Section 3.2 Effective Time. (a) Subject to the terms and conditions set forth in this Agreement, for each Participating Merging Partnership and its respective Transitory Partnership, a certificate of merger, articles of merger, certificate of cancellation, statement of merger or such other documents as may be required by the Governing Law applicable to such Participating Merging Partnership and its corresponding Transitory Partnership (each, a "Merger Certificate"), shall be duly executed and acknowledged by the applicable New GP LLC (or its designee), as the general partner of such Participating Merging Partnership and its corresponding Transitory Partnership, and thereafter delivered to the Secretary of State of the state of formation of such Participating Merging Partnership, as set forth on Schedule 4.1(c) of the Seller Disclosure Letter. (b) The Mergers shall become effective at such time on the Closing Date (or such later time as the parties may agree upon and set forth in each of the Merger 23 Certificates) (the "Effective Time" in respect of each such Merger) as specified in properly executed and certified copies of the Merger Certificate for each Participating Merging Partnership and its corresponding Transitory Partnership are duly filed with the Secretary of State of the state of formation of such Participating Merging Partnership, as set forth on Schedule 4.1(c) of the Seller Disclosure Letter, in accordance with the Governing Law applicable to each such Merger. To the extent permitted by the applicable Governing Law, each Merger Certificate shall be so filed at least one (1) business day prior to the Closing Date. Section 3.3 Effects of the Mergers; LLC Agreement. (a) Each of the Mergers shall have the effects set forth under the Governing Law applicable to such Merger. (b) At the Effective Time, the Original LLC Agreement shall be amended and restated in its entirety in the form of the LLC Agreement. The LLC Agreement shall be the organizational document of the Company from and after the Effective Time, until thereafter amended as provided therein or pursuant to applicable law. Section 3.4 Conversion of Partnership Interests. As of the Effective Time, by virtue of the Mergers and without any action on the part of any party hereto, any of the Transitory Partnerships, any Company LLC, any holder of any LP Interest or any holder of any GP Interest: (a) Each LP Interest of each class of LP Interests in each of the Participating Merging Partnerships outstanding immediately prior to the Effective Time shall be converted into and shall become the right to receive cash (without interest thereon) in an amount equal to the Per Unit Consideration Amount to which such LP Interest is entitled under the respective limited partnership agreement of such Participating Merging Partnership upon surrender of the Certificate(s) representing such LP Interest for cancellation (or, in the case of an LP Interest in a Participating Merging 24 Partnership which is a Merging Private Partnership, upon the delivery of the affidavit made in accordance with Section 3.5(d) hereof) to the Payment Agent. As of the Effective Time, each such LP Interest in each of the Participating Merging Partnerships shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of an LP Interest shall cease to have any rights with respect thereto, except the right to receive the Per Unit Consideration Amount and the Positive Excess Cash Balance (if any) in respect of such Participating Merging Partnership, in each case, without interest thereon, to which such LP Interest is entitled. (b) As of the Effective Time, each LP Interest in each Transitory Partnership issued and outstanding as of the Effective Time shall be converted into one fully issued and nonassessable LP Interest in the Surviving Partnership in each Merger between such Transitory Partnership and its corresponding Participating Merging Partnership. (c) Each GP Interest in each of the Participating Merging Partnerships outstanding immediately prior to the Effective Time shall be converted into and shall become one fully paid and nonassessable GP Interest in the Surviving Partnership in each Merger. As of the Effective Time, each GP Interest in each Transitory Partnership shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of such GP Interests shall cease to have any rights in respect thereto. Section 3.5 Payment of Merger Consideration. (a) At the Effective Time, as required by Section 3.5(b) hereof, the Company shall deposit with such agent or agents as may be appointed by the Company (the "Payment Agent") for the benefit of the holders of LP Interests in the Participating Merging Partnerships, cash in an aggregate amount equal to the sum of the Participating Partnership Consideration Amounts for each Participating McNeil Partnership (such sum, the "Merger Consideration," and the Merger Consideration deposited 25 with the Payment Agent is referred to as the "Merger Fund"). (b) Immediately following the Effective Time, the Payment Agent shall mail to each holder of record of certificate(s) which immediately prior to the Effective Time represented outstanding LP Interests in the Participating Merging Partnerships (the "Certificates") and which were converted into the right to receive the Merger Consideration pursuant to Section 3.4 hereof (or, in the case of any Participating Merging Partnership which is a Merging Private Partnership, each holder of record of an LP Interest in such Merging Private Partnership): (i) a letter of transmittal (which shall specify that delivery shall be effected and risk of loss and title to the LP Interests shall pass to the Company only upon delivery of the Certificates (or, in the case of any Participating Merging Partnership which is a Merging Private Partnership, upon the delivery by such holder of record of appropriate documentation and the delivery by MPLP of the affidavit specified in Section 3.5(d) hereof) to the Payment Agent and shall be in such form and have such other provisions as the Company may reasonably specify); and (ii) instructions for effecting the surrender of the Certificates (or delivery of such appropriate documentation and affidavit) in exchange for the Per Unit Consideration Amount which such holder has the right to receive pursuant to Section 3.4 hereof (taking into account different classes (if any) of LP Interests in such Participating Merging Partnership). Upon surrender of a Certificate for cancellation (or delivery of such appropriate documentation and affidavit) to the Payment Agent together with such letter of transmittal duly executed, the holder of such LP Interests shall be entitled to receive in exchange therefor a check representing the Per Unit Consideration Amount which such holder has the right to receive pursuant to Section 3.4 hereof, and any Certificates so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of LP Interests in a Participating Merging Partnership which is not registered in the transfer records of such Participating Merging Partnership, payment of the Per Unit Consideration Amount which such holder has the right to receive pursuant to Section 3.4 hereof may be made to a transferee if the Certificate representing such 26 LP Interests (or, in the case of any Participating Merging Partnership which is a Merging Private Partnership, if the affidavit specified in Section 3.5(d) hereof and a suitable bond or indemnity) is presented to the Payment Agent accompanied by all documents required to evidence and effect such transfer. Until surrendered as contemplated by this Section 3.5, each Certificate shall be deemed at and after the Effective Time to represent only the right to receive upon such Certificate's surrender the Per Unit Consideration Amount which the holder of such Certificate has the right to receive pursuant to Section 3.4 hereof. The Surviving Partnerships shall have the right to, and shall, take all steps necessary to ensure compliance, and shall comply, with all withholding obligations with respect to any foreign holders of LP Interests in connection with the payment of any Per Unit Consideration Amount. No interest will be paid or will accrue on any Per Unit Consideration Amount upon the surrender of any Certificate. (c) In the event that any Certificate shall have been lost, stolen or destroyed, the Payment Agent shall issue in exchange therefor, upon the making of an affidavit of that fact by the holder thereof, the Per Unit Consideration Amount which the holder of such Certificate has the right to receive pursuant to Section 3.4 hereof; provided, however, that the Payment Agent shall (unless the Company determines otherwise) require the delivery of a suitable bond or indemnity, the form of which bond or indemnity shall be acceptable to the Company. (d) In the case of LP Interests in the Participating Merging Partnerships which are Merging Private Partnerships, the Payment Agent shall issue in exchange therefor, upon the making of an affidavit as to the identity of each owner of LP Interests in such Merging Private Partnership by MPLP (in the case of Hearth Hollow and Midwest Properties) and Robert A. McNeil (in the case of Regency North), the Per Unit Consideration Amount which the holder of LP Interests therein has the right to receive pursuant to Section 3.4 hereof. (e) All Merger Consideration paid upon the surrender for exchange of LP Interests in the Participating Merging Partnerships in accordance with the 27 terms of this Agreement shall be deemed to have been paid in full satisfaction of all rights pertaining to such LP Interests; provided, however, that notwithstanding anything to the contrary contained in this Agreement, the Surviving Partnership in each of the Mergers shall continue to have an obligation following the Effective Time (i) to pay distributions with a record date prior to the Effective Time which may have been declared by a Participating Merging Partnership on LP Interests in such Participating McNeil Partnership in accordance with the terms of this Agreement or declared prior to the date of this Agreement and, in either case, which remain unpaid at the Effective Time and (ii) to distribute to the former limited partners of each Participating Merging Partnership the Positive Excess Cash Balance (if any) in respect of such Participating Merging Partnership in accordance with Section 2.4(c) hereof. From and after the Effective Time, there shall be no further registration of transfers on the transfer books of the Surviving Partnerships of LP Interests in the Participating Merging Partnerships which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Partnerships for any reason, such Certificates shall be canceled and exchanged as provided in this Section 3.5. If, after the Effective Time, owners of LP Interests in any Merging Private Partnerships who are identified on the affidavits described in Section 3.5(d) hereof request payment in respect of such LP Interests from the Surviving Partnerships for any reason, the Per Unit Consideration Amount which such owner has the right to receive pursuant to Section 3.4 hereof and which has not theretofore been paid to such owner shall be delivered to such owner in exchange for such LP Interests. (f) None of the Payment Agent, the parties to this Agreement, the Transitory Partnerships, the Company LLCs or any of their respective affiliates shall be liable to any holder of an LP Interest in a Participating Merging Partnership for cash from the Merger Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (g) Any portion of the Merger Fund which remains undistributed to the holders of LP Interests in the Participating Merging Partnerships for a period of six 28 months after the Effective Time shall be delivered to the Company, upon demand of the Company, and any such holder who has not theretofore complied with this Section 3.5 shall thereafter look only to the Company for payment of the Per Unit Consideration Amount which such holder had the right to receive pursuant to Section 3.4 hereof, and any unpaid distributions, subject to applicable escheat and other similar laws. The McNeil Partnerships shall pay all charges and expenses relating to the Mergers, and the Company shall reimburse the McNeil Partnerships, on the Closing Date and immediately prior to the distributions contemplated by Section 2.4(c) hereof, in an amount in cash equal to one-half of the amount of the charges and expenses relating to the Payment Agent (the "Merger Expense Reimbursement"). ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS Except as set forth in the disclosure letter delivered by Sellers to the Company prior to the execution of this Agreement (the "Seller Disclosure Letter") and referenced in the particular section of this Agreement to which exception is being taken, (i) MPLP, in its capacity as general partner of each of the McNeil Partnerships (other than Fairfax, Regency North and Summerhill), represents and warrants to the Company as of the date of this Agreement as to each of the McNeil Partnerships (other than Fairfax, Regency North and Summerhill) and such McNeil Partnership's respective Seller Subsidiaries (if any), (ii) MII, in its capacity as general partner of MPLP, represents and warrants to the Company as of the date of this Agreement as to MPLP and as to each of the McNeil Partnerships (other than Fairfax, Regency North and Summerhill) and such McNeil Partnership's respective Seller Subsidiaries (if any), (iii) each McNeil Partnership severally (and not jointly) represents and warrants to the Company as of the date of this Agreement as to itself and its respective Seller Subsidiaries (if any), (iv) Robert A. McNeil, in his capacity as the general partner of Fairfax and a general partner of Regency North, represents and warrants to the Company as of the date of this Agreement as to each of Fairfax and 29 Regency North and Regency North's Seller Subsidiaries, (v) Fairfax represents and warrants to the Company as of the date of this Agreement as to itself, (vi) Regency North represents and warrants to the Company as of the date of this Agreement as to itself and its Seller Subsidiaries, (vii) Summerhill GP, in its capacity as general partner of Summerhill, represents and warrants to the Company as of the date of this Agreement as to Summerhill, (viii) Summerhill represents and warrants to the Company as of the date of this Agreement as to itself and its Seller Subsidiaries, (ix) MPLP represents and warrants to the Company as of the date of this Agreement as to itself, (x) MII represents and warrants to the Company as of the date of this Agreement as to itself, (xi) Summerhill GP represents and warrants to the Company as of the date of this Agreement as to itself and (xii) McREMI represents and warrants to the Company as of the date of this Agreement as to itself, in each case, as follows: Section 4.1 Organization, Standing and Power. (a) Each of McREMI and MII is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and Summerhill GP is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Texas, and each of McREMI, MII and Summerhill GP has the requisite corporate power and authority to carry on its business as now being conducted and is duly qualified or licensed to do business as a foreign corporation and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or to be in good standing, individually or in the aggregate, would not have a Seller Material Adverse Effect. (b) MPLP is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware, has the requisite partnership power and authority to carry on its business as now being conducted and is duly qualified or licensed to do business as a foreign limited partnership and is in good standing 30 (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or to be in good standing, individually or in the aggregate, would not have a Seller Material Adverse Effect. (c) Each McNeil Partnership is a limited partnership duly formed, validly existing and in good standing under the laws of the state of formation set forth opposite the name of such partnership on Schedule 4.1(c) of the Seller Disclosure Letter, has the requisite partnership power and authority to carry on its business as now being conducted and is duly qualified or licensed to do business as a foreign limited partnership and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or to be in good standing, individually or in the aggregate, would not have a Seller Material Adverse Effect. (d) Complete and correct copies of the respective charters and bylaws of McREMI, MII and Summerhill GP and complete and correct copies of the respective certificate of limited partnership and limited partnership agreements of MPLP and the McNeil Partnerships, in each case as amended or supplemented to the date of this Agreement, have been made available to the Company. (e) Each Subsidiary Corporation is a corporation duly incorporated and validly existing under the laws of its jurisdiction of incorporation and has the requisite corporate power and authority to carry on its business as now being conducted, and each Subsidiary Partnership is a partnership duly formed and validly existing under the laws of its jurisdiction of formation and has the requisite partnership power and authority to carry on its business as now being conducted. Each Seller Subsidiary is duly qualified or licensed to do business 31 and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed, individually or in the aggregate, would not have a Seller Material Adverse Effect. True and correct copies of the respective certificate of incorporation, by-laws, partnership agreement, limited partnership agreement, certificate of partnership and certificate of limited partnership, as applicable, and other organizational documents of each Seller Subsidiary, in each case as amended or supplemented to the date of this Agreement, have been made available to the Company. Section 4.2 Capital Structure; Title and Ownership of McREMI Assets. (a) Schedule 4.2(a) of the Seller Disclosure Letter sets forth the following information with respect to MPLP and each of the McNeil Partnerships, opposite the name of such partnership: (i) the capital structure of such partnership (including, with respect to each McNeil Partnership, the number of limited partners of such partnership as of the date specified in such Schedule 4.2(a)); (ii) as of the date specified in such Schedule 4.2(a), to the best Knowledge of Sellers, the ownership of any holders of five percent or more of the partnership interests of such partnership; (iii) the general partners of such partnership; (iv) any other names such partnership was formerly known as; and (v) with respect to each McNeil Partnership, each real property owned directly by such McNeil Partnership or owned by a Seller Subsidiary of such McNeil Partnership. MII is the sole general partner of MPLP. Except as set forth in this Section 4.2 or on Schedule 4.2(a) of the Seller Disclosure Letter and except as contemplated by the terms of this Agreement, no other units of partnership interest or other equity interests in the McNeil Partnerships were issued, reserved for issuance or outstanding. All outstanding units of partnership interest or other equity interest of each McNeil Partnership (i) have been duly authorized and are validly issued, fully paid and nonassessable and (ii) are subject to no restrictions except as set forth in the limited 32 partnership agreement of such McNeil Partnership. Except as set forth on Schedule 4.2(a) of the Seller Disclosure Letter, none of the McNeil Partnerships has issued or granted or is a party to any outstanding commitments, agreements, options, arrangements or undertakings of any kind relating to units of partnership interest or any other equity interest of such McNeil Partnership or securities convertible into units of partnership interest or any other equity interest of such McNeil Partnership. (b) Except as set forth on Schedule 4.2(b) of the Seller Disclosure Letter, as of the date of this Agreement, McREMI has, and immediately prior to the contributions described in Section 2.3(a)(iii) hereof MPLP will have, good and marketable title to all of the McREMI Assets free and clear of all Liens. (c) As of the date of this Agreement, except as set forth on Schedule 4.2(c) of the Seller Disclosure Letter, (i) Robert A. McNeil has good and valid title to all of the GP Interests in Fairfax, (ii) Robert A. McNeil has good and valid title to all of the GP Interests in Regency North owned by him, (iii) Summerhill GP has good and valid title to all of the GP Interests in Summerhill, (iv) MPLP has good and valid title to (A) all of the GP Interests in each McNeil Partnership (other than Fairfax, Regency North and Summerhill), (B) all of the GP Interests in the MPLP GP Subsidiaries, and (C) all of the shares of capital stock in the MPLP Subsidiary Corporations, (v) Robert A. McNeil has good and valid title to all of the LP Interests in Fairfax owned by him, and (vi) Robert A. McNeil and Carole J. McNeil have good and valid title to all of the LP Interests in Summerhill, in the case of each of clauses (i) through (vi) above, free and clear of all Liens. (d) Immediately prior to the contributions described in Sections 2.3(a)(i), 2.3(a)(ii) and 2.3(a)(iii) hereof, MPLP shall have (i) good and valid title to (A) all of the GP Interests in each Participating McNeil Partnership, (B) all of the GP Interests in the MPLP GP Subsidiaries of the Participating McNeil Partnerships, and (C) all of the shares of capital stock in the MPLP Subsidiary Corporation of the Participating McNeil Partnerships, in each case, free and clear of all 33 Liens, (ii) good and valid title to all of the LP Interests in Fairfax, free and clear of all Liens, if Fairfax is a Participating McNeil Partnership, (iii) good and valid title to all of the LP Interests in Summerhill, free and clear of all Liens, if Summerhill is a Participating McNeil Partnership, and (iv) good and marketable title to all of the McREMI Assets, free and clear of all Liens. (e) Except as set forth on Schedule 4.2(e) of the Seller Disclosure Letter, all distributions to holders of LP Interests in the McNeil Partnerships which have been declared by any McNeil Partnership prior to the date of this Agreement have been paid in full. (f) Except as set forth on Schedule 4.2(f) of the Seller Disclosure Letter and except for interests in certain of the Seller Subsidiaries and certain of the McNeil Partnerships, none of the McNeil Partnerships or MPLP owns directly or indirectly any interest or investment (whether equity or debt) in any corporation, partnership, joint venture, business trust or other entity (other than investments in investment securities) ("Other Interest"). None of the Seller Subsidiaries owns directly or indirectly any Other Interest other than its interest (if any) in other Seller Subsidiaries. (g) Schedule 4.2(a) of the Seller Disclosure Letter sets forth, with respect to each Seller Subsidiary: (i) the identity (including any names it was formerly known as) and equity interest of any person with any equity interest in such Seller Subsidiary and (ii) each real property owned by such Seller Subsidiary. Except as set forth in this Section 4.2, no other shares of capital stock, partnership interests or other equity interests in the Seller Subsidiaries were issued, reserved for issuance or outstanding. Each of the outstanding shares of capital stock or outstanding partnership interests in each of the Seller Subsidiaries of the McNeil Partnerships is duly authorized, validly issued, fully paid and nonassessable (other than to secure any outstanding indebtedness to third party lenders with respect to any McNeil Partnership Property owned directly or indirectly by such Seller Subsidiary). Other than as set forth on Schedule 4.2(a) of the Seller Disclosure Letter, each Seller Subsidiary of 34 a McNeil Partnership is wholly-owned, directly or indirectly, by MPLP, such McNeil Partnership or other Seller Subsidiaries of such McNeil Partnership, free and clear of all Liens. None of the Seller Subsidiaries has issued or granted or is a party to any outstanding commitments, agreements, options, arrangements or undertakings of any kind relating to shares of capital stock, partnership interests or other equity interests of such Seller Subsidiary or securities convertible into shares of capital stock, partnership interests or other equity interests of such Seller Subsidiary. Section 4.3 Authority; Noncontravention; Consents. (a) Each of MII, McREMI and Summerhill GP has the requisite corporate power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and to consummate the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party. MPLP has the requisite partnership power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and to consummate the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party. Each McNeil Partnership has the requisite partnership power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and, subject to the requisite approvals of its partners, to consummate the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party. The execution and delivery by each Seller of this Agreement and the other Transaction Documents to which such Seller is a party and the consummation by such Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party have been duly authorized by all necessary action on the part of such Seller, except for and subject to the approval by each Merging Partnership of the Merger in respect of such Merging Partnership, the MPLP Contributions in respect of such Merging Partnership and the appointment of the applicable New GP LLC as the successor general partner of such Merging Partnership by the requisite approval of the limited partners of such Merging Partnership. This 35 Agreement has been duly executed and delivered by each Seller, and each of the other Transaction Documents has been duly executed and delivered by each Seller which is a party thereto, and, assuming the due execution and delivery of this Agreement and each such other Transaction Document by every other party hereto and thereto, respectively, this Agreement and each of such other Transaction Documents each constitutes a valid and binding obligation of such Seller, enforceable against such Seller in accordance with and subject to its terms, subject, as to enforcement, to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereinafter in effect affecting creditors' rights generally and (ii) general principles of equity. The board of directors of MII (as general partner of the general partner of each of the McNeil Partnerships, other than Fairfax, Regency North and Summerhill), the board of directors of Summerhill GP (as the general partner of Summerhill), Robert A. McNeil (as the general partner of Fairfax and a general partner of Regency North) and the limited partners of Summerhill have duly and validly approved, and taken all action required to be taken by them for the consummation of, the Mergers, the MPLP Contributions, the appointments of the applicable New GP LLCs as the successor general partners of the McNeil Partnerships and the other transactions contemplated by this Agreement and the other Transaction Documents. (b) With respect to each Seller, except as set forth on Schedule 4.3(b) of the Seller Disclosure Letter, the execution, delivery and performance by such Seller of this Agreement and the other Transaction Documents to which such Seller is a party do not, and the consummation by such Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party and compliance by such Seller with the provisions of this Agreement and the other Transaction Documents to which such Seller is a party shall not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under, or any other change in rights or obligations of any party under (including the right to amend or modify or refuse to perform or comply with), or result in the 36 creation of any Lien upon any of the properties or assets of such Seller or its Seller Subsidiaries under, (i) (A) in the case of McREMI, MII, Summerhill GP and each Subsidiary Corporation, the respective charter and bylaws of McREMI, MII, Summerhill GP and each such Subsidiary Corporation, each as amended or supplemented to the date of this Agreement, and (B) in the case of MPLP, each McNeil Partnership and each such Subsidiary Partnership, the respective certificate of partnership, certificate of limited partnership, partnership agreement or limited partnership agreement of MPLP, each McNeil Partnership and each such Subsidiary Partnership, each as amended or supplemented to the date of this Agreement, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other material agreement or obligation applicable to such Seller or its Seller Subsidiaries or their respective properties or assets, or (iii) subject to the governmental filings and other matters referred to in the following sentence of this Section 4.3(b), any judgment, order, decree, statute, law, ordinance, rule, regulation, arbitration award, agency requirement, license or permit of any Governmental Entity (collectively, "laws") applicable to such Seller or its Seller Subsidiaries or their respective properties or assets, other than, in the case of clause (ii) or (iii) above, any such conflicts, violations, defaults, rights, losses, changes or Liens that, individually or in the aggregate, would not have a Seller Material Adverse Effect or prevent the consummation by such Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party. With respect to each Seller, no consent, approval, order or authorization of, or filing with, any federal, state or local government or any court, administrative or regulatory agency or commission or other governmental authority or agency, domestic or foreign (each, a "Governmental Entity"), or third party is required by or with respect to such Seller or its Seller Subsidiaries in connection with the execution and delivery by such Seller of this Agreement or the other Transaction Documents to which such Seller is a party, or the consummation by such Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party, except for (i) the filing with the Securities and Exchange Commission (the "SEC") by the Public McNeil Partnerships of the Proxy 37 Statements and, if required by applicable law, the Schedule 13E-3, (ii) the acceptance for record of the Merger Certificate and any other documents required by the Governing Law applicable to each Merging Partnership and each Transitory Partnership, by the Secretary of State of the state of formation of such Merging Partnership and such Transitory Partnership, (iii) requisite approval of the limited partners of the Merging Partnerships, and (iv) such other consents, approvals, orders or authorizations of, or filings with, any Governmental Entity or third party (A) as are set forth on Schedule 4.3(b) of the Seller Disclosure Letter or (B) which, if not obtained or made, would not have, individually or in the aggregate, a Seller Material Adverse Effect or prevent the consummation by such Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party. (c) Solely for purposes of determining compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), each Seller confirms that the conduct of its business consists solely of investing in, owning, developing and operating, directly or indirectly through its subsidiaries, real estate for the benefit of its stockholders or partners, as the case may be, and that the McREMI Assets consist of management contracts relating to the McNeil Partnership Properties owned by the Participating McNeil Partnerships or their Seller Subsidiaries and other assets directly relating to the Participating McNeil Partnerships or their Seller Subsidiaries. Section 4.4 Compliance with Laws. Other than in respect of Environmental Laws and except as set forth on Schedule 4.4 of the Seller Disclosure Letter, Sellers and the Seller Subsidiaries are not violating or failing to comply with, and have not violated or failed to comply with, any law of any Governmental Entity applicable to their business, properties or operations, except to the extent that such violation or failure to comply, individually or in the aggregate, would not have a Seller Material Adverse Effect or prevent the consummation by any Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party. Except as set forth in the Seller SEC 38 Documents filed prior to the date hereof, and, except as set forth on Schedules 4.4, 4.7, 4.8(b), 4.8(c), 4.9 and 4.10 of the Seller Disclosure Letter, no investigation or review by any Governmental Entity with respect to any of Sellers or Seller Subsidiaries is pending or, to the Knowledge of Sellers, threatened, nor has any Governmental Entity indicated an intention to conduct the same, except for those the outcome of which would not, individually or in the aggregate, have a Seller Material Adverse Effect or prevent the consummation by any Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party. To the Knowledge of Sellers, no material change is required in Sellers' or the Seller Subsidiaries' processes, properties or procedures in connection with any such laws, and except as set forth on Schedules 4.4, 4.7, 4.8(b), 4.8(c), 4.9 and 4.10 of the Seller Disclosure Letter, Sellers have not received any written notice or communication of any material noncompliance with any such laws that has not been cured. Except as set forth on Schedules 4.4, 4.8(a), 4.8(b), 4.8(c), 4.8(e) and 4.9 of the Seller Disclosure Letter, each of Sellers and each of the Seller Subsidiaries has all permits, licenses, trademarks, trade names, copyrights, service marks, franchises, variances, exemptions, orders and other authorizations, consents and approvals from Governmental Entities necessary to conduct its business as presently conducted except those the absence of which would not, individually or in the aggregate, have a Seller Material Adverse Effect or prevent the consummation by any Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party. Section 4.5 SEC Documents; Financial Statements; Undisclosed Liabilities. (a) The McNeil Partnerships that are required to file reports with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are identified on Schedule 4.5(a) of the Seller Disclosure Letter (collectively, the "Public McNeil Partnerships"), and have filed all required reports, schedules, forms, statements and other documents with the SEC since January 1, 1996 (collectively, including any such reports filed in the period subsequent 39 to the date hereof but prior to the Closing Date, and as amended, the "Seller SEC Documents," and the financial statements of the Public McNeil Partnerships included in the Seller SEC Documents, the "Public McNeil Partnership Statements"). All of the Seller SEC Documents (other than preliminary material), as of their respective filing dates, complied (or, in the case of any Seller SEC Documents filed in the period subsequent to the date hereof but prior to the Closing Date, will comply as of their respective filing dates) in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act, and, in each case, the rules and regulations promulgated thereunder applicable to such Seller SEC Documents. None of the Seller SEC Documents at the time of filing contained (or, in the case of any Seller SEC Documents filed in the period subsequent to the date hereof but prior to the Closing Date, will contain at the time of filing) any untrue statement of a material fact or at the time of filing omitted (or, in the case of any Seller SEC Documents filed in the period subsequent to the date hereof but prior to the Closing Date, will omit at the time of filing) to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) Each of the Private McNeil Partnerships has made available to the Company copies of its unaudited balance sheets as of March 31, 1999 and December 31, 1998 and its related unaudited statements of operations and cash flows for the three-month period ended March 31, 1999 and for the year ended December 31, 1998 (such financial statements, collectively with the Public McNeil Partnership Statements, the "McNeil Partnership Statements"). In addition: Regency North has made available to the Company copies of the audited balance sheet as of December 31, 1998 and the related audited statements of operations and cash flows for the year ended December 31, 1998 for Regency North Apartments Limited Partnership, a Subsidiary Partnership of Regency North; Hearth Hollow has made available to the Company copies of the audited balance sheet as of December 31, 1998 and the related audited statements of operations and cash flows for the year ended December 31, 1998 for Hearth Hollow 40 Apartments Limited Partnership, a Subsidiary Partnership of Hearth Hollow; and Midwest Properties has made available to the Company copies of its audited balance sheet as of December 31, 1998 and its audited statements of operations and cash flows for the year ended December 31, 1998 and copies of the audited balance sheets as of December 31, 1998 and the related audited statements of operations and cash flows for the year ended December 31, 1998 for each of Cedarwood Hills Associates and East Bay Village Apartments Limited Partnership, each of which is a Subsidiary Partnership of Midwest Properties (all such financial statements described in this sentence, the "Subsidiary Financial Statements"). McREMI has made available to the Company copies of its unaudited balance sheet as of March 31, 1999 and its audited balance sheet as of December 31, 1998, and its related unaudited statements of operations and cash flows for the three-month period ended March 31, 1999 and its related audited statements of operations and cash flows for the year ended December 31, 1998. MII and MPLP have made available to the Company copies of their unaudited consolidated balance sheet as of March 31, 1999 and their audited consolidated balance sheet as of December 31, 1998, and their related unaudited consolidated statements of operations and cash flows for the three-month period ended March 31 1999 and their related audited consolidated statements of operations and cash flows for the year ended December 31, 1998. The financial statements of McREMI and the consolidated financial statements of MII and MPLP made available to the Company in accordance with this paragraph (b), together with the McNeil Partnership Statements, are referred to in this Agreement as the "Seller Statements." (c) The Public McNeil Partnership Statements complied (or, in the case of Public McNeil Partnership Statements contained in any Seller SEC Documents filed in the period subsequent to the date hereof but prior to the Closing Date, will comply) as to form in all material respects with the published rules and regulations of the SEC with respect thereto in effect at the time of such filing, and the audited Seller Statements have been prepared (or, in the case of any Seller Statements prepared for any period subsequent to the date hereof but prior to the Closing Date, will be prepared) in accordance with GAAP in effect at the time of such preparation 41 applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto). Each of the Seller Statements fairly presented (or, in the case of any Seller Statements for such Seller prepared for any period subsequent to the date hereof but prior to the Closing Date, will fairly present) in all material respects the financial position of the applicable Seller (and its consolidated subsidiaries, if applicable) for which such Seller Statements were prepared as of the date thereof and fairly presented (or, in the case of any Seller Statements for such Seller prepared for any period subsequent to the date hereof but prior to the Closing Date, will fairly present) in all material respects the results of operations, cash flows and changes in financial position of such Seller or the consolidated results of operations, cash flows and changes in financial position of the applicable Seller or Seller Subsidiary for which such Seller Statements were prepared for the period then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). (d) Except for liabilities and obligations set forth in the Seller SEC Documents filed prior to the date hereof, in the Seller Statements (including the notes thereto) made available to the Company or contained in Seller SEC Documents filed prior to the date hereof or in the Subsidiary Financial Statements (including the notes thereto) or on Schedule 4.5(d) of the Seller Disclosure Letter and except for liabilities and obligations incurred in the ordinary course since the respective dates of the balance sheets included in the Seller Statements made available to the Company or contained in Seller SEC Documents filed prior to the date hereof, there are no liabilities or obligations of the Seller (or its consolidated subsidiaries, if applicable) in respect of which such Seller Statement was prepared of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on the respective balance sheets of such Seller (and its consolidated subsidiaries, if applicable) included in the Seller Statements made available to the Company or contained in the Seller SEC Documents filed prior to the date hereof or in the notes thereto and which, individually or in the aggregate, would have a Seller Material Adverse Effect or prevent the consummation by Sellers of the transactions contemplated 42 by this Agreement and the other Transaction Documents to which Sellers are parties. Section 4.6 Absence of Certain Changes. Except as disclosed in the Seller SEC Documents filed prior to the date hereof, in the Seller Statements (including the notes thereto) made available to the Company prior to the date hereof or the Subsidiary Financial Statements (including the notes thereto) or on Schedule 4.6 of the Seller Disclosure Letter, since December 31, 1998 (the "Audit Date"), the McNeil Partnerships have conducted their businesses only in the ordinary course and there has not been: (i)(x) any change in the financial condition, properties, businesses or results of operations of the McNeil Partnerships and their consolidated subsidiaries (taken as a whole) or (y) to the Knowledge of Sellers, any development or combination of developments with respect to the McNeil Partnerships and their consolidated subsidiaries (taken as a whole) that in the case of clause (x) or (y), individually or in the aggregate, has had or would have a Seller Material Adverse Effect; (ii) any damage, destruction, loss, whether or not covered by insurance, or other event with respect to the McNeil Partnerships and their consolidated subsidiaries (taken as a whole) which, individually or in the aggregate, has had or would have a Seller Material Adverse Effect; (iii) except for regular semiannual distributions in an amount not to exceed ten million dollars ($10,000,000) in the aggregate for each such semiannual period or except as otherwise provided in this Agreement, any authorization, declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to the units of partnership interest of the McNeil Partnerships; (iv) any reclassification of the units of partnership interest of the McNeil Partnerships or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for units of partnership interest in the McNeil Partnerships; (v) any change in accounting methods, principles or practices of the McNeil Partnerships materially affecting the assets, liabilities or business of the McNeil Partnerships (taken as a whole), except insofar as may have been required by a change in Law or GAAP; (vi) except as permitted by the terms of this Agreement, any amendment of any employment, 43 consulting, severance, retention or any other similar agreement between the McNeil Partnerships and any officer or director of the McNeil Partnerships; or (vii) any acquisition or disposition of any real property of the McNeil Partnerships or their Seller Subsidiaries, or any commitment to do so, made by any Seller or the Seller Subsidiaries. Since the date of this Agreement, there has not been any increase in the compensation payable or that would become payable by the McNeil Partnerships or their Seller Subsidiaries to officers or key employees of Sellers or the Seller Subsidiaries, or any amendment of any compensation or benefit plans (if any) of, McREMI, the McNeil Partnerships or their Seller Subsidiaries, other than regular year-end bonuses consistent with past practice, budgeted salary increases, increases in salary in the ordinary course consistent with past practice, any such increase in compensation or amendment that would not result in any liability or obligation of the Company or any of the Participating McNeil Partnerships or their respective subsidiaries after the Closing Date. Section 4.7 Litigation. Schedule 4.7 of the Seller Disclosure Letter sets forth a list of all litigation in which service of process has been received by any Seller or any Seller Subsidiary or which, to the Knowledge of Sellers, is threatened against any Seller or any Seller Subsidiary or affects any Seller, any Seller Subsidiary or any McNeil Partnership Property, in each case as of the date specified in such Schedule 4.7. Except as disclosed on Schedule 4.7 of the Seller Disclosure Letter, as of the date of this Agreement, there is no suit, action or proceeding pending in which service of process has been received by the McNeil Partnerships or any Seller Subsidiary or, to the Knowledge of Sellers, threatened against any McNeil Partnership or any Seller Subsidiary or affects any McNeil Partnership, any Seller Subsidiary or any McNeil Partnership Property. Other than as indicated on Schedule 4.7 of the Seller Disclosure Letter, (i) none of the suits, actions or proceedings pending with respect to which service of process has been received by any McNeil Partnership or any Seller Subsidiary or, to the Knowledge of Sellers, threatened against any McNeil Partnership or any Seller Subsidiary or affecting any McNeil Partnership, any Seller Subsidiary or any McNeil Partnership Property, individually or in the 44 aggregate, would have a Seller Material Adverse Effect or prevent the consummation by any Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party, and (ii) there is no judgment, decree, rule or order of any Governmental Entity or arbitrator outstanding against or affecting any McNeil Partnership or any Seller Subsidiary or any McNeil Partnership Property having, or which in the future would have, a Seller Material Adverse Effect or prevent the consummation by any Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party. Section 4.8 Properties. (a)(i) Except as set forth on Schedule 4.8(a) of the Seller Disclosure Letter, the McNeil Partnerships or the Seller Subsidiaries own good and insurable fee simple title (or, with respect to those real properties listed on Schedule 4.8(a) of the Seller Disclosure Letter as being leasehold interests, own good and valid leasehold estates) to each of the real properties identified on Schedule 4.8(a) of the Seller Disclosure Letter (the "McNeil Partnership Properties"), which are all of the real estate properties owned by them as of the date of this Agreement, and no other person has any ownership interest in the McNeil Partnership Properties or any contract, option, right of first refusal or other agreement to purchase any McNeil Partnership Property or any part thereof, except as set forth on such Schedule 4.8(a) or otherwise provided in this Agreement. As of the date of this Agreement, Schedule 4.8(a) of the Seller Disclosure Letter contains a list of the latest surveys and owner's title policies obtained by Sellers with respect to each of the McNeil Partnership Properties, true and complete copies of which surveys and title policies have been made available to the Company. Each of the McNeil Partnership Properties is owned by the McNeil Partnerships or the Seller Subsidiaries, free and clear of all Liens, mortgages or deeds of trust, security interests or other encumbrances on title (collectively, "Encumbrances") and is not subject to any rights of way, easements, restrictive covenants, 45 declarations, written agreements, laws, ordinances and regulations affecting building use or occupancy, or reservations of any interest in title (collectively, "Property Restrictions"), except for the following (collectively, except for the matters set forth under the caption "Other Items" on Schedule 4.8(a) of the Seller Disclosure Letter (such matters, the "Other Items"), the "Permitted Restrictions and Encumbrances"): (i) Property Restrictions and Encumbrances disclosed on the title commitments attached to the letter agreement between Lawyer's Title Insurance Corporation and Arent Fox Kintner Plotkin & Kahn PLLC, dated as of June 23, 1999 (such title commitments, as marked, together with such letter agreement, the "Title Commitments"), or of which the Company has knowledge (other than the Other Items, matters disclosed by new surveys of a McNeil Partnership Property obtained by the Company after June 1, 1999 (unless such matters were specifically and expressly disclosed by, and were readily and directly apparent from, the existing surveys referenced on Schedule 4.8(a)), matters marked "omit", "delete" or otherwise noted as being required to be omitted or satisfied on the Title Commitments, and matters identified as the "Task List" (excluding the matters listed on Schedule A to the Task List) on Schedule 4.8(a) of the Seller Disclosure Letter); (ii) Property Restrictions imposed or promulgated by law or any Governmental Entity with respect to real property, including zoning regulations, which would not materially and adversely affect the continued use or value of any McNeil Partnership Property as it is being used as of the date of this Agreement; (iii) mechanics', carriers', workmen's and repairmen's liens, which are being contested in good faith, have heretofore been bonded or which, individually or in the aggregate, do not exceed one hundred thousand dollars ($100,000); (iv) Property Restrictions and Encumbrances which (A) could not reasonably preclude the continued use of such McNeil Partnership Property as it is being used as of the date of this Agreement or (B) could not reasonably materially and adversely affect the value of such McNeil Partnership Property as it is being used as of the date of this Agreement; (v) Taxes that are not yet delinquent; (vi) as of the 46 date of this Agreement, the Existing Loans; and (vii) as of the Closing Date, the Non-Terminated Loans. (ii) Schedule 4.8(a) of the Seller Disclosure Letter contains a true and complete list of all of the ground leases affecting the McNeil Partnership Properties (the "Ground Leases"). To the Knowledge of Sellers, each such Ground Lease is in full force and effect, has not been modified or amended in any way except by a document listed in Schedule 4.8(a) of the Seller Disclosure Letter. Each of Sellers and its Seller Subsidiaries has fully performed all of their material obligations under such Ground Leases. Except as set forth on Schedule 4.8(a) of the Seller Disclosure Letter, neither any of Sellers nor any of the Seller Subsidiaries has received any written notice of any default by it, as tenant, under any Ground Lease and, to the Knowledge of Sellers, there is no fact or circumstance which, with the giving of notice or the passage of time, would result in a material default under such Ground Lease. (b) Except for Permitted Restrictions and Encumbrances, except as disclosed on Schedule 4.8(b) or 4.8(o) of the Seller Disclosure Letter or in the documents referenced in such Schedule 4.8(b) or 4.8(o) and except as otherwise set forth in the most recent capital expenditure budget of the McNeil Partnerships, true and complete copies of which have been made available to the Company: (i) there is no certificate, permit or license from any Governmental Entity having jurisdiction over the McNeil Partnership Properties, and there is no agreement, easement or other right which is necessary to permit the lawful use and operation of the buildings and improvements on the McNeil Partnership Properties as they are being used as of the date of this Agreement, or which is necessary to permit the lawful use and operation of all driveways, roads and other means of lawful egress and ingress to and from the McNeil Partnership Properties, that has not been obtained and is not in full force and effect, and there is no pending threat of modification or cancellation thereof, except where the failure to obtain the same would not have a Seller Material Adverse Effect or prevent the consummation by any Seller of the 47 transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party; (ii) to the Knowledge of Sellers, all of the McNeil Partnership Properties have sufficient parking that complies with all laws and that is part of the McNeil Partnership Properties; (iii) none of Sellers or the Seller Subsidiaries has received any written notice of any violation of any federal, state or municipal Law issued by a Governmental Entity materially and adversely affecting any portion of any McNeil Partnership Property; (iv) to the Knowledge of Sellers, except for Known Defects, there are no structural defects relating to any individual McNeil Partnership Property which would cost more than twenty thousand dollars ($20,000) to repair or which, individually or in the aggregate, would have a Seller Material Adverse Effect; (v) to the Knowledge of Sellers, except for Known Defects, there are no individual McNeil Partnership Properties whose building systems and fixtures are not in working order and repair and which would cost more than twenty thousand dollars ($20,000) to repair or which, individually or in the aggregate, would have a Seller Material Adverse Effect; (vi) there is no physical damage to any McNeil Partnership Property for which there is no insurance in effect covering the cost of restoration, except for such physical damage that would not have a Seller Material Adverse Effect; and (vii) each McNeil Partnership Property is an independent property that does not rely on any facilities (other than public facilities and public roads) located on any property not included in such McNeil Partnership Property to fulfill any requirement of any Governmental Entity or for the furnishing to such McNeil Partnership Property of any essential building systems or utilities, except for any such reliance for which such McNeil Partnership Property has a legal or equitable right with respect thereto. (c) Except for Permitted Restrictions and Encumbrances and except as disclosed on Schedule 4.8(a) or 4.8(c) of the Seller Disclosure Letter or in the documents referenced in such Schedule 4.8(a) or 4.8(c), none of the McNeil Partnerships has received written notice to the effect that there are, and, to the Knowledge of Sellers, there are no, (i) condemnation or rezoning proceedings that are pending or threatened with respect to the McNeil Partnership Properties that would have a Seller Material 48 Adverse Effect or (ii) any zoning, building or similar laws, codes, ordinances, orders or regulations or condition or agreements contained in any easement, restrictive covenant or any similar instrument or agreement affecting any McNeil Partnership Property that are or will be violated by the continued maintenance, operation or use of any buildings or other improvements on the McNeil Partnership Properties or by the continued maintenance, operation or use of the parking areas where such violation would have a Seller Material Adverse Effect. Except for Known Defects and except as disclosed on Schedule 4.8(a) or 4.8(c) of the Seller Disclosure Letter, in the documents referenced in such Schedule 4.8(a) or 4.8(c) or in the Seller Statements (including the notes thereto) or the Subsidiary Financial Statements (including the notes thereto) made available to the Company or contained in Seller SEC Documents filed prior to the date hereof, or except as would not have a Seller Material Adverse Effect, all work to be performed, payments to be made and actions to be taken by Sellers or the Seller Subsidiaries prior to the date of this Agreement pursuant to any agreement entered into with a Governmental Entity in connection with a site approval, zoning reclassification or similar action relating to any McNeil Partnership Property (e.g., Local Improvement District or Road Improvement District, but excluding any such approval, reclassification or action relating to environmental matters) or as required as a condition to the issuance of any building permit, certificate of occupancy or zoning variance relating to any McNeil Partnership Property (e.g., off-site improvements or services or zoning proffers), has been performed, paid or taken, as the case may be, and, to the Knowledge of Sellers, there is no planned or proposed work, payments or actions that may be required after the date of this Agreement pursuant to such agreements. (d) As of the date hereof, to the Knowledge of Sellers, other than Permitted Restrictions and Encumbrances, there are no Encumbrances or defects in title to any McNeil Partnership Property or any matters affecting title to, or ownership of, the McNeil Partnership Properties which would materially and adversely affect the continued use or value of the McNeil 49 Partnership Properties as they are being used as of the date of this Agreement. (e) Except as disclosed on Schedule 4.8(e) of the Seller Disclosure Letter, (i) as of the date hereof, valid policies of title insurance (the "Title Insurance Policies") have been issued insuring the applicable McNeil Partnership's or Seller Subsidiary's fee simple (or ground leasehold, as applicable) title to each of the McNeil Partnership Properties in amounts at least equal to the purchase price thereof paid by such Seller or Seller Subsidiary or their respective predecessor, (ii) the Title Insurance Policies are in full force and effect and (iii) as of the date hereof, to the Knowledge of Sellers, no claim has been made against any Title Insurance Policy. (f) Each of the rent rolls for each McNeil Partnership Property as set forth in Schedule 4.8(f) of the Seller Disclosure Letter dated as of May 1999 (except for a date otherwise indicated therein) and each of the updated rent rolls to be made available to the Company within 15 days prior to the estimated Closing Date (each, a "Rent Roll") is true, complete and accurate as of its date. (g) Sellers have made available to the Company true, complete and accurate copies of all leases for space as of the date of this Agreement in the McNeil Partnership Properties identified on Annex E hereto as "Commercial Properties" (the "Commercial Leases"), and all amendments, modifications and supplements thereto through to the date hereof. Sellers have made available to the Company true, complete and accurate copies of (i) all Commercial Leases as of the date of this Agreement and (ii) the form of lease for leases for space as of the date of this Agreement in the McNeil Partnership Properties not identified on Annex E hereto as "Commercial Properties" (the "Residential Leases" and, together with the Commercial Leases, the "Leases"). As of the date of each Rent Roll, there are no Leases not shown on such Rent Roll, and, to the Knowledge of Sellers, except for Permitted Restrictions and Encumbrances, as of the date of each Rent Roll no third party has any occupancy or use rights with respect to any McNeil Partnership Properties except pursuant to the Leases shown on such Rent Roll. As 50 of the date of the Rent Roll, except as set forth on Schedule 4.8(g) of the Seller Disclosure Letter, all Leases shown on the Rent Roll are in full force and effect, each tenant has commenced paying rent thereunder, and all construction and other obligations of the landlord to be performed as of the date hereof in connection with the commencement of each Lease have been performed in full, except where the failure to be in full force or effect, the failure to commence payment of rent or to perform such obligations would not have a Seller Material Adverse Effect. (h) Except as set forth on Schedule 4.8(h) of the Seller Disclosure Letter, as of the date specified in such Schedule 4.8(h), no tenant is in default under its Lease for failure to pay rent or other sums when due under its Lease. To the Knowledge of Sellers, except as set forth on Schedule 4.8(h) of the Seller Disclosure Letter, no tenant is in default under its Lease which default would have a Seller Material Adverse Effect. To the Knowledge of Sellers, as of the date of each Rent Roll, no tenant thereunder is entitled to any free rent, rebate, rent concession, deduction or offset not set forth in the Leases or not otherwise approved as a Reimbursable Proposal. (i) (A) No Seller nor any Seller Subsidiary has failed to perform its material obligations under any Lease, (B) no Seller nor any Seller Subsidiary has received any written notice of its default under any of the Leases, and (C) except as set forth in the Leases, as of the date of each Rent Roll, no tenant thereunder is entitled to receive money, or any contribution from any Seller or any Seller Subsidiary, either in money or in kind, on account of the construction of any improvements, or setoff any amounts against its rental obligations, which has not otherwise been approved as a Reimbursable Proposal, except in the case of clauses (A), (B) and (C) as set forth on Schedule 4.8(i) of the Seller Disclosure Letter or except where such failure to perform, such default or such entitlement would not have a Seller Material Adverse Effect. Except as set forth on Schedule 4.8(i) of the Seller Disclosure Letter, to the Knowledge of Sellers, there are no bankruptcy, reorganization, insolvency or similar proceedings pending against any 51 tenants under Commercial Leases (the "Commercial Tenants"). (j) To the Knowledge of Sellers, as of the date of each Rent Roll, there are no verbal agreements with any tenant, and, to the Knowledge of Sellers, there are no parties in adverse possession of any part of any McNeil Partnership Property. (k) INTENTIONALLY OMITTED. (l) (i) All tenant improvements and other tenant inducement costs that are the responsibility of the landlord under any Lease executed prior to the date hereof have been completed or fully paid or will be completed or fully paid by the McNeil Partnerships or their respective Seller Subsidiaries, as applicable, on or prior to the Closing Date and (ii) there is no tenant improvement work in process for which the landlord is responsible nor any unspent tenant allowance, other than, in the case of clauses (i) and (ii), for Reimbursable Proposals. (m) All tenant security deposits are noted in the accounting records of the applicable McNeil Partnerships or their respective Seller Subsidiaries and are held in segregated accounts identified as set forth on Schedule 4.8(m) of the Seller Disclosure Letter. (n) Except as set forth on Schedule 4.8(n) of the Seller Disclosure Letter, there has been no delivery of any written notice to the McNeil Partnerships or the Seller Subsidiaries regarding any, and to the Knowledge of Sellers there is no, pending cancellation of any insurance on any McNeil Partnership Property or repairs, alterations or other work thereon which have been required by any insurance policy or any Governmental Entities. (o) Schedule 4.8(o) of the Seller Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, of all structural reports regarding the McNeil Partnership Properties that have been ordered and secured by Sellers or the Seller Subsidiaries, and true and complete copies of such reports have been made available to the Company. The parties hereto acknowledge 52 and agree that all Known Defects are deemed to be incorporated by reference into such Schedule 4.8(o). (p) All of the McNeil Partnership Properties are managed by McREMI or are self-managed. (q) Schedule 4.8(q) of the Seller Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, of all delinquent real property tax bills for the McNeil Partnership Properties, true and complete copies of which have been made available to the Company prior to the date hereof. True and complete copies of all real property tax bills for the McNeil Partnership Properties for the most recent fiscal year have been made available to the Company prior to the date hereof. To the Knowledge of Sellers, true and complete copies of all real property tax bills for the McNeil Partnership Properties for the fiscal year ended December 31, 1997 have been made available to the Company prior to the date hereof. To the Knowledge of Sellers, none of Sellers nor any Seller Subsidiary has received any written notice of any proposed special assessments or proposed reassessments relating to the McNeil Partnership Properties. Section 4.9 Environmental Matters. For purposes of this Section 4.9, the term "Hazardous Material" means any substance, material or waste which is regulated in any concentration or is otherwise defined by any federal, state or local governmental body under Environmental Law as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "contaminant," "toxic waste" or "toxic substance" under any provision of Environmental Law, which includes petroleum, petroleum products or by-products, asbestos, presumed asbestos-containing material or asbestos-containing material, lead-containing paint or plumbing, radioactive material or radon, urea formaldehyde and polychlorinated biphenyls. Except as disclosed on Schedule 4.9 of the Seller Disclosure Letter or in the reports referenced in such Schedule 4.9 and except for Known Defects and except for matters which would not have, individually or in the aggregate, a Seller Material Adverse Effect: 53 (a) To the Knowledge of Sellers, there is not present in, on or under any McNeil Partnership Property any Hazardous Material in such form or quantities as to create, and Sellers and the Seller Subsidiaries have not created, any liability or obligation under federal, state, local or other governmental statute, law (including common law), ordinance or regulation, relating to, or dealing with the protection of human health or the environment in effect as of the date of this Agreement ("Environmental Law") for any McNeil Partnership; (b) There is no pending request, claim, written notice, investigation, demand, administrative proceeding, hearing or litigation, nor, to the Knowledge of Sellers, is one threatened, alleging liability under, violation of, or noncompliance with any Environmental Law or any license, permit or other authorization issued pursuant thereto ("Environmental Complaints") relating to any McNeil Partnership Property (or any real property formerly owned or operated by any of the McNeil Partnerships or any of the Seller Subsidiaries) and against Sellers or the Seller Subsidiaries, and there is no reasonable basis for believing that circumstances or conditions exist which would support any such Environmental Complaint against Sellers or the Seller Subsidiaries relating to the McNeil Partnership Properties; (c) Sellers have developed and implemented appropriate operation and maintenance programs for all of the McNeil Partnership Properties which contain "Asbestos Containing Materials," have complied with all applicable regulations of the Occupational Health and Safety Administration regarding asbestos notification to workers and tenants, and have complied with all applicable provisions of the Lead Based Paint Hazard Reduction Act of 1992 and all regulations promulgated thereto; (d) The McNeil Partnership Properties comply with all Environmental Laws; (e) To the actual knowledge, without any inquiry of or investigation by, the individuals listed on Schedule 10.1(a) of the Seller Disclosure Letter, no real property formerly owned or operated by any of the McNeil Partnerships or any of the Seller Subsidiaries was 54 contaminated with any Hazardous Material during or prior to such period of ownership or operations; and (f) Sellers have made available to the Company copies of all material environmental reports, studies, assessments, sampling data and other environmental information, in each case, that is in their possession and that relates to Sellers or the Seller Subsidiaries or their respective current properties or operations. Section 4.10 Taxes. (a) Except as set forth on Schedule 4.10 of the Seller Disclosure Letter, each McNeil Partnership and its respective Seller Subsidiaries has prepared in good faith and timely filed all Tax returns and reports required to be filed by it (after giving effect to any filing extension properly granted by a Governmental Entity having authority to do so) and has paid (or has had paid on its behalf) all Taxes shown on such returns and reports as required to be paid by it or that each McNeil Partnership is obligated to withhold from amounts owing to any employee, creditor or third party. Except as set forth on Schedule 4.10 of the Seller Disclosure Letter, to the Knowledge of Sellers, all Tax returns are complete, correct and accurate and the McNeil Partnerships and their respective Seller Subsidiaries are not required to pay any Taxes other than as shown on such returns. Except for Taxes that are being contested in good faith by appropriate proceedings and for which such McNeil Partnership shall have set aside on its books adequate reserves, which are set forth on Schedule 4.10 of the Seller Disclosure Letter, none of the McNeil Partnerships is being audited by any Governmental Entity and there are no pending or, to the Knowledge of Sellers, threatened audits, examinations, investigations or other proceedings in respect of Taxes or Tax matters. The most recent audited McNeil Partnership Statements contained in the Seller SEC Documents or made available to the Company, as the case may be, reflect an adequate reserve for all material Taxes payable by the McNeil Partnerships and their respective Seller Subsidiaries for all taxable periods and portions thereof through the date of such financial statements, which Taxes are material to the McNeil Partnerships and their respective Seller 55 Subsidiaries taken as a whole. Except as set forth on Schedule 4.10 of the Seller Disclosure Letter, to the Knowledge of Sellers, no deficiencies for any Taxes have been proposed, asserted or assessed against the McNeil Partnerships and their respective Seller Subsidiaries, and no requests for waivers of the time to assess any such Taxes are pending. As used in this Agreement, "Taxes" includes all federal, state, local and foreign income, property, franchise, employment, excise and other taxes together with penalties, interest or additions to Tax with respect thereto (but shall not include any sales or use taxes). (b) The McNeil Partnerships and the Seller Subsidiaries that have been partnerships, joint ventures or disregarded entities or limited liability companies since formation have at all times qualified as partnerships or disregarded entities for federal income tax purposes. The McNeil Partnerships and the Seller Subsidiaries that have been partnerships, joint ventures or disregarded entities or limited liability companies since formation are not publicly traded partnerships within the meaning of Section 7704 of the Internal Revenue Code of 1986, as amended (the "Code"), or otherwise taxable as an association for federal income tax purposes. Section 4.11 No Payments to Employees, Officers or Directors. Except for the contracts listed on Schedule 4.11 of the Seller Disclosure Letter or as otherwise provided for in this Agreement, there is no employment or severance contract, or other plan, arrangement or agreement, entitling any employees of McREMI or the officers of any Seller Corporation to severance pay, or requiring, accelerating the time of payment or vesting, increasing or triggering payments or funding (through a grantor trust or otherwise) of compensation or benefits, cancellation of indebtedness or other obligation (collectively, "Severance Obligations") to be made on a change of control or otherwise as a result of the consummation of the transactions contemplated by this Agreement and the other Transaction Documents, with respect to any present or former employee, officer or director of McREMI or such Seller Corporation. 56 Section 4.12 Related Party Transactions. Set forth on Schedule 4.12 of the Seller Disclosure Letter is a list of all Related Party Transactions as of the date of this Agreement. Complete and correct copies, to the extent available, documenting the Related Party Transactions have been made available to the Company. Section 4.13 Employee Benefits. (a) Schedule 4.13 of the Seller Disclosure Letter contains a true and complete list as of the date of this Agreement of each: "welfare plan," fund, contract, policy or program (within the meaning of section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")); "pension plan," fund or program (within the meaning of section 3(2) of ERISA); employment, termination or severance agreement; and other employee benefit plan, fund, program, contract agreement or arrangement, in each case, that is sponsored, maintained or contributed to or required to be contributed to by McREMI or by any trade or business, whether or not incorporated, that together with McREMI would be deemed a "single employer" within the meaning of section 4001(b) of ERISA (a "McREMI ERISA Affiliate"), or to which McREMI or any McREMI ERISA Affiliate is party, for the benefit of any employee or former employee of McREMI (the "McREMI Plans"). (b) With respect to each McREMI Plan, McREMI has heretofore made available to the Company true and complete copies of such McREMI Plan and any amendments thereto, any related trust insurance contract or other funding vehicle, any reports or summaries required under ERISA or the Code and the most recent determination letter received from the Internal Revenue Service with respect to each McREMI Plan intended to qualify under section 401 of the Code. (c) No liability under Title IV or section 302 of ERISA has been incurred by McREMI or any McREMI ERISA Affiliate with respect to any ongoing, frozen or terminated "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the single-employer plan of a McREMI ERISA Affiliate, that has not been satisfied in 57 full, and, to the Knowledge of Sellers, no condition exists that presents a material risk to McREMI or any McREMI ERISA Affiliate of incurring any such liability, other than liability for premiums due the Pension Benefit Guaranty Corporation (which premiums have been paid when due). (d) No McREMI Plan is a "multiemployer pension plan," as defined in section 3(37) of ERISA, and neither McREMI nor any McREMI ERISA Affiliate has contributed to a multiemployer plan at any time on or after September 1, 1980. No notice of a "reportable event", within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any McREMI Plan or by any McREMI ERISA Affiliate within the twelve-month period ending on the date hereof or will be required to be filed in connection with the transactions contemplated by this Agreement. (e) Each McREMI Plan has been operated and administered in all material respects in accordance with its terms and applicable law, including but not limited to ERISA and the Code. (f) Each McREMI Plan intended to be "qualified" within the meaning of section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service stating that it is so qualified, and, to the Knowledge of Sellers, no event has occurred since the date of such determination that would adversely affect such determination. (g) There are no pending or, to the Knowledge of Sellers, anticipated claims by or on behalf of any McREMI Plan, by any employee or beneficiary covered under any such McREMI Plan, or otherwise involving any such McREMI Plan (other than routine claims for benefits). None of Sellers nor any of the Seller Subsidiaries has engaged in a transaction with respect to any McREMI Plan that, assuming the taxable period of such transaction expired as of the date hereof or as of the Closing Date, could subject McREMI, any McNeil Partnership or any Seller Subsidiary to a tax or penalty imposed by either Section 58 4975 of the Code or Section 502(i) of ERISA in an amount which would be material. (h) All contributions required to be made under the terms of any McREMI Plan have been timely made or have been reflected on the audited or unaudited balance sheet of McREMI made available to the Company. (i) McREMI has no obligations for retiree health and life benefits under any McREMI Plan. McREMI may amend or terminate any such McREMI Plan at any time without incurring any liability thereunder, other than claims for benefits accrued prior to the Effective Time. Section 4.14 Employee Matters. (a) Except for the officers of the Seller Corporations set forth on Schedule 4.14(a) of the Seller Disclosure Letter, none of the McNeil Partnerships nor any of their respective Seller Subsidiaries has any employees. (b) Schedule 4.14(b) of the Seller Disclosure Letter lists the employee handbooks of McREMI in effect as of the date of this Agreement. A copy of each such employee handbook has been made available to the Company. Except as set forth on Schedule 4.14(b) of the Seller Disclosure Letter, such handbooks fairly and accurately summarize all material employee policies, vacation policies and payroll practices of McREMI. Section 4.15 Contracts; Debt Instruments. (a) Except as set forth on Schedule 4.15(a) of the Seller Disclosure Letter, none of Sellers or the Seller Subsidiaries has received a written notice that any Seller or any Seller Subsidiary is in violation of or in default under, nor does there exist any condition which upon the passage of time or the giving of notice or both would cause such a violation of or default under, any loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or any other material contract, agreement, arrangement or understanding (each, a "Material Contract"), to which it is a party or by which it or any of its properties or assets is bound, nor does such a violation or default exist, except to the 59 extent that such violation or default, individually or in the aggregate, would not have a Seller Material Adverse Effect or prevent the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is a party. Each Material Contract which has not been filed as an exhibit to any of the Seller SEC Documents has been previously made available to the Company (except as noted on Schedule 4.15(a) of the Seller Disclosure Letter) and a list of all Material Contracts that have not been so filed is set forth in Schedule 4.15(a) of the Seller Disclosure Letter. Except as set forth in the Seller SEC Documents filed prior to the date hereof or on Schedule 4.15(a) of the Seller Disclosure Letter, there is no contract or agreement that purports to limit in any material respect the geographic location in which McREMI, any of the McNeil Partnerships or any of the Seller Subsidiaries may conduct its business. (b) Except for any of the following expressly identified in the Seller SEC Documents, Schedule 4.15(b) of the Seller Disclosure Letter sets forth a list, as of the date of this Agreement, of each loan or credit agreement, note, bond, mortgage, indenture, security agreement, financing statement and any other material agreement and instrument and all amendments thereto pursuant to which any Indebtedness of Sellers or any Seller Subsidiary is outstanding or may be incurred or secured. For purposes of this Agreement, "Indebtedness" means (i) indebtedness for borrowed money, whether secured or unsecured, (ii) obligations under conditional sale or other title retention agreements relating to property purchased by such person, (iii) capitalized lease obligations, (iv) obligations under any interest rate cap, swap, collar or similar transaction or currency hedging transactions (valued at the termination value thereof) and (v) guarantees of any such Indebtedness of any other person. (c) Except as set forth on Schedule 4.15(b) of the Seller Disclosure Letter, as of the date of this Agreement, there is no interest rate cap, interest rate collar, interest rate swap, currency hedging transaction or any other agreement relating to a similar transaction 60 to which any Seller or any Seller Subsidiary is a party or an obligor with respect thereto. (d) Except as set forth on Schedule 4.15(d) of the Seller Disclosure Letter, none of Sellers nor any Seller Subsidiary is party to any agreement which would restrict any of them from prepaying any of their material Indebtedness without penalty or premium at any time or which requires any of them to maintain any amount of Indebtedness with respect to any McNeil Partnership Property. (e) Except as set forth on Schedule 4.15(e) of the Seller Disclosure Letter, none of Sellers nor any Seller Subsidiary is a party to any agreement relating to the management or leasing of any McNeil Partnership Property by any person other than McREMI, except the commercial listing agreements listed on Schedule 4.15(e) of the Seller Disclosure Letter and except for any service agreement which either (i) is cancellable upon no greater than sixty (60) days' notice or (ii) which requires Sellers to make annual payments pursuant thereto not in excess of fifty thousand dollars ($50,000) per year. Complete and correct copies of such commercial listing agreements and such service agreements have been made available to the Company. (f) None of Sellers nor any Seller Subsidiary is a party to any agreement pursuant to which any Seller or any Seller Subsidiary manages any real properties other than the McNeil Partnership Properties, except for the agreements listed on Schedule 4.15(f) of the Seller Disclosure Letter. (g) Except for budgeted construction disclosed in the most recent capital expenditure budget of the McNeil Partnership Properties (a true and complete copy of which has been made available to the Company), Schedule 4.15(g) of the Seller Disclosure Letter lists all agreements entered into by any Seller or any Seller Subsidiary relating to the development or construction of, or additions or expansions to, any McNeil Partnership Property which are currently in effect as of the date specified in such Schedule 4.15(g) (collectively, the "Construction Contracts") and under which Sellers or any 61 Seller Subsidiary currently has, or expects to incur, an obligation in excess of twenty-thousand dollars ($20,000). Complete and correct copies of Construction Contracts in effect as of the date specified in Schedule 4.15(g) of the Seller Disclosure Letter and under which Sellers or any Seller Subsidiary currently has, or expects to incur, an obligation in excess of fifty thousand dollars ($50,000) in any calendar year have been made available to the Company. (h) Schedule 4.15(h) of the Seller Disclosure Letter lists all agreements, which are currently in effect as of the date hereof, entered into by any Seller or any Seller Subsidiary or affecting any McNeil Partnership Property providing for the sale of, or option to sell, any McNeil Partnership Properties or the purchase of, or option to purchase, any real estate. (i) Except as set forth on Schedule 4.15(i) of the Seller Disclosure Letter, none of Sellers nor any Seller Subsidiary has any continuing contractual liability (i) for indemnification or otherwise under any agreement relating to the sale of real estate previously owned, whether directly or indirectly, by any Seller or any Seller Subsidiary or (ii) to pay any additional purchase price for any McNeil Partnership Property. Section 4.16 Brokers. No broker, investment banker, financial advisor or other person, other than PaineWebber Incorporated, Eastdil, Susan Barlow, Stanger, and Houlihan, Lokey, Howard & Zukin, the arrangements with which have previously been made available to the Company, is entitled to any broker's, finder's, financial advisor's, valuation or other similar fee or commission in connection with the transactions contemplated by this Agreement or the other Transaction Documents based upon arrangements made by or on behalf of Sellers, and Sellers shall pay all such fees at or prior to the Closing. Section 4.17 Management Agreements. The management agreements listed on Schedule 4.17 of the Seller Disclosure Letter (the "Management Agreements") are in full force and effect and no violations of such agreements currently are occurring by Sellers or the 62 Seller Subsidiaries or, to the Knowledge of Sellers, parties other than Sellers or the Seller Subsidiaries. Section 4.18 INTENTIONALLY OMITTED. Section 4.19 State Takeover Statutes. Each Seller has taken all actions necessary to exempt the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party from the operation of any "fair price," "moratorium," "control share acquisition" or any other anti-takeover statute or similar statute that applies to such Seller (a "Takeover Statute") or any antitakeover provision contained in the limited partnership agreement, certificate of incorporation or by-laws of any Seller. Section 4.20 Investment Company Act of 1940. None of Sellers or the Seller Subsidiaries is, or at the Effective Time will be, required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"). Section 4.21 Insurance. (a) Schedule 4.21(a) of the Seller Disclosure Letter sets forth a true, correct and complete list, as of the date of this Agreement, of all material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by Sellers (the "Insurance Policies"). To the Knowledge of Sellers, such Insurance Policies have been in full force and effect since January 1, 1999. (b) To the Knowledge of Sellers, Schedule 4.21(b) sets forth a true and correct list of all Insurance Policies (together with the names of the respective carriers of such Insurance Policies) maintained by Sellers for any period since January 1, 1992. Section 4.22 Year 2000. Sellers are taking steps to institute a program which is intended to ensure (it being acknowledged and agreed by the parties hereto that such intention may never be realized) that software systems of Sellers do not cause the McNeil Partnerships or 63 the Seller Subsidiaries to experience invalid or incorrect results or abnormal software operation related to calendar year 2000 except where such invalid or incorrect results or abnormal software operation would not, individually or in the aggregate, have a Seller Material Adverse Effect. Section 4.23 Books and Records. The books and records of each of Sellers and the Seller Subsidiaries (including, without limitation, the books of account, minute books and LP Interest record books) are complete and correct in all material respects. The minute books of each of Sellers and the Seller Subsidiaries contain accurate and complete records in all material respects of all meetings held of, and corporate or other action taken by, the equity holders and the boards of directors (or similar governing body) of the respective entities and no meetings of or actions by such equity holders or any such boards of directors (or similar governing body) have been held or taken for which minutes have not been prepared and are not contained in such minute books. Section 4.24 Personal Property. The McNeil Partnerships or the Seller Subsidiaries have good title to, or a valid leasehold interest in, or other good and sufficient right to use, all tangible personal properties that are material to the business and operations of the McNeil Partnerships and the Seller Subsidiaries taken as a whole. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to each Seller as follows: Section 5.1 Organization, Standing and Power of the Company, the Company LLCs and the Transitory Partnerships. (a) The Company is a limited liability company duly formed and validly existing under the laws of the State of Delaware and has the requisite power and authority to carry on its business as now being conducted 64 and on or prior to the Effective Time will be duly qualified or licensed to do business and will be in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or use of its properties makes such qualification or licensing necessary, other than in jurisdictions where the failure to be so qualified or licensed or to be in good standing, individually or in the aggregate, would not prevent the consummation by the Company of the transactions contemplated by this Agreement and the other Transaction Documents to which the Company is a party. The Company has delivered to Sellers complete and correct copies of the Original LLC Agreement, as amended or supplemented to the date of this Agreement. The Company was formed solely for the purpose of engaging in the transactions contemplated by this Agreement and has not engaged in any business activities or conducted any operations other than as expressly provided for in this Agreement. Other than the Transitory Partnerships and the Company LLCs upon their formation, the Company has never owned any capital stock or other equity interests in any other person. (b) Prior to the contributions described in Section 2.3(a) hereof and in Section 6.1 of the LLC Agreement, the Company will have no assets or liabilities or obligations whatsoever (other than the rights and obligations set forth in this Agreement, the LLC Agreement, the Commitment Letter and any debt commitment letter the Company may obtain) (the parties hereto acknowledge and agree that nothing in this Section 5.1(b) shall affect or be deemed to amend or modify any provision of this Agreement, including Sections 8.1, 8.2 and 8.3 hereof). (c) From the time of their formation through to the Effective Time, each Company LLC and each Transitory Partnership will be an entity duly formed and validly existing under the laws of the state of its formation and shall have the requisite power and authority to carry on its business and will be duly qualified or licensed to do business and will be in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or use of its properties makes such 65 qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or to be in good standing, individually or in the aggregate, would not prevent the consummation of the transactions contemplated by this Agreement. The Company will deliver to Sellers complete and correct copies of the formation documents of each Company LLC and each Transitory Partnership. Each Company LLC and each Transitory Partnership will be formed solely for the purpose of engaging in the transactions contemplated by this Agreement and will not engage in any business activities or conduct any operations other than as expressly provided for in this Agreement. Other than as expressly contemplated by this Agreement, from the date of their formation through to the Effective Time, each of the Company LLCs and each of the Transitory Partnerships will not own any capital stock or other equity interests in any other person (other than the Transitory Partnerships and the Company LLCs), will conduct no business and will have no assets or liabilities or obligations whatsoever. (d) The Company has delivered to Sellers complete and correct copies of the certificate of formation, limited liability company operating agreement and other organizational documents of the Company, each as amended and supplemented to the date of this Agreement. The Company will deliver to Sellers upon formation complete and correct copies of the certificate of limited partnership, limited partnership agreement, certificate of formation, limited liability company operating agreement and other organizational documents of each of the Company LLCs and each of the Transitory Partnerships, each as amended and supplemented to the date of this Agreement. Section 5.2 Capital Structure. (a) As of the date of this Agreement and as of the time immediately prior to the contributions described in Section 2.3(a) hereof, WXI/MCN Real Estate, L.L.C., a Delaware limited liability company (the "Managing Member"), owns all of the outstanding interests in and is the sole member of the Company. As of the date of this Agreement and as of the Closing Date, Whitehall Street Real Estate Limited Partnership XI, a Delaware limited partnership ("Whitehall"), is the managing member of the 66 Managing Member. At any and all times prior to the Effective Time, Whitehall shall continue to be the managing member of the Managing Member, and the Managing Member shall continue to own all of the outstanding interests in the Company and shall be the sole member of the Company. All outstanding interests in the Company (i) have been duly authorized and are validly issued, fully paid and nonassessable and (ii) are subject to no restriction, except as provided in the Original LLC Agreement. Except as set forth in this Section 5.2, no interests in the Company are issued, reserved for issuance or outstanding, and none of the Managing Member, the Company or any affiliate or subsidiary of the Company has outstanding any obligations the holders of which have the right to vote (or which are convertible, exchangeable or exercisable for interests having the right to vote) with members of the Company on any matter. Except as set forth above, there are no outstanding securities, interests, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind obligating the Managing Member, the Company or any affiliate or subsidiary of the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional interests in the Company or securities or interests convertible, exchangeable or exercisable into interests in the Company. There are no agreements, arrangements or understandings of any kind with respect to the voting of interests in the Company or which restrict the transfer of any such interests, except as provided in the Original LLC Agreement. (b) Upon the formation of each Company LLC and each Transitory Partnership, all outstanding interests in each Company LLC and each Transitory Partnership (i) will have been duly authorized and validly issued, fully paid and nonassessable and (ii) will be subject to no restriction, except as provided in the organizational documents of such entities. As of its formation and through to the Effective Time, the Company will own all of the outstanding interests in the Sub LLC (if the Sub LLC is formed), and the Company or the Sub LLC will own all of the outstanding interests in the other Company LLCs. As of their formation and through to the Effective Time, the Company or the Sub LLC will own all of the outstanding LP Interests in, and the applicable New GP LLC will own all 67 of the outstanding GP Interests in, each Transitory Partnership. Except as expressly provided for in this Agreement, from their formation through to the Effective Time, no interests in the Company LLCs or the Transitory Partnerships will be issued, reserved for issuance or outstanding, and there will be no outstanding securities, interests, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind obligating any such entity to issue, deliver or sell, or cause to be issued, delivered or sold, additional interests in such entity or securities or interests convertible, exchangeable or exercisable into interests in such entity. Section 5.3 Authority; Noncontravention; Consents. (a) The Company has the requisite power and authority to enter into this Agreement and the other Transaction Documents to which it is a party, and to consummate the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party. The execution and delivery by the Company of this Agreement and the other Transaction Documents to which it is a party and the consummation by the Company of the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party have been duly authorized by all necessary action on the part of the Company. This Agreement has been duly executed and delivered by the Company, and each of the other Transaction Documents to which the Company is a party has been duly executed and delivered by the Company, and, assuming the due execution and delivery of this Agreement and such other Transaction Documents by every other party hereto and thereto, respectively, this Agreement and such other Transaction Documents each constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with and subject to its terms, subject, as to enforcement, to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereinafter in effect affecting creditors' rights generally and (ii) general principles of equity. The governing body of the Company has duly and validly approved, and taken all action required to be taken by them for the consummation of the Mergers, the MPLP 68 Contributions, the appointments of the applicable New GP LLCs as the successor general partners of the McNeil Partnerships and the other transactions contemplated by this Agreement and the other Transaction Documents. (b) Prior to the Effective Time, the Company shall have taken all necessary action to permit the issuance of the Company Interests required to be issued to the Contributing Partners pursuant to Sections 1.1 and 1.4 hereof. The issuance and delivery by the Company of such Company Interests shall be, prior to any of the contributions described in Section 2.3(a) hereof, duly and validly authorized by all necessary action on the part of the Company. Such Company Interests, when issued to the Contributing Partners in accordance with the terms of this Agreement and the LLC Agreement, shall have been duly authorized and shall be validly issued, fully paid and nonassessable and not subject to any Liens or any rights or restrictions other than such rights and restrictions with respect to such Company Interests as set forth in the LLC Agreement, the Indemnification Agreement or the DLLCA. (c) The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party do not, and the consummation by the Company of the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party and compliance by the Company with the provisions of this Agreement and the other Transaction Documents to which it is a party shall not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under, or any other change in rights or obligations of any party under (including the right to amend or modify or refuse to perform or comply with), or result in the creation of any Lien upon any of the properties or assets of the Managing Member, the Company or any of its subsidiaries under (i) the certificate of formation, operating agreement or other organizational documents of the Company or the Managing Member, the charter, bylaws or other organizational documents of any such subsidiary which is a corporation or the partnership agreement, certificate of partnership, or limited 69 partnership agreement, certificate of limited partnership or other organizational documents or operating or similar agreements (as the case may be) of any such subsidiary which is an entity other than a corporation, each as amended or supplemented to the date of this Agreement, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other material agreement or other obligation, applicable to the Managing Member, the Company or to any of its subsidiaries or to their respective properties or assets, or (iii) subject to the governmental filings and other matters referred to in Section 5.3(d) hereof, any Laws applicable to the Managing Member, the Company or to any of its subsidiaries or to their respective properties or assets, other than, in the case of clause (ii) or (iii) above, any such conflicts, violations, defaults, rights, losses or Liens that, individually or in the aggregate, would not prevent the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which the Company, any Company LLC or any Transitory Partnership is a party. (d) No consent, approval, order or authorization of, or filing with any Governmental Entity or third party is required by or with respect to the Managing Member, the Company or any of the Company's affiliates or subsidiaries in connection with the execution and delivery of this Agreement or the other Transaction Documents or the consummation by the Company of the transactions contemplated by this Agreement and the other Transaction Documents, except for (i) the acceptance for record of the Merger Certificate and any other documents required by the Governing Law applicable to each Participating McNeil Partnership and its respective Transitory Partnership, by the Secretary of State of the state of formation of such Participating McNeil Partnership and such Transitory Partnership or (ii) such other consents, approvals, orders or authorizations of, or filings with, any Governmental Entity or third party which, if not obtained or made, would not prevent the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which the Company, any Company LLC or any Transitory Partnership is a party. 70 (e) For purposes of determining compliance with the HSR Act only, the Company confirms that the conduct of its business and the business of its subsidiaries consists solely of investing in, owning, developing, managing and operating real estate, directly or through one or more subsidiaries, for the benefit of its stockholders or members, as the case may be. Section 5.4 Compliance with Laws. None of the Managing Member, the Company nor any of the Company's subsidiaries is violating or failing to comply with, or has violated or failed to comply with, any Law of any Governmental Entity applicable to its business, properties or operations, except to the extent that such violation or failure to comply, individually or in the aggregate, would not prevent the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which the Company, any Company LLC or any Transitory Partnership is a party. No investigation or review by any Governmental Entity with respect to the Managing Member, the Company or any subsidiary of the Company is pending or, to the Knowledge of the Company, threatened, nor has any Governmental Entity indicated an intention to conduct the same, except for those the outcome of which would not, individually or in the aggregate, prevent the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which the Company, any Company LLC or any Transitory Partnership is a party. To the Knowledge of the Company, no material change is required in the processes, properties or procedures of the Managing Member, the Company or any subsidiary of the Company in connection with any such Laws, and neither the Managing Member, the Company nor any subsidiary of the Company has received any written notice or communication of any material noncompliance with any such Laws that has not been cured. Each of the Managing Member, the Company and each of the subsidiaries of the Company has all permits, licenses, trademarks, trade names, copyrights, service marks, franchises, variances, exemptions, orders and other authorizations, consents and approvals from Governmental Entities necessary to conduct its business as presently conducted except those the absence of which would not, individually or in the aggregate, prevent the consummation of the transactions contemplated by this Agreement and the 71 other Transaction Documents to which the Company, any Company LLC or any Transitory Partnership is a party. Section 5.5 Litigation. (i) There is no suit, action or proceeding pending in which service of process has been received by or, to the Knowledge of the Company, threatened against or affecting, the Managing Member, the Company or any subsidiary of the Company that, individually or in the aggregate, would prevent the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which the Company, any Company LLC or any Transitory Partnership is a party, and (ii) there is no judgment, decree, rule or order of any Governmental Entity or arbitrator outstanding against the Managing Member, the Company or any subsidiary of the Company as of the date of this Agreement which would prevent the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which the Company, any Company LLC or any Transitory Partnership is a party. Section 5.6 Brokers. Neither the Managing Member, the Company nor any affiliate or subsidiary of the Company has entered into any agreement with any broker, investment banker, financial advisor or other person which would require the Company or Sellers, individually or in the aggregate, to pay any broker's, finder's, financial advisor's, valuation or other similar fee or commission in connection with the transactions contemplated by this Agreement or the other Transaction Documents. Section 5.7 Investment Company Act of 1940. Neither the Managing Member, the Company nor any subsidiary of the Company is, or at the Effective Time will be, required to be registered under the 1940 Act. Section 5.8 Financing. The Company has entered into a written commitment letter for financing from Whitehall (the "Commitment Letter"), and Sellers have received a written guarantee of the Company's obligations under this Agreement from Whitehall (the "Guarantee"). Regardless of whether or not the transactions contemplated by the Commitment Letter are consummated or the obligations under the Guarantee are performed, immediately prior to the Effective Time, the Company will have 72 sufficient funds to consummate the transactions contemplated to occur at or after the Effective Time by this Agreement and the other Transaction Documents. A true, correct and complete copy of the Commitment Letter and the Guarantee have been delivered to Sellers prior to the date hereof. The Commitment Letter and the Guarantee are, and have been at all times since entered into, in full force and effect and have not been withdrawn or amended or breached by any party thereto. Notwithstanding anything to the contrary in this Agreement or the other Transaction Documents or the Commitment Letter or the Guarantee (in each case, whether express or implied), the Company acknowledges and agrees that its obligation to effect the transactions contemplated by this Agreement and the other Transaction Documents is not subject to the availability to Whitehall, the Managing Member, the Company or any of their respective affiliates or subsidiaries (including affiliates and subsidiaries both prior to and following the Effective Time) of any debt or equity or other financing in any amount whatsoever. The parties hereto acknowledge and agree that nothing in this Section 5.8 shall affect the condition to Closing set forth in Section 8.2(d)(i) hereof. ARTICLE VI CONDUCT OF BUSINESS PENDING MERGER Section 6.1 Conduct of Business of Sellers Prior to the Effective Time. Prior to the Effective Time, except as consented to in writing by the Company (which consent shall not be unreasonably withheld or delayed), except as expressly provided for in this Agreement or the other Transaction Documents, and except as set forth in Schedule 6.1 of the Seller Disclosure Letter, each Seller covenants that it shall, and shall cause each of its respective Seller Subsidiaries to: (a) conduct its business only in the ordinary course and in substantially the same manner as conducted prior to the date of this Agreement (including diligent performance of their landlord obligations); 73 (b) preserve intact its business organizations and goodwill and use its reasonable efforts to keep available the services of its officers and employees; (c) confer on a regular basis with one or more representatives of the Company to report on material operational matters (it being understood that all such conversations and exchange of documents (if any) shall be subject to the Confidentiality Agreement); (d) promptly notify the Company of any material emergency or other material change in the condition (financial or otherwise), of its business, properties, assets, liabilities or the normal course of its businesses or in the operation of its properties, or of any material governmental complaints, investigations or hearings (including any fire or casualty losses or receipt of any written violation notices); (e) maintain its books and records in accordance with GAAP applied consistently with past practice and not change in any material manner any of its methods, principles or practices of accounting in effect at the Audit Date, except as may be (or may have been) required by applicable law or GAAP; (f) duly and timely file all reports, tax returns and other documents required to be filed with federal, state, local and other authorities, under the Code and maintain existing insurance coverage; (g) not make or rescind any express or deemed election relating to Taxes; (h) not amend its certificate of incorporation, bylaws, certificate of limited partnership, limited partnership agreement, certificate of partnership, partnership agreement or similar organizational documents, as the case may be, except to cure any ambiguity, to correct or supplement any provision therein which may be inconsistent with any other provision therein, or with law, or as may otherwise be required in connection with the filing of the Proxy Statements and the review of the Proxy Statements by the SEC; 74 (i) not make any change in the number of its shares of capital stock or units of partnership interest issued and outstanding, other than with respect to units of partnership interest abandoned by a limited partner and cancelled by the partnership; provided, however, that nothing contained in this paragraph (i) shall prevent MREF XXVII from repurchasing units of its LP Interests in accordance with its limited partnership agreement in effect on the date hereof; (j) not grant any options or other right or commitment relating to the issuance of its shares of capital stock or units of partnership interest or any security convertible into its shares of capital stock or units of partnership interest, or any security the value of which is measured by its shares of capital stock or units of partnership interest or any security subordinated to the claim of its general creditors; (k) not (i) authorize, declare, set aside or pay any non-cash dividend or make any other non-cash distribution or payment with respect to any of its shares of capital stock or units of partnership interest, (ii) directly or indirectly redeem, purchase or otherwise acquire any of its shares of capital stock or units of partnership interest or any option, warrant or right to acquire, or security convertible into, its shares of capital stock or units of partnership interest, other than units of partnership interest abandoned by a limited partner and cancelled by the partnership or (iii) make any payment to McREMI or MPLP in respect of any Pre-Allocation Upstream Payable; provided, however, that nothing contained in this paragraph (k): (1) shall prevent any Seller or any Seller Subsidiary from making or receiving cash distributions, cash dividends or cash payments (including, without limitation, Post-Allocation Upstream Payables); or (2) shall prevent MREF XXVII from repurchasing units of its LP Interests in accordance with its limited partnership agreement in effect on the date hereof; (l) not sell, lease, or amend any existing lease (other than Residential Leases on lease forms previously approved by the Company and in conformance with rental guidelines previously approved by the Company), or 75 grant any easement, right of way, declaration, restriction, mortgage, encumber, subject to any Lien or otherwise dispose of any of its real properties; provided, however, that following a request by Sellers to enter into a new Commercial Lease or to renew an existing Commercial Lease, the Company shall be required to notify Sellers in writing as to whether or not the Company consents to such new Commercial Lease or such renewal within five (5) business days after Sellers' request therefor; provided further, however, that nothing contained in this paragraph (l) shall prevent any Seller or any Seller Subsidiary from replacing existing mortgage debt on any of its properties (whether real, personal or intangible) prior to the Stanger Determination Date, without the consent of the Company, so long as such replacement debt is prepayable at any time without penalty, premium, exit fees or similar charges and has terms substantially similar to those of mortgage debt incurred by any Seller or any Seller Subsidiary in the ordinary course of business and does not contain any participating or contingent interest features; (m) not sell, lease, mortgage, subject to any Lien or otherwise dispose of any of its personal property or intangible property, except in the ordinary course of business or unless such property is replaced with equal quality items; (n) not make any loans, advances or capital contributions to, or investments in, any other person, other than in the ordinary course of business and other than with respect to Post-Allocation Upstream Payables; provided, however, that nothing contained in this paragraph (n) shall prevent any Seller or any Seller Subsidiary from replacing existing mortgage debt on any of its properties (whether real, personal or intangible) prior to the Stanger Determination Date, without the consent of the Company, so long as such replacement debt is prepayable any time without penalty, premium, exit fees or similar charges and has terms substantially similar to those of mortgage debt incurred by any Seller or any Seller Subsidiary in the ordinary course of business and does not contain any participating or contingent interest features; 76 (o) not pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction (i) of all transaction costs in connection with the transactions contemplated by this Agreement and the other Transaction Documents, (ii) of claims, liabilities and obligations in the ordinary course of business consistent with past practice, (iii) in accordance with their terms, of claims, liabilities and obligations reflected or reserved against in, or contemplated by, the Seller Statements (or the notes thereto) included in the Seller SEC Documents filed prior to the date hereof or in the Seller Statements (or the notes thereto) made available to the Company prior to the date hereof or in the Subsidiary Financial Statements (or the notes thereto); (iv) of suits, actions or proceedings not subject to Section 6.1(v) hereof in the ordinary course of business; and (v) of Post-Allocation Upstream Payables; (p) not guarantee the indebtedness of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing; (q) except for regular year-end bonuses consistent with past practice, except for budgeted salary increases and except for increases in salary in the ordinary course consistent with past practice, not increase any compensation or enter into or amend any employment agreement with any of its officers, directors or employees earning more than seventy thousand dollars ($70,000) per annum, other than waivers by employees of benefits under such agreements and other than any such increase in compensation, agreement or amendment that would not result in any increased liability or obligation upon the Company or any of the Participating McNeil Partnerships or their subsidiaries after the Closing Date; (r) not adopt any new employee benefit plan or amend any existing plans or rights, except for changes which are required by law, except for changes which are not in the aggregate more favorable to participants than provisions presently in effect, and except for changes 77 which would not result in any increased liability or obligation upon the Company or any of the Participating McNeil Partnerships or their subsidiaries after the Closing Date; (s) not merge or consolidate with any person; (t) in any transaction or series of related transactions involving capital, securities, other assets (including cash) or indebtedness of such Seller or its respective Seller Subsidiaries, not acquire or agree to acquire by merging or consolidating with, or by purchasing all or any portion of the equity securities or all or any assets of, or by any other manner, any business or any person; (u) not enter into any new or amend any existing leasing commission agreements, service contracts or management agreements, and not enter into any new or amend any existing agreement with any Governmental Entity regarding any McNeil Partnership Property, other than, in either case, (1) agreements entered into in the ordinary course of business which are cancellable upon no greater than sixty (60) days' notice and (2) agreements which are terminable upon the Closing without causing the Company or its subsidiaries to incur fees and costs or creating any liabilities for the Company or the Participating McNeil Partnerships or their subsidiaries after the Closing Date; (v) not settle or compromise any claim relating to the transactions contemplated by this Agreement that is brought against any Seller by any current, former or purported holder of any securities of any McNeil Partnership without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed, other than settlements or compromises of such claim (i) which involve the making of a lump sum cash payment as the only obligation of the applicable Sellers or Seller Subsidiaries as a result of such settlements or compromises, (ii) which irrevocably and unconditionally release the applicable Sellers, Seller Subsidiaries, the Company and their affiliates in form consented to by the Company (which consent shall not be unreasonably withheld or delayed) from all claims brought, (iii) where any payment under clause (i) above is made prior to the date 78 of the Pre-Closing Balance Sheets or no payment is required to be paid by any Participating McNeil Partnership or its Seller Subsidiaries, and (iv) which do not involve any admission of wrongdoing on the part of the applicable Participating McNeil Partnerships, their respective Seller Subsidiaries or the Company; (w) not take any action which, at the time of the taking of such action, such party knew or reasonably should have known would cause any representation or warranty of Sellers set forth in Article IV hereof to become untrue in any material respect; (x) not increase the number of Property Employees or Corporate Employees, in each case by more than 1% over the aggregate number of employees projected in the most recent budget of McREMI; and (y) not agree in writing or otherwise to not take any of the actions described in paragraphs (a) through (f) of this Section 6.1 or not agree in writing or otherwise to take any of the actions described in paragraphs (g) through (x) of this Section 6.1. Section 6.2 Conduct of Business of the Company, the Transitory Partnerships and the Company LLCs Prior to the Effective Time. Prior to the Effective Time, except as consented to in writing by MPLP on behalf of Sellers (which consent shall not be unreasonably withheld or delayed) or except as expressly provided for in this Agreement or the other Transaction Documents, the Company covenants that it shall and, as applicable, shall cause the Managing Member and each of the Company's subsidiaries to: (a) not conduct any business whatsoever directly or indirectly through the Company, the Transitory Partnerships or the Company LLCs; (b) promptly notify Sellers of any material emergency or other material change in the condition (financial or otherwise) of its assets or the incurrence of any liabilities or any material emergency or other material change (financial or otherwise) in Whitehall; 79 (c) duly and timely file all reports, tax returns and other documents required to be filed with federal state, local and other authorities; (d) not amend the limited partnership agreement, certificate of limited partnership, operating agreement or other organizational documents of the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs; (e) not make any change (including without limitation in the number thereof) in any membership or other equity interests in the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs, in each case, issued or outstanding; (f) not grant any options or other right or commitment relating to any membership or other equity interests in the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs or any security convertible into any membership or other equity interests in the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs, or any security the value of which is measured by any membership or other equity interests in the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs or any security subordinated to the claim of its general creditors; provided, however, that nothing contained in this paragraph (f) shall prevent the formation of the Sub LLC and the issuance of the Preferred Equity Financing (the parties hereto acknowledge and agree that nothing in this Section 6.2(f) shall affect or be deemed to amend or modify any provision of this Agreement, including Sections 5.8, 8.1, 8.2 and 8.3 hereof); (g) (i) not authorize, declare, set aside or pay any dividend or make any other distribution or payment with respect to any membership or other equity interests in the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs and (ii) not directly or indirectly redeem, purchase or otherwise acquire any membership or other equity interests in the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs or any option, warrant or right to acquire, or security convertible into, 80 membership or other equity interests in the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs; (h) not permit the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs to make any loans, advances or capital contributions to, or investments in, any other person; provided, however, that nothing contained in this paragraph (h) shall prevent the formation of the Sub LLC and the issuance of the Preferred Equity Financing (the parties hereto acknowledge and agree that nothing in this Section 6.2(h) shall affect or be deemed to amend or modify any provision of this Agreement, including Sections 5.8, 8.1, 8.2 and 8.3 hereof); (i) not permit the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs to incur any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) of any kind or nature whatsoever (other than claims, liabilities and obligations against any such person for breaches of this Agreement or any other agreements to which any such person is a party and other than the Preferred Equity Financing and other financing that the Company or its subsidiaries may enter into to effect the transactions contemplated by this Agreement) (the parties hereto acknowledge and agree that nothing in this Section 6.2(i) shall affect or be deemed to amend or modify any provision of this Agreement, including Sections 5.8, 8.1, 8.2 and 8.3 hereof); (j) not permit the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs to issue or sell any equity interests, or grant, confer or award any options, warrants or rights of any kind to acquire any equity interests, including securities convertible or exchangeable for equity interests in one or more of the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs; provided, however, that nothing contained in this paragraph (j) shall prevent the formation of the Sub LLC and the issuance of the Preferred Equity Financing (the parties hereto acknowledge and agree that nothing in this Section 6.2(j) shall affect or be deemed to amend or 81 modify any provision of this Agreement, including Sections 5.8, 8.1, 8.2 and 8.3 hereof); (k) not permit the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs to incur, guarantee the indebtedness of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing; (l) not permit the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs to merge or consolidate with any person; (m) not permit the Company, the Managing Member, any of the Transitory Partnerships or any of the Company LLCs to sell, assign, convey, lease, mortgage, pledge, transfer or otherwise dispose of any of its assets or properties or adopt any plan of liquidation, dissolution or winding-up; (n) not take any action which, at the time of the taking of such action, such party knew or reasonably should have known would cause any representation or warranty of the Company set forth in Article V hereof to become untrue in any material respect; and (o) not agree in writing or otherwise to not take any of the actions described in paragraphs (b) and (c) of this Section 6.2 or not agree in writing or otherwise to take any of the actions described in paragraph (a) and paragraphs (d) through (n) of this Section 6.2. Section 6.3 Reimbursable Proposals. (a) During the period from the date hereof through to the Closing Date, Sellers shall have the option of presenting to the Company one or more proposals for capital expenditures, tenant inducements (e.g., free rent, other cash-equivalent inducements, and out-of-pocket inducements) or commissions, specifying the budgeted amounts therefor, that one or more McNeil Partnerships are contemplating in connection with one or more new 82 Commercial Leases or the lease of additional space to an existing Commercial Tenant (each such capital expenditure, tenant inducement or commission proposal, a "Reimbursable Proposal"). In addition, the parties hereto acknowledge that on or prior to the date of this Agreement, Sellers have presented to the Company, and the Company has approved, the Reimbursable Proposals and the budgeted amounts therefor listed on Schedule 6.3 of the Seller Disclosure Letter. (b) To the extent any one or more Reimbursable Proposals with respect to any Participating McNeil Partnership have been approved by the Company on or prior to the date hereof or are approved by the Company (which approval shall not be unreasonably withheld or delayed) subsequent to the date hereof, the Company shall make a cash contribution to such Participating McNeil Partnership, prior to the distributions contemplated by Section 2.4(c) hereof, in an amount equal to the Capital Expenditure Reimbursement for such Participating McNeil Partnership which shall be taken into consideration in the determination of the Excess Cash Balance of such Participating McNeil Partnership in accordance with the Excess Cash Balance Schedule for such Participating McNeil Partnership. (c) For purposes of this Agreement, the following terms shall have the following meanings: (i) "Capital Expenditure Reimbursement" means, for any McNeil Partnership, the sum of the Capital Expenditure Reimbursement Amounts for each Reimbursable Proposal for such McNeil Partnership. (ii) "Capital Expenditure Reimbursement Amount" means, for each Reimbursable Proposal, an amount equal to the product determined by multiplying (A) the Reimbursable Proposal Amount for such Reimbursable Proposal by (B) a fraction (in no event shall such fraction be greater than one (1)), the numerator of which is the number of months (including any fraction thereof) in the period beginning on the estimated Closing Date and ending on the last day of the initial term of the applicable Commercial Lease and the denominator of which is the aggregate number 83 of months in the initial term of the applicable Commercial Lease. (iii) "Completed Amount" means, for any Reimbursable Proposal, an amount equal to the aggregate amount expended or incurred through to the estimated Closing Date in connection with such Reimbursable Proposal. (iv) "Reimbursable Proposal Amount" means, for any Reimbursable Proposal, an amount equal to the lesser of (1) the Completed Amount and (2) the total budgeted amounts for such Reimbursable Proposal; provided, however, that for any Reimbursable Proposal which will be uncompleted as of the estimated Closing Date, the "Reimbursable Proposal Amount" for such Reimbursable Proposal shall be an amount equal to the difference determined by subtracting (x) the Underbudgeted Amount (if any) for such Reimbursable Proposal from (y) the Completed Amount for such Reimbursable Proposal. (v) "Underbudgeted Amount" means, for any Reimbursable Proposal, the excess (if any) of (1) the sum of (A) the Completed Amount and (B) the estimated additional amount (which is reasonably and in good faith jointly determined by the Company and MPLP) required to be expended or incurred following the estimated Closing Date to complete such Reimbursable Proposal over (2) the total budgeted amounts for such Reimbursable Proposal. ARTICLE VII ADDITIONAL COVENANTS Section 7.1 Preparation of the Proxy Statement; Recommendation of Mergers. (a) With respect to each Merging Partnership, Sellers shall prepare (and, in the case of each of the Public McNeil Partnerships, file with the SEC) as soon as practicable after the date of this Agreement, but in any event not later than August 31, 1999, which date may be 84 extended by Sellers (subject to approval of the Company, which shall not be unreasonably withheld or delayed) or by the Company, a proxy statement with respect to the McNeil Limited Partner Meeting of such Merging Partnership to approve the Merger in respect of such Merging Partnership, the MPLP Contributions with respect to such Merging Partnership, the appointment of the applicable New GP LLC as the successor general partner of such Merging Partnership and the other transactions contemplated by this Agreement (each, a "Proxy Statement"). If required by law, Sellers and any person that may be deemed to be an affiliate of any Public McNeil Partnership shall prepare and file concurrently with the filing of the Proxy Statement for such Public McNeil Partnership a Statement on Schedule 13E-3 (each, a "Schedule 13E-3") with the SEC with respect to such Public McNeil Partnership. The Company shall, upon request by Sellers, furnish Sellers with such information concerning itself, the Managing Member and Whitehall as may be required by law or by any Governmental Entity in connection with any Proxy Statement, any Schedule 13E-3 or any other statement, filing, notice or application made by or on behalf of the Company to any third party or any Governmental Entity or both in connection with the Mergers, the MPLP Contributions, the appointments of the applicable New GP LLCs as the successor general partners of the McNeil Partnerships and the other transactions contemplated by this Agreement. Sellers shall use their reasonable best efforts to (i) promptly respond to any comments of the SEC and (ii) cause the respective Proxy Statements to be mailed to the limited partners of the respective Merging Partnerships as promptly as practicable after the date of this Agreement. Sellers shall notify the Company promptly of the receipt of any comments from the SEC and of any request by the SEC for amendments or supplements to any Proxy Statement or any Schedule 13E-3 or for additional information and shall supply the Company with copies of all correspondence between Sellers or any of their representatives, on the one hand, and the SEC, on the other hand, with respect to any Proxy Statement or any Schedule 13E-3. The Proxy Statements for the Public McNeil Partnerships and the Schedule 13E-3s shall comply in all material respects with all applicable requirements of law and the rules and regulations of the SEC. Whenever any event occurs which is required to be set forth in an 85 amendment or supplement to any Proxy Statement, Sellers and the Company each shall promptly inform the other of such occurrences and Sellers shall prepare (and, in the case of the Public McNeil Partnerships, file with the SEC) and mail to the limited partners of the applicable Merging Partnership such amendment or supplement to such Proxy Statement. Whenever any event occurs which is required to be set forth in an amendment or supplement to any Schedule 13E-3, Sellers shall promptly inform the Company of such occurrence, and Sellers and the affiliates of the applicable Public McNeil Partnership shall file such amendment or supplement. The Proxy Statements (at the respective dates thereof and at the dates of the respective McNeil Limited Partner Meetings) and Schedule 13E-3s (at the respective dates thereof) will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the foregoing shall not apply to the extent that any such untrue statement of a material fact or omission to state a material fact was made by Sellers in reliance upon and in conformity with information concerning the Company or any affiliates of the Company or concerning the Transitory Partnerships or the Company LLCs furnished to Sellers in writing by the Company specifically for use in any such Proxy Statements or Schedule 13E-3s. (b) Each Merging Partnership shall, as soon as practicable following the date of this Agreement, subject to the time periods set forth in its organizational documents and in applicable laws, duly call, give notice of, convene and hold a meeting of its limited partners (a "McNeil Limited Partner Meeting") to be held at the earliest practicable date following the date the applicable Proxy Statement is mailed to its limited partners for the purpose of obtaining requisite approval by its limited partners of the Merger in respect of such Merging Partnership, the MPLP Contributions with respect to such Merging Partnership, the appointment of the applicable New GP LLC as the general partner of such Merging Partnership and the other transactions contemplated by this Agreement. Unless otherwise prohibited by law, each Merging Partnership and its 86 general partner shall be required to hold the McNeil Limited Partner Meeting with respect to such Merging Partnership, regardless of whether the general partner of such Merging Partnership has withdrawn, amended or modified its recommendation that the limited partners of such Merging Partnership approve the Merger in respect of such Merging Partnership, the MPLP Contributions with respect to such Merging Partnership, the appointment of the applicable New GP LLC as the general partner of such Merging Partnership and the other transactions contemplated by this Agreement, unless this Agreement has been terminated in respect of such Merging Partnership pursuant to the provisions of Section 9.3 hereof. The general partner of each of the Merging Partnerships shall recommend to the limited partners of such Merging Partnership approval of the Merger in respect of such Merging Partnership, the MPLP Contributions with respect to such Merging Partnership, the appointment of the applicable New GP LLC as the successor general partner of such Merging Partnership and the other transactions contemplated by this Agreement; provided, however, that prior to the McNeil Limited Partner Meeting for such Merging Partnership (or any adjournment thereof), the recommendation of the general partner of such Merging Partnership may be withdrawn, modified or amended as a result of the commencement or receipt of a proposal constituting a Superior Acquisition Proposal with respect to such Merging Partnership, but only to the extent expressly permitted under Section 7.2 hereof. (c) If on the date of the McNeil Limited Partner Meeting for a Merging Partnership, such Merging Partnership has not received duly executed proxies which, when added to the number of votes represented in person at the meeting by persons who intend to vote to adopt this Agreement, will constitute a sufficient number of votes to adopt this Agreement (and limited partners holding greater than a majority of the outstanding LP Interests in such Merging Partnership have not indicated their intention to vote against, and have not submitted duly executed proxies voting against, the adoption of this Agreement), then such Merging Partnership and its general partner shall recommend the adjournment of its McNeil Limited Partner Meeting until the date ten (10) days after the originally scheduled date of such McNeil Limited Partner Meeting. 87 Section 7.2 Acquisition Proposals. Prior to the Effective Time, each Seller agrees that: (a) it shall not, directly or indirectly, through any of its officers, directors, employees or agents or representatives (including any investment banker, attorney or accountant) retained by it, and it shall not authorize or permit its officers, directors, employees or agents or representatives (including any investment banker, attorney or accountant) retained by it to, initiate, solicit or encourage any inquiries or the making or implementation of any Acquisition Proposal or engage in any negotiations concerning or provide any confidential information or data to, or have any discussions with, any person relating to an Acquisition Proposal, or otherwise facilitate any efforts to attempt to make or implement an Acquisition Proposal; (b) it shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal and shall take the necessary steps to inform its officers, directors, employees or agents or representatives (including any investment banker, attorney or accountant) retained by it of the obligations undertaken in this Section 7.2; and (c) it shall notify the Company immediately if it receives any such inquiries or proposals, or any requests for such information, or if any such negotiations or discussions are sought to be initiated or continued with it; provided, however, that nothing contained in this Section 7.2: (i) shall prohibit the general partner of any McNeil Partnership from furnishing information to or entering into discussions or negotiations with, any person that makes an unsolicited Acquisition Proposal for such McNeil Partnership, if, and only to the extent that, (A) such general partner determines in good faith that such unsolicited Acquisition Proposal could result in a Superior Acquisition Proposal and that such action is required for such general partner to comply with its duties to its limited partners imposed by law, (B) prior 88 to furnishing such information to, or entering into discussions or negotiations with, such person, such general partner provides written notice to the Company to the effect that it is furnishing information to, or entering into discussions with, such person and (C) (1) subject to clause (2) below, such general partner keeps the Company informed of the status (not the terms) of any such discussions or negotiations and (2) such general partner complies with the last sentence of Section 9.3(b) hereof; or (ii) to the extent applicable, shall prohibit the general partner of any McNeil Partnership from taking and disclosing to the limited partners of such McNeil Partnership a position, with respect to such McNeil Partnership, contemplated by Rules 14d-9 and 14e-2 under the Exchange Act with regard to an Acquisition Proposal for such McNeil Partnership; provided further, however, that the general partner of any McNeil Partnership may approve and recommend a Superior Acquisition Proposal and, in connection therewith, withdraw or modify its approval or recommendation of this Agreement, the Merger in respect of such McNeil Partnership, the MPLP Contributions with respect to such McNeil Partnership, the appointment of the applicable New GP LLC as the successor general partner of such McNeil Partnership and the other transactions contemplated by this Agreement, prior to the approval by the holders of LP Interests of such McNeil Partnership of this Agreement, the Merger in respect of such McNeil Partnership, the MPLP Contributions with respect to such McNeil Partnership, the appointment of the applicable New GP LLC as the successor general partner of such McNeil Partnerships and the other transactions contemplated by this Agreement at the McNeil Limited Partner Meeting (or any adjournment thereof) of such McNeil Partnership. Any disclosure that the general partner of any McNeil Partnership may be compelled to make with respect to the receipt of an Acquisition Proposal for such McNeil Partnership in order to comply with its duties to its limited partners or that the general partner of any McNeil Partnership may be compelled to make in order to comply with Rule 14d-9 or 14e-2, shall not constitute a violation of this Section 7.2, provided that such disclosure states that no action shall be taken by such general partner with respect to the withdrawal of its recommendation of the transactions contemplated hereby or the approval or 89 recommendation of any Acquisition Proposal except in accordance with this Section 7.2. Section 7.3 Access to Information; Confidentiality. (a) Subject to the requirements of confidentiality agreements entered into with third parties and subject to all other legal limitations (including attorney-client and work product privileges, confidentiality, antitrust and fair trade limitations), Sellers shall (and shall cause their respective Seller Subsidiaries to) afford to the Company and to the officers, employees, accountants, counsel, financial advisors and other representatives of the Company, reasonable access during normal business hours prior to the Effective Time to such Sellers' and such Seller Subsidiaries' respective properties, books, contracts, commitments, personnel and records, and Sellers shall (and shall cause their respective Seller Subsidiaries to) promptly make available to the Company or its representatives all information concerning such Sellers' and such Seller Subsidiaries' respective business, properties and personnel as the Company or its representatives may reasonably request; provided, however, that no investigation pursuant to this Section 7.3 shall affect or be deemed to modify any representation or warranty made by Sellers. (b) Following the date of this Agreement and until and including the Closing Date, Sellers will prepare in accordance with GAAP applied consistently with past practice and make available to the Company (i) within forty-five (45) days following the end of any fiscal quarter, a copy of the unaudited quarterly balance sheet and related unaudited statements of operations and cash flows for such quarter for each Private McNeil Partnership that is a Participating McNeil Partnership at such time and (ii) within fifteen (15) days following the end of each fiscal month, a copy of the unaudited monthly balance sheet and related unaudited statements of operations and cash flows for such month for each Participating McNeil Partnership and a Preliminary Excess Cash Balance Schedule for each such Participating McNeil Partnership. Sellers and the Company will use their best efforts to respond to 90 any inquiries any such party may have concerning such quarterly and monthly financial statements and monthly Preliminary Excess Cash Balance Schedules. No such discussion or failure to raise issues shall become final and binding upon any party hereto except pursuant to Section 2.4(b) hereof. (c) The Company shall, and shall cause its subsidiaries and affiliates to, and shall cause each of their officers, employees, accountants, counsel, financial advisors and other representatives to, hold any nonpublic information relating to Sellers or the Seller Subsidiaries or any of their respective businesses or properties in confidence to the extent required by, and in accordance with, the provisions of the letter agreement dated as of March 25, 1999 among Whitehall, MPLP and McREMI (the "Confidentiality Agreement"), regardless of whether such information was disclosed pursuant to this Section 7.3 or any other provision of this Agreement. Section 7.4 Reasonable Best Efforts; Notification. (a) Subject to the terms and conditions provided in this Agreement, Sellers, on the one hand, and the Company, on the other hand, shall use their respective reasonable best efforts: (i) to cooperate with one another in (A) determining which consents, approvals, orders or authorizations of, or filings with, any Governmental Entities are required to be obtained or made prior to the Effective Time in connection with the execution and delivery of this Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, and (B) timely making all such filings and timely seeking all such consents, approvals, orders or authorizations; (ii) subject to Section 7.8 hereof, without the payment of any consideration therefor (except as expressly contemplated by this Agreement) and without compromising their respective rights and without incurring additional liabilities or obligations, to obtain in writing any consents, approvals, orders or authorizations required from non-governmental third parties to effectuate the Mergers, the MPLP Contributions, the appointments of the applicable New GP LLCs as the successor general partners 91 of the McNeil Partnerships and the other transactions contemplated by this Agreement and the other Transaction Documents, such consents, approvals, orders or authorizations to be in form reasonably satisfactory to Sellers and the Company (it being acknowledged and agreed that nothing in this Section 7.4(a)(ii) shall affect or be deemed to amend or modify any provision of this Agreement, including Sections 5.8, 8.1, 8.2 and 8.3 hereof); and (iii) without the payment of any consideration therefor and without compromising their respective rights and without incurring additional liabilities or obligations, to take, or cause to be taken, all other action and do, or cause to be done, all other things necessary, proper or appropriate to consummate and make effective the transactions contemplated by this Agreement and the other Transaction Documents (it being acknowledged and agreed that nothing in this Section 7.4(a)(iii) shall affect or be deemed to amend or modify any provision of this Agreement, including Sections 5.8, 8.1, 8.2 and 8.3 hereof). (b) If at any time after the Effective Time any further action is necessary or desirable to carry out the purpose of this Agreement, without the payment of any consideration therefor and without compromising their respective rights and without incurring additional liabilities or obligations, each Seller and the Company shall, and each shall cause its respective affiliates and subsidiaries to, take all such necessary action. Without the payment of any consideration therefor and without compromising their respective rights and without incurring additional liabilities or obligations, Sellers shall use their reasonable efforts to cooperate with the Company in assisting the Company in its efforts to correct or satisfy the items set forth on Schedule A to the Seller's Task List. The Company shall indemnify and hold Sellers harmless for any and all losses or damages (including reasonable attorneys' fees) that Sellers may suffer in connection with such cooperative efforts. (c) Promptly following the Effective Time, McREMI or MPLP shall file Schedule K-1s with supporting documents (not including Form 15s) with respect to the Participating McNeil Partnerships to reflect the change of 92 status of each Participating McNeil Partnership as a result of the transactions contemplated hereby. Section 7.5 Public Announcements. (a) Sellers, on the one hand, and the Company, on the other hand, shall consult with each other before the issuance by any of them or by any of their affiliates, and shall provide each other the opportunity to review and comment upon, any press release or other written public statements with respect to the transactions contemplated by this Agreement and the other Transaction Documents, and shall not, and shall cause their affiliates not to, issue any such press release or make any such written public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement and the other Transaction Documents shall be in the form mutually agreed to by the parties to this Agreement prior to the execution of this Agreement. (b) Prior to the Closing, the Company shall not, and shall cause its subsidiaries and affiliates not to, and shall cause each of their respective partners, equity holders, members, officers, directors, managers, employees, agents, accountants, counsel, financial advisors and other representatives not to, publicly announce or disclose to any person (other than to senior management of Sellers and, after notifying such lenders and prospective third party property managers verbally of the confidential nature of such proposal or intention, any existing or prospective lenders of the Company and any prospective third party property managers for the Commercial Properties), whether verbally or in writing, any proposal or intention to sell, transfer or otherwise dispose of, in any manner (including by way of merger, consolidation, exchange, business combination or any other transaction), directly or indirectly, any of the McNeil Partnerships, Seller Subsidiaries, McNeil Partnership Properties or assets of McREMI. 93 Section 7.6 Benefit Plans and Other Employee Arrangements. (a)(i) Prior to the date of the mailing of the Proxy Statements for the Participating McNeil Partnerships (the "Proxy Mailing Date"), the Company shall provide a written list (the "Employment List") to Sellers of each employee of Sellers or any Seller Subsidiary to whom, as of the Effective Time, the Company shall cause Management LLC to offer employment (each such employee, a "Listed Employee") provided that such employee is still an employee of McREMI as of the Effective Time. The Listed Employees shall be comprised of two groups: one group shall be comprised of Property Employees for Multifamily Properties and shall be designated on the Employment List as the "Property Listed Employees" (the "Property Listed Employees") and the other group shall be comprised of Corporate Employees and shall be designated on the Employment List as the "Corporate Listed Employees" (the "Corporate Listed Employees"). The Property Listed Employees shall not constitute less than 75% of those employees of McREMI who, as of the Proxy Mailing Date, were Property Employees for Multifamily Properties with respect to the Participating McNeil Partnerships. The Corporate Listed Employees shall not constitute less than the Threshold Amount of those employees of McREMI, who, as of the Proxy Mailing Date, were Corporate Employees. For purposes of this Agreement, the "Threshold Amount" shall be an amount equal to the product determined by multiplying (A) the number of Corporate Employees as of the Proxy Mailing Date by (B) 0.5 by (C) a fraction, the numerator of which is the total number of McNeil Partnership Properties of the Participating McNeil Partnerships and their Seller Subsidiaries and the denominator of which is the total number of McNeil Partnership Properties of the McNeil Partnerships and their Seller Subsidiaries. The Company shall cause Management LLC to make such offers of employment on terms and conditions that are considered reasonable and customary in the real estate asset/property management industry as of the Closing Date, taking into account the geographic location of the employee 94 to whom such offer of employment is being made. All such offers of employment may be made subject to drug testing, criminal background checks and credit checks. (ii) The Company shall cause Management LLC to continue the employment of any Property Employee and any Corporate Employee who accepts such offer of employment for a period ending on December 31st of the calendar year following the calendar year in which the Closing occurs subject to termination for cause, resignation, retirement, performance reasons or business reasons. For purposes of this Agreement, any employee that accepts an offer of employment from the Company (or a subsidiary or affiliate of the Company) as of the Closing Date shall be referred to as an "Affected Employee." (iii) In addition to continuing the workforce of McREMI in accordance with this Section 7.6, the Company shall cause Management LLC, for a period ending on December 31st of the calendar year following the calendar year in which the Closing occurs to continue utilizing the McREMI Assets listed on Annex H hereto to the extent those assets are transferred at Closing; provided, however, that, to the extent the Company reasonably determines that the continued utilization of a specific McREMI Asset is not supported by sound business practices, Management LLC may cease utilization of such asset and, if the Company reasonably determines that a substitution (which can be accomplished by way of purchasing, licensing, or leasing such substituted asset from a third party or an affiliate of the Company or developing such substituted asset in Management LLC) of such asset would be sound business practice, substitute a more appropriate asset in its stead; provided further, however, that if the Company determines not to substitute an asset for a discontinued asset it will not permit Management LLC to utilize an asset of Archon or its subsidiaries to provide the underlying function of the discontinued asset. In the event that Management LLC requires additional employees (because of any Affected Employee's termination, resignation, death, or 95 retirement), such additional employees shall become employees of Management LLC. (iv) Neither the Company (nor any subsidiary or affiliate of the Company) shall have any obligation to continue the employment of any Affected Employee that is not a Property Listed Employee or a Corporate Listed Employee for any specified period of time following the Closing. (b) At the Effective Time, McREMI shall terminate the employment of each Affected Employee and shall cause the termination of employment of each other employee of the Participating McNeil Partnerships and their respective Seller Subsidiaries, and the employment of each Affected Employee by the Company, Management LLC or their respective subsidiaries, as the case may be, shall commence. The Company shall, or shall cause the appropriate subsidiary or affiliate to, provide health, pension, retirement, disability and other employee benefits to each Affected Employee on the same terms as, or on terms not less favorable in the aggregate than, those provided to such Affected Employee immediately prior to the Effective Time (such benefits, the "Buyer Plans"). Prior to the Effective Time, McREMI and each applicable Seller Subsidiary shall cause the cancellation of all employment related agreements (including, without limitation, all of the agreements listed on Schedule 4.11 of the Seller Disclosure Letter) between it and any of its officers or directors and shall pay all fees and costs related to such cancellation. Subject to the provisions of this Section 7.6(b), the Company retains the right to amend or terminate any of the Buyer Plans at any time. (c) As of the Effective Time, Affected Employees shall cease to participate in the McREMI Plans and shall commence participation or shall become eligible to participate in all Buyer Plans maintained after the Effective Time in accordance with the second sentence of Section 7.6(b) hereof. McREMI shall retain responsibility for all McREMI Plan claims incurred by Affected Employees prior to the Effective Time regardless of when such claim is reported or made. For purposes of this Section 7.6(c), a claim shall be deemed to have been incurred when the medical or other service giving rise to the claim is 96 performed, except that disability claims shall be deemed to have been incurred on the date the Affected Employee becomes disabled. (d) The Company shall, or shall cause its appropriate subsidiary or affiliate to, give each Affected Employee full credit for up to five accrued vacation days (in accordance with Item I of Note 18 to the applicable Participating McNeil Partnership's Excess Cash Balance Schedule) and full credit for purposes of eligibility, vesting, accruing subsequent vacation days and determination of the level of benefits under each Buyer Plan (other than incentive compensation plans) for such Affected Employee's service with McREMI to the same extent recognized by such Seller or Seller Subsidiary immediately prior to the Effective Time. (e) The Company shall, or shall cause its appropriate subsidiary or affiliate to, waive all limitations as to preexisting conditions exclusions and waiting periods with respect to participation and coverage requirements applicable to each Affected Employee under any Buyer Plan (except for preexisting conditions with respect to life insurance coverage), other than limitations or waiting periods that are already in effect with respect to such Affected Employee and that have not been satisfied as of the Effective Time under any McREMI Plan maintained for the Affected Employee immediately prior to the Effective Time. (f) Prior to the Effective Time, McREMI shall terminate any 401(k) Savings Plan of McREMI (each, a "McREMI 401(k) Savings Plan"), and each employee who is a participant in any such terminated McREMI 401(k) Savings Plan shall have the right to elect to receive a distribution of all of such employee's account balance in such McREMI 401(k) Savings Plan (subject to, and in accordance with, the provisions of such McREMI 401(k) Savings Plan and applicable law). The Company shall, or shall cause its appropriate subsidiary or Archon to, take any and all necessary action (subject to, and in accordance with, the provisions of the Buyer Plan and applicable law) to cause the trustee of a defined contribution plan of the Company (or its subsidiaries or Archon), if requested to do so by a distributee who is an 97 Affected Employee, to accept the direct "roll over" of all or a portion of any such distribution from any McREMI 401(k) Savings Plan. (g) Except as set forth in Section 7.6(h) hereof, McREMI shall be liable for and be responsible for the administration of all claims, losses, damages and expenses and other liabilities and obligations relating to or arising out of all workers' compensation claims of Affected Employees pending as of the Effective Time, or made after the Effective Time but relating to events occurring prior to the Effective Time. The Company and its subsidiaries that employ such Affected Employees shall be liable for and be responsible for the administration of all claims, losses, damages and expenses and other liabilities and obligations relating to or arising out of all workers' compensation claims of Affected Employees made after the Effective Time and relating to events occurring after the Effective Time. (h) McREMI shall give or arrange for written notice to be provided to those employees (and their spouses) of McREMI who are not deemed Affected Employees (the "Terminated Employees") of their right to elect to pay continuation coverage under Section 4980B of the Code ("COBRA") in accordance with applicable law. With respect to continuation coverage under COBRA required to be provided by McREMI, the Company shall, if requested by McREMI, be responsible following the Effective Time for administering on behalf of McREMI (without cost to McREMI) the provision of such coverage for (A) all former McREMI employees and their present or former dependents covered under COBRA at the Effective Time and (B) all Terminated Employees and their present or former dependents; provided, however, that the Company shall not be responsible for any liabilities associated with COBRA benefit claims (other than liabilities associated with the failure by the Company to pay-over to the appropriate insurers the insurance premiums collected from COBRA participants). (i) Sellers shall, or shall cause their respective Seller Subsidiaries to, take all necessary action to satisfy, or set aside sufficient funds to 98 satisfy, all Severance Obligations for the Terminated Employees on or prior to the Closing Date. Section 7.7 Ancillary Agreements. (a) Immediately prior to the Effective Time, each party hereto shall, and shall cause its affiliates to, execute and deliver each Ancillary Agreement to which such party or such party's affiliate is a party. (b) At the Closing, the Company shall, and the Company shall cause Archon Group, L.P. ("Archon") to, execute and deliver the Portfolio Advisory Agreement. Section 7.8 Support Agreements; Financing. (a) The Company shall, and shall cause the Company's subsidiaries to, deliver at the Closing such agreements, instruments and other documents (collectively, the "Replacement Support Agreements") as may be necessary to assume all of Sellers' and their affiliates' (other than the Participating McNeil Partnerships' and their subsidiaries') obligations as an indemnitor under any and all Existing Support Agreements on terms no less favorable than those under the Existing Support Agreements on the date hereof. The Company shall use its reasonable efforts to ensure that the Replacement Support Agreements shall contain provisions releasing Sellers and their pre-Closing affiliates (other than the Participating McNeil Partnerships and their subsidiaries) from all obligations thereunder. Without limiting the foregoing, the Company hereby agrees to indemnify and hold harmless Sellers and their pre-Closing affiliates (other than the Participating McNeil Partnerships and their subsidiaries) from and against all obligations incurred under the Existing Support Agreements from and after the Closing Date. MPLP, to the extent that the obligations of MPLP or MII as an indemnitor under any Existing Support Agreement are not discharged thereunder, agrees to indemnify and hold harmless the Company from and against all obligations incurred by MPLP or MII as an indemnitor under any such Existing Support Agreement prior to the Closing Date. (b) Without the payment of any consideration therefor (other than as expressly contemplated by this 99 Agreement), without compromising any rights and without incurring additional liabilities or obligations, Sellers shall take all necessary action (including using their reasonable best efforts to obtain any third party consents) and the Company shall, and shall cause its subsidiaries and affiliates to, take all necessary action (including cooperating with Sellers to obtain any third party consents), (i) to enable the Company to repay all Terminated Loans at the Effective Time and (ii) to permit the Non-Terminated Loans to continue to remain outstanding without penalty at and after the Effective Time until their expiration or prepayment as indebtedness of the persons which incurred the Non-Terminated Loans prior to the Effective Time (it being acknowledged and agreed that nothing in this Section 7.8(b) shall affect or shall be deemed to amend or modify any provision of this Agreement, including Sections 1.5, 8.1, 8.2 and 8.3 hereof). (c) Without limiting, amending or modifying any other provision of this Agreement (including Sections 5.8, 8.1, 8.2 and 8.3 hereof), without the payment of any consideration therefor, without compromising any rights and without incurring additional liabilities or obligations, Sellers shall cooperate with the Company to assist the Company in obtaining new financing in connection with the Mergers and the other transactions contemplated by this Agreement and the other Transaction Documents. Section 7.9 Fees and Expenses. (a) Except as expressly provided to the contrary in this Agreement, whether or not the transactions contemplated by this Agreement or the other Transaction Documents are consummated, all costs and expenses incurred in connection with this Agreement and the other Transaction Documents including, without limitation, the fees, expenses and disbursements of counsel, financial advisors and accountants, shall be paid by the party incurring such costs and expenses. Without limiting the generality of the foregoing, whether or not the transactions contemplated by this Agreement or the other Transaction Documents are consummated, McREMI agrees that it shall 100 be liable for the McREMI Transaction Expenses and each McNeil Partnership agrees that it shall be liable for its Per Partnership Transaction Expenses; provided, however, that a McNeil Partnership which becomes an Excluded McNeil Partnership pursuant to Section 9.3(a) hereof shall not be liable for its Per Partnership Transaction Expenses incurred following the date on which such McNeil Partnership became an Excluded McNeil Partnership pursuant to Section 9.3(a) hereof, and the Participating McNeil Partnerships shall share such expenses ratably, based on their relative Partnership Percentages. (b) Any Assumption Fees, Prepayment Fees and Transaction Expenses (including without limitation the McREMI Transaction Expenses) paid by the Contributing Partners or any Seller (other than a McNeil Partnership) and any fees, expenses and disbursements incurred and paid by the Contributing Partners or any Seller (other than a McNeil Partnership) in connection with this Agreement and the other Transaction Documents, subject to documentation and approval (which shall not be unreasonably withheld or delayed) by the Board of Managers of the Company (the "Board of Managers"), in an aggregate amount not to exceed one-half of the aggregate amount of fees, expenses and disbursements charged to the Company, its subsidiaries and affiliates by Sullivan & Cromwell with respect to negotiating and documenting the transactions contemplated by this Agreement and the other Transaction Documents, shall be treated as a contribution in-kind to the Company (the "Capitalized McNeil Expenses") by MPLP (or another designee of the Contributing Partners) in exchange for Company Interests in accordance with Section 1.4 hereof. Section 7.10 Allocations. The Company and Sellers each covenant (which covenant shall survive the Closing and the Effective Time), and the LLC Agreement shall provide (until thereafter changed in accordance with the terms of the LLC Agreement or applicable law), that the Allocations shall be binding on Sellers and on the Company, its subsidiaries and affiliates and shall be adhered to by Sellers and by the Company, its subsidiaries and affiliates for the purposes of reporting the book and tax basis of the Company's assets. 101 Section 7.11 Related Party Transactions. (a) Prior to the Effective Time, except as consented to in writing by the Company (which consent shall not be unreasonably withheld or delayed), or except as expressly provided for in this Agreement or the other Transaction Documents, Sellers shall, and shall cause the Seller Subsidiaries to, settle all Related Party Transactions with respect to the Participating McNeil Partnerships in the ordinary course of business prior to the Effective Time. In the event that any Related Party Transaction is not settled prior to the Effective Time, such Related Party Transaction shall be cancelled as of the Effective Time, and all fees and costs related to such cancellation shall be taken into consideration in calculating the Excess Cash Balance of the applicable Participating McNeil Partnerships in accordance with the Excess Cash Balance Schedule. (b) Notwithstanding anything to the contrary in this Agreement, if Summerhill is a Participating McNeil Partnership, the Company shall contribute adequate cash to Summerhill to, and shall cause Summerhill to, repay at the Effective Time (including all accrued but unpaid interest thereon through to the Effective Time) the demand note, dated November 17, 1997, payable by Summerhill to Robert A. McNeil and Carole J. McNeil (the "Summerhill Note"). The parties hereto acknowledge and agree that in determining the Excess Cash Balance of Summerhill, the Summerhill Note shall be deemed to be a current liability and no adjustment shall be made to the cash line item to reflect any payment of the Summerhill Note or any contribution of cash to effect such payment. Section 7.12 Stanger Reports. Sellers shall use their reasonable best efforts to obtain from Stanger the Stanger Opinions, the Allocation Analysis and, if requested, the Appraisals, and to obtain from Eastdil the Eastdil Opinions, in each case on or prior to the date on which the Proxy Statements are mailed to the limited partners of the McNeil Partnerships in accordance with Section 7.1 hereof. 102 Section 7.13 Estoppels. (a) Without the payment of any consideration therefor (other than as expressly contemplated by this Agreement), without compromising any rights and without incurring additional liabilities or obligations, Sellers shall use their reasonable best efforts to obtain (i) the consent and estoppel certificates and the consents (in each case, in the forms attached as exhibits to this Agreement) specified in Section 8.2(d) hereof, (ii) the Estoppels (in each case, in the forms attached as exhibits to this Agreement) from all Commercial Tenants and from all lessors under each Ground Lease and (iii) subject to Section 7.13(b) hereof, subordination, non-disturbance and attornment agreements (the "SNDA Agreements") in the event that the Company requests in writing that Sellers assist in obtaining SNDA Agreements. (b) In the event that the Company requests in writing that Sellers assist in obtaining (i) any consents or estoppels specified in Section 8.2(d) hereof in a form other than the forms attached as Exhibits to this Agreement ("Other Consents"), (ii) any Estoppels in a form other than the forms attached as Exhibits to this Agreement ("Other Estoppels") or (iii) any SNDA Agreements, the parties hereto acknowledge and agree that Sellers shall have no obligation to comply with such requests of the Company until Sellers and the Company reach a mutually acceptable agreement as to the timing of the solicitation of the Other Consents, Other Estoppels and SNDA Agreements in relation to the requisite dating of the consents, the consent and estoppel certificates and the Estoppels attached to this Agreement and as to the content of the Other Consents, Other Estoppels and SNDA Agreements. Nothing in this Section 7.13(b) shall limit, amend or modify any other provision of this Agreement (including Sections 5.8, 8.1, 8.2 and 8.3 hereof), or shall require the payment of any consideration therefor by any Seller, or shall require compromising any rights of any Seller or shall require any Seller to incur additional liabilities or obligations. 103 Section 7.14 Harbour Club. (a) If (i) either MREF XXII or MREF XXIII or both are Participating McNeil Partnerships and (ii) MREF XXV is an Excluded McNeil Partnership, then MREF XXV hereby grants to the Company the right (which right shall vest as of the Effective Time) to purchase the property known as Harbour Club I Apartments, located at 49000 Denton Road, Belleville, Michigan, together with the property known as the Harbour Club Golf Course (together, "Harbour Club I"), at a price equal to eleven million nine hundred sixty thousand dollars ($11,960,000) (the "Option Price"). In the event that the Company desires to exercise such right, the Company shall deliver a written notice to MREF XXV of its election to do so promptly following the Effective Time, but in no event later than the fifteenth business day following the Closing Date. In the event that such notice has not been provided to MREF XXV by the Company by such fifteenth business day, then, to the extent such right has vested in accordance with this Section 7.14(a), such right shall irrevocably lapse and MREF XXV's obligations in respect thereof shall be irrevocably discharged. The parties hereto acknowledge and agree that the closing of the Company's purchase of Harbour Club I must be completed within twenty (20) business days following the Closing Date. (b) Notwithstanding anything to the contrary in this Agreement, in the event that the Company exercises its right to purchase Harbour Club I in accordance with Section 7.14(a) hereof, the Company shall pay at the closing of such transaction any indebtedness outstanding which is secured by Harbour Club I (including all accrued but unpaid interest thereon through to the date of such closing) and all prepayment fees relating to such indebtedness on Harbour Club I and the Option Price shall be reduced by the amount of such indebtedness (and not the prepayment fees). (c) The obligations of the Company to effect the closing of the Company's purchase of Harbour Club I pursuant to Section 7.14(a) hereof is subject to the fulfillment (or waiver by the Company) on the date of such closing of the following conditions: (i) title to Harbour Club I shall be free and clear of all Property 104 Restrictions and Encumbrances other than the Permitted Restrictions and Encumbrances and any matters arising after the Expiration Time (or, in the case of the Survey Materials, after the Survey Materials Expiration Time) which (A) would not preclude the continued use of Harbour Club I as it is being used as of the date of this Agreement or (B) would not materially and adversely affect the value of Harbour Club I as it is being used as of the date of this Agreement and (ii) Lawyer's Title Insurance Company (or such other nationally recognized title insurance company reasonably acceptable to Sellers and the Company) shall be unconditionally obligated and prepared, subject to the payment of the applicable title insurance premium and related charges at the Company's sole cost and expense, to issue to or for the benefit of the Company and one or more of its subsidiaries, a Title Policy (or the equivalent in the applicable jurisdiction) for Harbour Club I in an amount requested by the Company, which shall be a commercially reasonable amount, or, at the option of the Company, a "date-down" to an existing policy of owner's title insurance. Such Title Policy shall be issued in accordance with the Title Commitment for Harbour Club I. In the event that one or both of the conditions set forth in the immediately preceding clauses (i) and (ii) are not satisfied at the time of the closing of the Company's purchase of Harbour Club I and the Company has not waived any such unsatisfied condition prior to such time, MPLP and the Company agree to negotiate in good faith a fair reduction in the Option Price to take into account the matters with respect to which such conditions are not satisfied. (d) At and after the Effective Time, the owner of Harbour Club I agrees, for so long as such owner shall continue to own Harbour Club I, to manage, or cause to be managed, either or both of the Other Harbour Club Properties, if so requested by the respective owners thereof, at market terms and at market rates, pursuant to a property management agreement in a form substantially comparable to that used for comparable properties, subject to such owner obtaining the consent or approval of each person whose consent or approval shall be required to a change in the management of such property. For purposes of this Agreement, "Other Harbour Club Properties" means the property known as the Harbour Club II Apartments and 105 the property known as the Harbour Club III Apartments, each located at 49000 Denton Road, Belleville, Michigan. Section 7.15 Material Encumbrances. (a) In the event that Other Items, or surveys that were received by the Company after June 1, 1999, with respect to McNeil Partnership Properties, in each case received prior to the Expiration Time (the Other Items and such surveys, collectively, the "Survey Materials"), disclose any Property Restrictions, Encumbrances or other matters affecting title to such McNeil Partnership Property (other than Permitted Restrictions and Encumbrances) which reasonably could preclude the continued use of such McNeil Partnership Property as it is being used as of the date of this Agreement or reasonably could materially and adversely affect the value of such McNeil Partnership Property as it is being used as of the date of this Agreement (each, a "Material Encumbrance") (it being understood and agreed that the absence of legal access to a public right of way or utilities shall be a Material Encumbrance), the Company shall promptly, and in no event later than 5:00 p.m., New York City time, on July 16, 1999 (the "Expiration Time"), deliver a written notice (the "Encumbrance Notice") to Sellers of such Material Encumbrance, which notice shall describe in reasonable detail such Material Encumbrance and the manner in which such Material Encumbrance reasonably could preclude the continued use of such McNeil Partnership Property as it was being used as of the date of this Agreement or reasonably could materially and adversely affect the value of such McNeil Partnership Property as it was being used as of the date of this Agreement, and the Company shall include a copy of the Survey Materials disclosing such Material Encumbrance; provided, however, that the failure to provide such information and description shall not vitiate the legal effect of having sent such Encumbrance Notice if such Encumbrance Notice was otherwise sent in good faith. (b) If the Company shall fail to deliver an Encumbrance Notice prior to the Expiration Time with respect to one or more Material Encumbrances on one or more McNeil Partnership Properties, then from and after the Expiration Time (regardless of whether or not the 106 Company was aware of any such Material Encumbrance as of the Expiration Time, and regardless of whether or not the Company has obtained all of the Other Items), (i) each such Material Encumbrance shall automatically be deemed to be a Permitted Restriction and Encumbrance for all purposes under this Agreement, (ii) each such Material Encumbrance shall not be considered in determining whether or not a Seller Material Adverse Effect has occurred for any and all purposes under this Agreement (including Article VIII hereof) and (iii) the Company shall be deemed to have waived all conditions to the Closing set forth in Article VIII hereof relating to such Survey Materials (including, without limitation, whether or not the representations and warranties contained in Section 4.8 hereof were true and correct and whether or not the condition set forth in Section 8.2(e) hereof has been fulfilled). Section 7.16 Additional Seller Tax Covenant. From the date of this Agreement until the Closing Date, the McNeil Partnerships shall at all times qualify, and Sellers shall cause any of the Seller Subsidiaries that have been partnerships, joint ventures or disregarded entities or limited liability companies since formation to continue to qualify, as partnerships or disregarded entities for federal income tax purposes. From the date of this Agreement until the Closing Date, the McNeil Partnerships shall not at any time become, and Sellers shall not permit any Seller Subsidiaries that have been partnerships, joint ventures or disregarded entities or limited liability companies since formation to become, publicly traded partnerships within the meaning of Section 7704 of the Code or otherwise taxable as an association for federal income tax purposes. Section 7.17 Title Deliveries. The Sellers shall arrange for the delivery of the documents, certificates, affidavits and undertakings reasonably required by the title insurer for the issuance of the title insurance coverage contemplated by Section 8.2(e) hereof (provided that the Company, the Participating McNeil Partnerships and their respective subsidiaries shall not be liable directly or indirectly for such certificates, affidavits or undertakings). 107 ARTICLE VIII CONDITIONS Section 8.1 Conditions to Each Party's Obligation to Effect the Mergers. Subject to Section 8.4 hereof, the obligations of each party to effect the Mergers of the Participating McNeil Partnerships and the other transactions relating to the Participating McNeil Partnerships which are contemplated by this Agreement to be performed at or after the Effective Time shall be subject to the fulfillment (or waiver by each party hereto) at or prior to the Effective Time of the following conditions: (a) Limited Partner Approvals. This Agreement and the transactions contemplated hereby shall have been approved and adopted by the requisite approval of the limited partners of each Participating McNeil Partnership (other than Summerhill, whose approval has been obtained prior to the date hereof). (b) No Injunctions or Restraints. No court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) (i) that is in effect and prohibits consummation of the Mergers of the Participating McNeil Partnerships, the MPLP Contributions relating to the Participating McNeil Partnerships, the appointment of each of the applicable New GP LLCs as the general partner of its corresponding Participating McNeil Partnership or any other transactions with respect to the Participating McNeil Partnerships expressly contemplated by this Agreement or (ii) that is enacted, issued, promulgated, enforced or entered after the date of this Agreement and, in any such case, is in effect and imposes restrictions on the Company or the Participating McNeil Partnerships with respect to the business operations of the Participating McNeil Partnerships which would result in a Seller Material Adverse Effect (clauses (i) and (ii), collectively, an "Order"), and no Governmental Entity shall have instituted any proceeding or threatened to institute any proceeding seeking any such Order, and no other person shall have 108 instituted any proceeding seeking any such Order which is reasonably likely to succeed. (c) Certain Actions and Consents. All material actions by, and all consents, approvals, orders or authorizations from, or filings with, Governmental Entities of competent authority necessary for the consummation of the Mergers of the Participating McNeil Partnerships, the MPLP Contributions relating to the Participating McNeil Partnerships, the appointment of each of the applicable New GP LLCs as the general partner of its corresponding Participating McNeil Partnership or any other transactions with respect to the Participating McNeil Partnerships expressly contemplated by this Agreement shall have been obtained or made, as the case may be. (d) Settlement of Class Action Litigation. All claims with respect to the Participating McNeil Partnerships, the general partners of the Participating McNeil Partnerships and the McREMI Assets asserted in connection with the action of James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger, Louise C. Homburger, Elizabeth Jung, Robert Lewis, Morton Farber and Warren Heller v. McNeil Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil, Carole J. McNeil, Donald K. Reed and McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXI, L.P., McNeil Real Estate Fund XII, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P. McNeil Real Estate Fund XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P. (Case No. BC133799), Superior Court of the State of California, County of Los Angeles, shall have been settled on terms satisfactory to MPLP and such settlement shall be substantially in the form of the settlement agreement delivered by Sellers to the Company prior to the date hereof. (e) Determination of Excess Cash Balances. The Excess Cash Balance shall have been determined for each 109 Participating McNeil Partnership in accordance with Section 2.4 hereof. Section 8.2 Conditions to Obligations of the Company. Subject to Section 8.4 hereof, the obligations of the Company to effect the Mergers of the Participating McNeil Partnerships and the other transactions relating to the Participating McNeil Partnerships which are contemplated by this Agreement to be performed at or after the Effective Time are further subject to the fulfillment (or waiver by the Company) at or prior to the Effective Time of the following conditions: (a) Representations and Warranties. (i) The representations and warranties of Sellers set forth in Article IV of this Agreement (other than the representations and warranties that are the subject of Section 8.2(a)(ii) below) shall be true and correct at and as of the Closing Date (each such representation and warranty shall be deemed to be amended as of the Closing Date (i) in accordance with Section 8.4 hereof and (ii) so as not to give effect to any materiality or Seller Material Adverse Effect qualifiers contained therein), as though made on and as of the Closing Date but immediately prior to the transfers of assets, rights and interests and the other transactions contemplated by Articles II and III of this Agreement, except to the extent any representation or warranty is expressly limited by its terms to a specific date, in which case such representation or warranty shall be true and correct at and as of such date; provided, however, that the condition set forth in this Section 8.2(a) shall be deemed satisfied if the respects in which such representations and warranties (as each has been deemed amended as of the Closing Date) are not true and correct at and as of the Closing Date but immediately prior to the transfers of assets, rights and interests and the other transactions contemplated by Articles II and III of this Agreement, or at and as of such other date, would not constitute, individually or in the aggregate, a Seller Material Adverse Effect. 110 (ii) The representations and warranties of Sellers set forth in Sections 4.1(a), 4.1(d), 4.2(b), 4.3(a) and 4.3(c) hereof (each such representation and warranty shall be deemed to be amended as of the Closing Date in accordance with Section 8.4 hereof) shall be true and correct in all material respects (other than the representations and warranties having a materiality or Seller Material Adverse Effect qualifier, which representations and warranties shall be true and correct in all respects) at and as of the Closing Date, as though made on and as of the Closing Date but immediately prior to the transfers of assets, rights and interests and the other transactions contemplated by Articles II and III of this Agreement, except to the extent any representation or warranty is expressly limited by its terms to a specific date, in which case such representation or warranty shall be true and correct at and as of such date. (b) Performance of Obligations of Sellers. Sellers shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Effective Time (other than obligations with respect to Excluded McNeil Partnerships), including the execution and delivery of the Ancillary Agreements to which any Seller is a party. (c) Officer's Certificate. The Company shall have received a certificate signed on behalf of Sellers by an executive officer thereof certifying the accuracy of the statements set forth in Sections 8.2(a) and 8.2(b) hereof. (d) Consents. (i) Sellers shall have obtained the consent and estoppel certificate of each lender of the Non-Terminated Loans listed on Schedule 8.2(d)(i) of the Seller Disclosure Letter, in the form of the consent and estoppel certificate attached as Exhibit A hereto or in the form(s) of a consent or estoppel certificate or both returned by the person from whom such consent and estoppel certificate is being sought pursuant to this Section 8.2(d)(i) provided such 111 form(s) of consent or estoppel certificate is substantially comparable to the form of the consent and estoppel certificate attached as Exhibit A hereto. (ii) Sellers shall have obtained any consents or approvals which if not obtained would have, individually or in the aggregate, a Seller Material Adverse Effect, in the form of the consent attached as Exhibit B hereto or in the form of the consent returned by the person whose consent is being sought pursuant to this Section 8.2(d)(ii) provided such form of consent is substantially comparable to the form of the consent attached as Exhibit B hereto. (e) Title. On the Closing Date, (i) title to each McNeil Partnership Property owned by a Participating McNeil Partnership shall be free and clear of all Encumbrances and Property Restrictions other than Permitted Restrictions and Encumbrances and other than any matters disclosed after the Expiration Time (other than the Survey Materials) which (A) would not reasonably preclude the continued use of such McNeil Partnership Property as it is being used as of the date of this Agreement or (B) would not reasonably materially and adversely affect the value of such McNeil Partnership Property as it is being used as of the date of this Agreement and (ii) Lawyer's Title Insurance Corporation (or such other nationally recognized title insurance company reasonably acceptable to Sellers and the Company) shall be unconditionally obligated and prepared, subject to the payment of the applicable title insurance premium and related charges at the Company's sole cost and expense, to issue to or for the benefit of the Company and one or more of its subsidiaries, an extended coverage ATLA owner's policy of title insurance effective as of the Closing Date (the "Title Policies") (or the equivalent in the applicable jurisdiction) for each McNeil Partnership Property owned by a Participating McNeil Partnership in an amount requested by the Company, which amount shall be commercially reasonable, or, at the option of the Company, a "date-down" to an existing policy of owner's title insurance. Such Title Policies shall be issued in accordance with the Title Commitments; provided, however, that, notwithstanding anything to the contrary set forth 112 in this Agreement or in the Title Commitments, the title exceptions listed on Schedule A to the Task List need not be omitted from the Title Policies and the title company requirements listed on Schedule A to the Task List need not be satisfied in determining whether or not this Section 8.2(e) has been satisfied. (f) Estoppels. (i) Sellers shall have received from tenants (which tenants shall include the tenants leasing space pursuant to the Commercial Leases listed on Schedule 8.2(f)(i) of the Seller Disclosure Letter) leasing at least seventy-five percent (75%) of the aggregate square footage leased pursuant to all Commercial Leases, a certificate (an "Estoppel"), addressed to the Company and its lender (as defined in the Estoppel attached as Exhibit D hereto), dated not more than sixty (60) days prior to the Closing Date, in either (A) the form of Estoppel attached as Exhibit D hereto or (B) the form of Estoppel returned by the tenant whose Estoppel is being sought pursuant to this Section 8.2(f)(i) provided such form of Estoppel is substantially comparable to the form of Estoppel attached as Exhibit D hereto. The Company hereby acknowledges and agrees that, in lieu of any one or more of such Estoppels, MPLP may deliver a landlord Estoppel provided that (A) such form of landlord Estoppel is in the form of Estoppel attached as Exhibit D hereto, (B) the landlord Estoppels delivered by MPLP pursuant to this Section 8.2(f)(i) shall not be given in respect of more than ten percent (10%) of the aggregate square footage leased pursuant to all Commercial Leases and (C) such landlord Estoppels delivered by MPLP shall not be delivered in respect of the Commercial Leases listed on Schedule 8.2(f)(i) of the Seller Disclosure Letter. (ii) Sellers shall have received an Estoppel from each lessor under a Ground Lease, addressed to the Company and its lender (as defined in the Estoppel attached as Exhibit E hereto), dated not more than sixty (60) days prior to the Closing Date in either (A) the form of Estoppel attached as 113 Exhibit E hereto or (B) the form of Estoppel returned by the lessor whose Estoppel is being sought pursuant to this Section 8.2(f)(ii) provided such form of Estoppel is substantially comparable to the form of Estoppel attached as Exhibit E hereto. (g) Opinion Relating to the Pledge. The Company shall have received an opinion from Skadden, Arps, Slate, Meagher & Flom LLP or other counsel to Sellers reasonably acceptable to the Company, dated as of the Closing Date, substantially in the form attached as Exhibit C hereto. (h) Percentage Reduction in NOI. The sum of the Net Operating Incomes for each Participating McNeil Partnership for the twelve months ended on the NOI Determination Date shall be greater than or equal to the product determined by multiplying (i) 0.8723 by (ii) an amount equal to the sum of the NOI Amounts for each Participating McNeil Partnership. For purposes of this Agreement, the term "NOI Determination Date" means the last day of the most recently completed fiscal month prior to the Closing Date. (i) Consummation of the Contributions. The transactions contemplated by Sections 2.2 and 2.3(a) hereof shall have been consummated. Section 8.3 Conditions to Obligations of Sellers. Subject to Section 8.4 hereof, the obligations of Sellers to effect the Mergers of the Participating McNeil Partnerships and the other transactions contemplated by this Agreement relating to the Participating McNeil Partnerships which are to be performed at or after the Effective Time are further subject to the fulfillment (or waiver by each Seller) at or prior to the Effective Time of the following conditions: (a) Representations and Warranties. The representations and warranties of the Company set forth in Article V of this Agreement shall be true and correct at and as of the Closing Date (each such representation and warranty shall be deemed to be amended as of the Closing Date so as not to give effect to any materiality 114 qualifiers contained therein), as though made on and as of the Closing Date but immediately prior to the transfers of assets, rights and interests and the other transactions contemplated by Articles II and III of this Agreement, except to the extent any representation or warranty is expressly limited by its terms to a specific date, in which case such representation or warranty shall be true and correct at and as of such date; provided, however, that the condition set forth in this Section 8.3(a) shall be deemed satisfied if the respects in which such representations and warranties (as each has been deemed amended as of the Closing Date) are not true and correct at and as of the Closing Date but immediately prior to the transfers of assets, rights and interests and the other transactions contemplated by Articles II and III of this Agreement, or at and as of such other date, would not prevent the Company, any Company LLC or any Transitory Partnership from consummating the transactions contemplated by this Agreement and the other Transaction Documents. (b) Performance of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time (other than obligations with respect to Excluded McNeil Partnerships), including the execution and delivery of the Ancillary Agreements to which either the Company or any of its affiliates is a party. (c) Officers' Certificate. Each Seller shall have received a certificate signed on behalf of the Company by a senior officer of the Company certifying the accuracy of the statements set forth in Sections 8.3(a) and 8.3(b) hereof. (d) Fairness Opinions. (i) Stanger shall have delivered to Sellers (A) the Allocation Analysis, (B) the Appraisals (if they had been requested by Sellers prior to the date of the mailing of the Proxy Statements) and (C) the Stanger Opinions, in each case, prior to the date of the mailing of the Proxy Statements for the Participating McNeil Partnerships. 115 The Sellers shall have received the Stanger Opinions to the effect that each of the matters opined upon therein and each of the Allocations is fair from a financial point of view to the holders of each class of LP Interests in each McNeil Partnership. (ii) Eastdil shall have delivered to the Special Committee the Eastdil Opinions prior to the date of the mailing of the Proxy Statements for the Participating McNeil Partnerships. The Special Committee shall have received the Eastdil Opinions to the effect that each of the matters opined upon therein is fair from a financial point of view to the holders of each class of LP Interests in each McNeil Partnership. Section 8.4 Certain Exclusions from Conditions to Closing. (a) Notwithstanding anything to the contrary in this Agreement (including Sections 8.1, 8.2 and 8.3 hereof), the parties hereto acknowledge and agree that, in accordance with Section 9.4 hereof, none of the conditions to Closing set forth in Sections 8.1, 8.2 and 8.3 hereof shall be deemed to be unsatisfied because such condition was not satisfied with respect to an Excluded McNeil Partnership (or such Excluded McNeil Partnerships' subsidiaries, properties, etc.) (i.e., since no Excluded McNeil Partnership is subject to the Closing, the conditions to the Closing need not be satisfied with respect to any Excluded McNeil Partnership, such Excluded McNeil Partnerships' subsidiaries, properties, etc.). (b) Notwithstanding anything to the contrary in this Agreement (including Sections 8.1 and 8.2 hereof), the following shall not be considered in determining whether or not any or all of the conditions set forth in Sections 8.1 and 8.2 hereof have been fulfilled: (i) any effect on any of the Participating McNeil Partnerships' business, properties, financial condition or results of operations resulting, directly or indirectly, from the Company's failure to consent to a Commercial Lease or any amendment to any Commercial Lease as requested by Sellers in good faith pursuant to Section 6.1(l) hereof; and (ii) any effect on any of the Participating McNeil 116 Partnerships' business, properties, financial condition or results of operations resulting, directly or indirectly, from the Company's failure to consent to a Reimbursable Proposal proposed by Sellers in good faith. (c) Notwithstanding anything to the contrary in this Agreement (including Sections 8.1, 8.2 and 8.3 hereof), the parties hereto acknowledge and agree that none of the Discretionary Closing Conditions shall be deemed to be unsatisfied because such condition was not satisfied with respect to any one or more Included McNeil Partnerships (or such Included McNeil Partnerships' subsidiaries, properties, etc.). (d) Notwithstanding anything to the contrary in this Agreement (including Sections 8.1, 8.2 and 8.3 hereof), the parties hereto acknowledge and agree that none of the Discretionary Closing Conditions shall be deemed to be unsatisfied because such condition was not satisfied with respect to any one or more Included Partnership Matters. (e) Notwithstanding anything to the contrary in this Agreement (including Sections 8.1, 8.2 and 8.3 hereof), the parties hereto acknowledge and agree that Section 7.15(b) hereof shall be given effect prior to determining whether or not any or all of the conditions set forth in Sections 8.1 and 8.2 hereof have been fulfilled. Section 8.5 Removal Notices. (a) In the case of any Participating McNeil Partnership, at any time after the date of this Agreement through to the date of the McNeil Limited Partner Meeting for such Participating McNeil Partnership, the Sellers may provide a written notice (the "Matter Removal Notice") to the Company identifying such Participating McNeil Partnership as a "Removable Partnership" and which shall describe in reasonable detail certain matters relating to such Participating McNeil Partnership as "Designated Partnership Matters" that Sellers believe in good faith may cause the Participating McNeil Partnership to become an Excluded McNeil Partnership. 117 (b) Upon the Company's receipt of the Matter Removal Notice (the earlier of (1) the tenth full business day following the date of the Company's receipt of the Matter Removal Notice and (2) the third full business day following the date of the Company's receipt of the Pre-Closing Removal Notice, the "Matter Removal Notice Date"), the Company shall have until 5:00 p.m., New York City time, on the Matter Removal Notice Date to provide written notice to Sellers, which notice shall identify which (if any) of the Designated Partnership Matters the Company designates as an "Included Partnership Matter." (c) In the case of any Participating McNeil Partnership, at any time following the date of the McNeil Limited Partner Meeting for a Participating McNeil Partnership, the Sellers may provide a written notice (the "Pre-Closing Removal Notice") to the Company identifying such Participating McNeil Partnership as a "Pre-Closing Removable Partnership" which may or may not (in the sole and absolute discretion of the Sellers) designate certain of the McNeil Partnership Properties of such Pre-Closing Removable Partnership as "Designated Partnership Properties." (d) Upon the Company's receipt of the Pre-Closing Removal Notice (the third full business day following the date of the Company's receipt of the Pre-Closing Removal Notice, the "Pre-Closing Removal Notice Date"), the Company shall have until 5:00 p.m., New York City time, on the Pre-Closing Removal Notice Date to provide written notice to Sellers, which notice shall identify which (if any) of the Pre-Closing Removable Partnerships the Company designates as an "Included McNeil Partnership." (e) The parties hereto acknowledge and agree that the exercise (or lack of exercise) by any Seller of its rights under Sections 8.5(a) and 8.5(c) hereof and the exercise (or lack of exercise) by the Company of its rights under Sections 8.5(b) and 8.5(d) hereof shall not be the basis of any suit, action or proceeding by any person against any party to this Agreement or their respective affiliates, and shall not constitute a presumption that any McNeil Partnership has, in fact, violated any representation, warranty, covenant or 118 agreement in this Agreement or that the conditions to Closing with respect to any McNeil Partnership were not, in fact, satisfied. (f) If the Closing occurs and if one or more McNeil Partnerships became an Excluded McNeil Partnership by operation of Section 9.3(f), 9.3(g) or 9.3(h) hereof, each party to this Agreement hereby waives any rights it may have to file or commence any suit, action or proceeding against each other party to this Agreement or their respective affiliates with respect to any such Excluded McNeil Partnership and hereby irrevocably and unconditionally releases each such other party and its affiliates from any and all claims, known or unknown, it may have relating to the transactions contemplated by this Agreement and the other Transaction Documents with respect to any such Excluded McNeil Partnership. ARTICLE IX TERMINATION Section 9.1 Termination of this Agreement Prior to the Effective Time. This Agreement may be terminated at any time prior to the Effective Time (regardless of whether or not the requisite approvals of the respective limited partners of each of the McNeil Partnerships have been obtained) as follows: (a) by the mutual written consent of each Seller and the Company; (b) by the Company, on the one hand, or any Seller, on the other hand, upon written notice given to the other if any judgment, injunction, order, decree or action by any Governmental Entity of competent authority preventing the consummation of the transactions contemplated by this Agreement (other than transactions relating to the Excluded McNeil Partnerships) shall have become final and nonappealable; (c) by the Company, on the one hand, or any Seller, on the other hand, upon written notice given to the other if the Closing shall not have occurred on or 119 before the twelve (12)-month anniversary of the date of this Agreement (the "Termination Date"); (d) by any Seller upon written notice given to the Company, upon a material breach on the part of the Company of any representation, warranty, covenant, obligation or agreement of the Company set forth herein that is not curable or, if curable, is not cured within thirty (30) days after written notice of such breach is given by any Seller to the party committing such breach, if the conditions set forth in Section 8.3(a) or 8.3(b) hereof would be incapable of being satisfied by the Termination Date ; or (e) by the Company upon written notice given to Sellers, upon a material breach on the part of Sellers of any representation, warranty, covenant, obligation or agreement of Sellers set forth herein that is not curable or, if curable, is not cured within thirty (30) days after written notice of such breach is given by the Company to the party committing such breach, if the conditions set forth in Section 8.2(a) or 8.2(b) hereof would be incapable of being satisfied by the Termination Date. Section 9.2 Effect of Termination Pursuant to Section 9.1. In the event of the termination of this Agreement by any Seller or the Company as provided in Section 9.1 hereof, this Agreement shall become null and void and of no further force or effect, and there shall be no liability or obligation hereunder on the part of Sellers or the Company, or any of their respective subsidiaries, or any of their respective general partners, limited partners, partners, stockholders, members, equity holders, directors, officers, employees, affiliates, agents, representatives, successors or assigns, except (i) any obligations of the parties to this Agreement under Sections 7.3(c), 7.9(a), 9.2, 9.4, 9.5 and 9.6 hereof and Article XI hereof shall survive such termination and (ii) one or more of Sellers or the Company, as the case may be, may have liability to one or more of Sellers or the Company, as the case may be, if the basis of the termination is a willful, material breach by one or more of Sellers or the Company, as the case may be, of one or more of the provisions of this Agreement. Furthermore, if this Agreement is terminated pursuant to Section 9.1 120 hereof, the Company shall not, and shall cause its affiliates not to, oppose or seek to prevent or frustrate any transaction or agreement that Sellers or any of their subsidiaries may propose or enter into relating to any business combination between Sellers and any third party; provided, however, that if (1) Goldman, Sachs & Co. and its affiliates (including, without limitation, Whitehall and the Managing Member) are not using all or any portion of the Evaluation Material (as defined in the Confidentiality Agreement) in violation of the Confidentiality Agreement, and (2) Goldman, Sachs & Co. and its affiliates (including, without limitation, Whitehall and the Managing Member) are not using all or any portion of the Evaluation Material (as defined in the Confidentiality Agreement) in any of the activities specified below and (3) Goldman, Sachs & Co. and its affiliates (including, without limitation, Whitehall and the Managing Member) are not in violation of Section 7.3(c) hereof, then nothing in this Agreement shall in any manner apply to or restrict the activities of Goldman, Sachs & Co. and its affiliates from engaging in asset management, brokerage, investment advisory, investment banking, financial advisory, anti-raid advisory, financing, trading, market making, arbitrage and other similar activities conducted in the ordinary course of its and its affiliates' business. Section 9.3 Termination of Certain Rights and Obligations Prior to the Effective Time. Certain rights and obligations under this Agreement of one or more McNeil Partnerships (each, an "Excluded McNeil Partnership") and of all of the parties hereto in respect of each such Excluded McNeil Partnership may be terminated at any time prior to the Effective Time (regardless of whether or not the requisite approvals of the respective limited partners of the McNeil Partnerships have been obtained (except as indicated to the contrary below)) as follows: (a) by the Company, on the one hand, or any Seller, on the other hand, upon written notice given to the other if, upon a vote at a duly held McNeil Limited Partner Meeting (or any adjournment thereof) for such McNeil Partnership, the requisite approval of the limited partners of such McNeil Partnership of the Merger in respect of such McNeil Partnership, the MPLP Contributions 121 with respect to such McNeil Partnership, the appointment of the applicable New GP LLC as the general partner of such McNeil Partnership and the other transactions contemplated by this Agreement with respect to such McNeil Partnership, shall not have been obtained as contemplated by Section 7.1 hereof; (b) by any Seller upon written notice given to the Company, if, prior to the approval by the holders of LP Interests of such McNeil Partnership of this Agreement, the Merger in respect of such McNeil Partnership, the MPLP Contributions with respect to such McNeil Partnership, the appointment of the applicable New GP LLC as the successor general partner of such McNeil Partnerships and the other transactions contemplated by this Agreement at the McNeil Limited Partner Meeting (or any adjournment thereof) of such McNeil Partnership, in the exercise of good faith judgment of the general partner of such McNeil Partnership as to its fiduciary duties to the limited partners of such McNeil Partnership as imposed by law, such general partner, as advised by counsel, determines that such termination is required by reason of a Superior Acquisition Proposal being made with respect to such McNeil Partnership. Each McNeil Partnership agrees that it shall not enter into a binding written agreement with respect to an Acquisition Proposal without providing the Company with at least four business days prior notice of its intent to do so (which notice shall disclose the material terms of such Acquisition Proposal). (c) by the Company upon written notice given to the applicable McNeil Partnership, if the general partner of such McNeil Partnership (A) has failed to recommend to the limited partners of such McNeil Partnership the approval of the Merger in respect of such McNeil Partnership, the MPLP Contributions with respect to such McNeil Partnership, the appointment of the applicable New GP LLC as the successor general partner of such McNeil Partnership and the other transactions contemplated by this Agreement with respect to such McNeil Partnership, in connection with an Acquisition Proposal by a third party in respect of such McNeil Partnership, (B) has withdrawn or modified in a manner adverse to the Company its approval or recommendation that the limited partners of such McNeil Partnership approve the Merger in respect of such McNeil Partnership, the MPLP Contributions with 122 respect to such McNeil Partnership, the appointment of the applicable New GP LLC as the successor general partner of such McNeil Partnership and the other transactions contemplated by this Agreement with respect to such McNeil Partnership, in connection with an Acquisition Proposal for such McNeil Partnership, or (C) has approved or recommended an Acquisition Proposal for such McNeil Partnership; (d) by the Company, on the one hand, or any Seller, on the other hand, with respect to a McNeil Partnership, upon written notice given to the other if any judgment, injunction, order, decree or action by any Governmental Entity of competent authority preventing the consummation of the transactions contemplated by this Agreement with respect to such McNeil Partnership shall have become final and nonappealable; (e) by the mutual written consent of each Seller and the Company; (f) by any Seller upon written notice to the Company, in respect of any McNeil Partnership which owns any McNeil Partnership Property in respect of which an Encumbrance Notice has been delivered to Sellers pursuant to Section 7.15 hereof; (g) after 5:00 p.m., New York City time, on the Pre-Closing Removal Notice Date but at least two (2) business days prior to the estimated Closing Date (such time, the "Pre-Closing Removal Notice Time"), by any Seller upon written notice to the Company, in respect of any one or more of the Pre-Closing Removable Partnerships which the Company has not designated in writing as an Included McNeil Partnership by the Pre-Closing Removal Notice Time; (h) after 5:00 p.m., New York City time, on the Matter Removal Notice Date but no later than the earlier of (1) the tenth business day following the Matter Removal Notice Date and (2) the day which is at least two (2) business days prior to the estimated Closing Date (such time, the "Matter Removal Notice Time"), by any Seller upon written notice to the Company, in respect of any one or more of the Removable Partnerships with respect to 123 which the Company has not designated in writing as Included Partnership Matters all of the Designated Partnership Matters by the Matter Removal Notice Time; or (i) in respect of Fairfax only, following the date which is the tenth business day after the date of the mailing of the Proxy Statements for the Participating McNeil Partnerships, by the Company, on the one hand, or any Seller, on the other hand, upon written notice given to the other if the requisite approval of the limited partners of Fairfax of the MPLP Contributions with respect to Fairfax, the appointment of the applicable New GP LLC as the general partner of Fairfax and the other transactions contemplated by this Agreement with respect to Fairfax shall not have been obtained. Section 9.4 Effect of Termination Pursuant to Section 9.3. In the event of the termination of certain rights and obligations under this Agreement of one or more Excluded McNeil Partnerships and of all of the parties hereto in respect of such Excluded McNeil Partnerships as provided in Section 9.3 hereof, all of the rights and obligations under this Agreement of each such Excluded McNeil Partnership and of all of the other parties hereto in respect of each such Excluded McNeil Partnership shall become null and void and of no further force or effect, and there shall be no liability or obligation hereunder of such Excluded McNeil Partnership or of the other parties hereto in respect of any such Excluded McNeil Partnership on the part of any other party hereto, or their respective subsidiaries, or any of their respective general partners, partners, stockholders, members, equity holders, directors, officers, employees, affiliates, agents, representatives, successors or assigns, except (i) any obligations of the parties to this Agreement under Sections 7.3(c), 7.4(b), 7.5, 7.9(a), 7.10, 7.14, 9.4, 9.5 and 9.6 hereof and Article XI hereof (other than Section 11.3 hereof) shall survive such termination and (ii) one or more of Sellers or the Company, as the case may be, may have liability to one or more of Sellers or the Company, as the case may be, if the basis of the termination is a willful, material breach by one or more of Sellers or the Company, as the case may be, of one or more of the provisions of this Agreement; provided, however, that except as provided in this Section 9.4, nothing in this 124 Section 9.4 shall otherwise affect any of the rights or obligations under this Agreement of any party to this Agreement. Furthermore, if the obligations and liabilities under this Agreement in respect of an Excluded McNeil Partnership are terminated pursuant to Section 9.3 hereof, the Company shall not, and shall cause its affiliates not to, oppose or seek to prevent or frustrate any transaction or agreement that Sellers or any of their subsidiaries may propose or enter into relating to any business combination between Sellers and any third party in respect of such Excluded McNeil Partnership; provided, however, that if (1) Goldman, Sachs & Co. and its affiliates (including, without limitation, Whitehall and the Managing Member) are not using all or any portion of the Evaluation Material (as defined in the Confidentiality Agreement) in violation of the Confidentiality Agreement, and (2) Goldman, Sachs & Co. and its affiliates (including, without limitation, Whitehall and the Managing Member) are not using all or any portion of the Evaluation Material (as defined in the Confidentiality Agreement) in any of the activities specified below and (3) Goldman, Sachs & Co. and its affiliates (including, without limitation, Whitehall and the Managing Member) are not in violation of Section 7.3(c) hereof, then nothing in this Agreement shall in any manner apply to or restrict the activities of Goldman, Sachs & Co. and its affiliates from engaging in asset management, brokerage, investment advisory, investment banking, financial advisory, anti-raid advisory, financing, trading, market making, arbitrage and other similar activities conducted in the ordinary course of its and its affiliates' business. Section 9.5 Payment of Break-Up Fee. (a) If the rights and obligations under this Agreement in respect of one or more Excluded McNeil Partnerships have been terminated pursuant to Section 9.3(b) or 9.3(c) hereof, each such Excluded McNeil Partnership shall be severally (and not jointly) liable for payment to the Company of a fee equal to the Partnership Break-Up Fee determined in respect of such Excluded McNeil Partnership. Each Excluded McNeil Partnership shall be severally liable for payment of the Partnership Break-Up Fee in respect of itself, and no other party to this Agreement shall have any liability to 125 the Company or an Excluded McNeil Partnership for the Partnership Break-Up Fee of such Excluded McNeil Partnership. Any payment required to be made pursuant to this Section 9.5(a) as a result of termination of this Agreement pursuant to Section 9.3(b) or 9.3(c) hereof shall be made not later than the earlier of (A) ninety (90) days after the date of the termination of this Agreement pursuant to Section 9.3(b) or 9.3(c) hereof and (B) three (3) business days after the date on which a definitive agreement relating to an Acquisition Proposal is entered into. Any payment required to be made pursuant to this Section 9.5(a) with respect to an Excluded McNeil Partnership shall accrue interest at ten percent (10%) per annum, compounded annually, from the date of the termination under Section 9.3(b) or 9.3(c) hereof and no distribution or other payment shall be made to the general partner or any limited partner of such Excluded McNeil Partnership until such payment pursuant to this Section 9.5(a) and such accrued interest is paid in full. (b) If (i) (A) either (1) a person who is not an affiliate of the Company, Whitehall or the Managing Member consummates an acquisition of more than 10% of the outstanding LP Interests of a McNeil Partnership following the date of this Agreement or (2) a person who is not an affiliate of the Company, Whitehall or the Managing Member makes an Acquisition Proposal for a McNeil Partnership, and (B) such McNeil Partnership becomes an Excluded McNeil Partnership through the operation of Section 9.3(a) hereof and (C) such McNeil Partnership enters into a definitive agreement relating to a Higher Acquisition Proposal within six months of such McNeil Partnership becoming an Excluded McNeil Partnership, or (ii) (A) the general partner of a McNeil Partnership as of the date of this Agreement is replaced and (B) such McNeil Partnership becomes an Excluded McNeil Partnership through the operation of Section 9.3(a) or 9.3(i) hereof, then, in the case of either clause (i) or (ii), each such Excluded McNeil Partnership shall be severally (and not jointly) liable for payment to the Company of a fee equal to the Partnership Break-Up Fee determined in respect of such Excluded McNeil Partnership. Any payment required to be made pursuant to clause (i) of the first sentence of this Section 9.5(b) shall be made not later than the earlier of (A) ninety (90) days after the date of the termination of 126 this Agreement pursuant to Section 9.3(a) hereof and (B) three (3) business days after the date on which a definitive agreement relating to a Higher Acquisition Proposal is entered into. Any payment required to be made pursuant to clause (ii) of the first sentence of this Section 9.5(b) shall be made not later than three (3) business days after the date of the termination of this Agreement in respect of such Excluded McNeil Partnership pursuant to Section 9.3 hereof. Any payment required to be made pursuant to this Section 9.5(b) with respect to an Excluded McNeil Partnership shall accrue interest at ten percent (10%) per annum, compounded annually, from the date such payment is due and no distribution or other payment shall be made to the general partner or any limited partner of such Excluded McNeil Partnership until such payment pursuant to this Section 9.5(b) and such accrued interest is paid in full. (c) The payment of the Partnership Break-Up Fee with respect to an Excluded McNeil Partnership shall be compensation and liquidated damages for any loss suffered by the Company or any one or more of its affiliates or subsidiaries as a result of the failure of the Merger of such Excluded McNeil Partnership and the other transactions contemplated by this Agreement with respect to such Excluded McNeil Partnership to be consummated and to avoid the difficulty of determining damages under the circumstances, and shall be the sole and exclusive remedy of the Company, its affiliates and subsidiaries against Sellers and the Seller Subsidiaries and their respective subsidiaries, general partners, limited partners, partners, stockholders, members, equity holders, directors, officers, employees, affiliates, agents, representatives, successors and assigns with respect to the occurrence giving rise to such payment. (d) If at the time any party hereto terminates the rights and obligations under this Agreement in respect of one or more Excluded McNeil Partnerships pursuant to Section 9.3 hereof, there had been a breach of any representation, warranty, covenant, obligation or agreement on the part of the Company, such that the conditions set forth in Section 8.3(a) or 8.3(b) hereof would be incapable of being satisfied by the Termination 127 Date, the Company shall not be entitled to any of the benefits of this Section 9.5 or Section 9.6 hereof. Initials: ________ (Jonathan Langer on behalf of the Company) ________ (Robert A. McNeil on behalf of himself and Sellers) Section 9.6 Reimbursement of Expenses. (a) If (i) (A) notwithstanding the satisfaction or waiver of all of the conditions set forth in Sections 8.1 and 8.3 hereof, Sellers (exclusive of any Excluded McNeil Partnership) fail to consummate prior to the Termination Date the Mergers of the Participating McNeil Partnerships and the other transactions contemplated by this Agreement to occur at the Effective Time or (B) Sellers have failed to use their reasonable best efforts in accordance with Section 7.4(a) hereof to satisfy the conditions set forth in Sections 8.1 and 8.3 hereof, and (ii) the Company terminates this Agreement pursuant to Section 9.1(c) or 9.1(e) hereof, then Sellers shall pay to the Company an amount equal to the Company Reimbursable Expenses for which Sellers shall be jointly and severally liable; provided, however, that no amount shall be payable by Sellers to the Company pursuant to this Section 9.6(a) if, at the time of such termination, Sellers would have been entitled to terminate this Agreement pursuant to Section 9.1(d) hereof. Any payment required to be made by Sellers pursuant to this Section 9.6(a) shall be made not later than ninety (90) days after Sellers have received reasonably detailed documents from the Company evidencing such costs and expenses. (b) If (i) (A) notwithstanding the satisfaction or waiver of all of the conditions set forth in Sections 8.1 and 8.2 hereof, the Company fails to consummate prior to the Termination Date the Mergers and the other transactions contemplated by this Agreement to occur at the Effective Time or (B) the Company has failed to use its reasonable best efforts in accordance with Section 7.4(a) hereof to satisfy the conditions set forth in Sections 8.1 and 8.2 hereof, and (ii) Sellers terminate 128 this Agreement pursuant to Section 9.1(c) or 9.1(d) hereof, then the Company shall pay to Sellers an amount equal to the Seller Reimbursable Expenses; provided, however, that no amount shall be payable by the Company to Sellers pursuant to this Section 9.6(b) if, at the time of such termination, the Company would have been entitled to terminate this Agreement pursuant to Section 9.1(e) hereof. Any payment required to be made by the Company pursuant to this Section 9.6(b) shall be made not later than ninety (90) days after the Company has received reasonably detailed documents from Sellers evidencing such costs and expenses. (c) The parties hereto agree that any receipt by the Company of any one or more Partnership Break-Up Fees shall offset any obligation of Sellers to pay the Company Reimbursable Expenses. ARTICLE X CERTAIN DEFINITIONS; OTHER MATTERS Section 10.1 Definitions. For purposes of this Agreement and the Seller Disclosure Letter, the following terms shall have the following meanings: "Acquisition Proposal" means any proposal or offer with respect to a merger, acquisition, purchase, tender offer, exchange offer, consolidation or similar transaction involving all or any significant portion of the assets (whether owned directly or indirectly) or equity securities of, one or more of Sellers, other than the transactions with the Company contemplated by this Agreement and the other Transaction Documents. "affiliate" of any person means another person that directly or indirectly controls, is controlled by, or is under common control with, such first person, where "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise. 129 "Aggregate Consideration" means six hundred forty-four million four hundred thirty-nine thousand eight hundred three dollars ($644,439,803). "Allocated McNeil Value" means the sum of (i) the Net McREMI Allocated Value, (ii) the sum of the GP Allocation Amounts for each Participating McNeil Partnership, (iii) the Participating Partnership Consideration Amount for Fairfax if Fairfax is a Participating McNeil Partnership, and (iv) the Participating Partnership Consideration Amount for Summerhill if Summerhill is a Participating McNeil Partnership. "Allocation Analysis" shall have the meaning ascribed to such term in the Stanger Engagement Letter. "Allocations" means any and all of the allocations described in Sections 1.3(a), 1.3(b), 1.3(c) and 1.3(d) hereof. "Ancillary Agreements" means the LLC Agreement, the Portfolio Advisory Agreement, the Indemnification Agreement, the Replacement Support Agreements, the Shortfall Agreement and the Waiver Letter. "Appraisals" shall have the meaning ascribed to such term in the Stanger Engagement Letter. "Assignment Agreement" means the Instrument of Assignment attached hereto as Exhibit H. "business day" means any day excluding: Saturday, Sunday and any day which is in the City of New York a legal holiday or a day upon which banking institutions in the City of New York are required or authorized by law or other governmental action to close. "California Partnerships" means the following McNeil Partnerships, each of which is a California limited partnership: MREF IX, MREF X, MREF XI, MREF XII, MREF XIV, MREF XV, MREF XX, MREF XXI, MREF XXII, MREF XXIII, MREF XXIV, MREF XXV and MREF XXVI. 130 "Company Person" means (i) Whitehall, (ii) the Managing Member, (iii) any and all affiliates and subsidiaries of the Company, Whitehall and the Managing Member and any and all indirect and direct holders of beneficial interests in the Company, Whitehall or the Managing Member and (iv) in respect of each person specified in clauses (i), (ii) and (iii), each such person's respective directors, officers, partners, members, employees, controlling persons, agents and representatives; provided, however, that in no event shall the Company be a Company Person. "Company Reimbursable Expenses" means an amount equal to the lesser of (i) one million five hundred thousand dollars ($1,500,000) and (ii) the Company's and its affiliates' actual, reasonable out-of-pocket expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement (including, without limitation, all attorneys', accountants' and investment bankers' fees and expenses). "Contributing Partners" means Robert A. McNeil, Carole J. McNeil, MPLP and MII. "Corporate Employees" means any and all employees of McREMI who are not Property Employees; provided that this definition shall not include any persons hired by Sellers to conduct the proxy solicitation process. "CRLPA" means the California Revised Limited Partnership Act. "Discretionary Closing Conditions" means those closing conditions set forth in Sections 8.2(a), 8.2(b), 8.2(d), 8.2(e), 8.2(f) and 8.2(h) hereof, after having taken into account the effects of Section 8.4 hereof. "DLLCA" means the Delaware Limited Liability Company Act. "DRULPA" means the Delaware Revised Uniform Limited Partnership Act. "Eastdil" means Eastdil Realty Company. 131 "Eastdil Engagement Letter" means the letter agreement between the McNeil Partnerships and Eastdil, dated as of May 7, 1999, as the same may be amended from time to time. "Eastdil Opinions" shall mean the opinions of Eastdil described in the Eastdil Engagement Letter. "Excluded McREMI Assets" means assets relating to persons which are not Participating McNeil Partnerships or to the properties of any such person (e.g., Management Agreements for any McNeil Partnership Properties owned by any Excluded McNeil Partnership), leased assets, all leases for space, any McREMI Assets that were not transferrable, and any and all rights under the Transaction Documents. "Excluded MPLP Assets" means all of the GP Interests in McNeil Pacific Investors Fund 1972, all of the GP Interests in McNeil Pension Investment Fund, Ltd., all of the GP Interests in each Excluded McNeil Partnership and all rights related thereto, all of the GP Interests and shares of capital stock owned by MPLP in any Seller Subsidiary of an Excluded McNeil Partnership, all assets relating to persons which are not Participating McNeil Partnerships, leased assets, and any and all rights under the Transaction Documents. "Existing Support Agreements" means all Support Agreements listed on Schedule 10.1(c) of the Seller Disclosure Letter. "Financial Advisor" shall mean, (i) in the case of a Higher Acquisition Proposal in which the consideration offered to the limited partners is solely cash consideration, Stanger (provided that Stanger shall make such determination within ten (10) business days) and (ii) in the case of a Higher Acquisition Proposal in which the consideration offered to the limited partners involves non-cash consideration, an investment bank which has been selected by the mutual agreement of the parties, or failing that, an investment bank which has been selected jointly by an investment bank selected by MPLP and an investment bank selected by the Company. 132 "First McNeil Threshold" means an amount equal to the product determined by multiplying (i) sixty million dollars ($60,000,000) by (ii) the sum of the Partnership Percentages for each Participating McNeil Partnership. "FRULPA" means the Florida Revised Uniform Limited Partnership Act. "Governing Laws" means the CRLPA, DRULPA, MULPL, KRULPA, TRLPA and FRULPA, as applicable. "GP Interest" means: (i) with respect to any limited partnership, a unit of general partnership interest in such partnership; and (ii) with respect to a McNeil Partnership, the units of general partnership interest held by the general partner of such McNeil Partnership and all of the rights in respect thereof, including not only the general partner's proportionate interest of the profits and losses of that McNeil Partnership based on the general partner's capital contribution but also the rights and other assets (if any) corresponding to such McNeil Partnership which are being contributed to the applicable New GP LLC at the direction of the Company in accordance with Article II hereof. "Higher Acquisition Proposal" means an Acquisition Proposal made by one or more persons which are not affiliates of the Company, Whitehall or the Managing Member with respect to a McNeil Partnership, which the Company and the general partner of such McNeil Partnership jointly determine to be more favorable to the limited partners of such McNeil Partnership from a financial point of view than the Merger and the other transactions contemplated by this Agreement with respect to such McNeil Partnership; provided, however, that the payment of the Partnership Break-Up Fee by such person(s) shall not be taken into consideration in determining whether or not such Acquisition Proposal is more favorable to the limited partners of such McNeil Partnership from a financial point of view than the Merger and the other transactions contemplated by this Agreement with respect to such McNeil Partnership; provided further, however, that if the Company and the general partner of the applicable McNeil Partnership are unable to reach agreement as to whether or not such Acquisition Proposal is more favorable to the 133 limited partners of such McNeil Partnership from a financial point of view than the Merger and the other transactions contemplated by this Agreement with respect to such McNeil Partnership within three (3) business days of such McNeil Partnership's execution of definitive documents relating to such Acquisition Proposal, then the Company and such McNeil Partnership agree to submit such dispute to the Financial Advisor whose determination shall be final and binding upon all of the parties hereto. "Indemnification Agreement" means the Indemnification and Pledge Agreement, in the form attached as Exhibit F hereto, by and between MPLP (or another designee of the Contributing Partners) and the Managing Member. "Knowledge of Sellers" (or words of similar import) means the actual knowledge, after due inquiry, of those individuals identified on Schedule 10.1(a) of the Seller Disclosure Letter. "Knowledge of the Company" (or words of similar import) means the actual knowledge, after due inquiry, of the officers of Whitehall, the Managing Member, the Company and the Company's subsidiaries. "Known Defects" means any and all reports, and any and all facts and conclusions set forth therein, which were commissioned or requested and received by the Company or any of its affiliates in connection with the transactions contemplated by this Agreement or the other Transaction Documents and which relate to, or were prepared in connection with, environmental or structural matters with respect to any one or more properties currently or formerly owned, operated or leased by any Seller or any of its subsidiaries. "KRULPA" means the Kansas Revised Uniform Limited Partnership Act. "Liens" means any and all options, claims, security interests, pledges, liens, charges, encumbrances or restrictions (whether on voting, sale, transfer, disposition or otherwise), whether imposed by agreement, understanding, law or otherwise, other than, in the case 134 of any of the McNeil Partnerships, Liens created pursuant to the terms of the limited partnership agreement for such McNeil Partnership, and other than Liens relating to Non-Terminated Loans. "LLC Agreement" means the First Amended and Restated Limited Liability Company Agreement of the Company, in the form attached as Exhibit G to this Agreement. "LP Interest" means a unit of limited partnership interest in a limited partnership. "McNeil Person" means (i) Robert A. McNeil and Carole J. McNeil, (ii) any and all affiliates and subsidiaries of each Seller, (iii) any and all indirect and direct holders of beneficial interests in each Seller and (iv) in respect of each Seller and each person specified in clauses (i), (ii) and (iii), each of their respective directors, officers, partners, members, employees, controlling persons, agents and representatives; provided, however, that in no event shall the definition of McNeil Person include any party to this Agreement (other than Robert A. McNeil); provided further, however, that the definition of McNeil Person shall include Robert A. McNeil. "McREMI Assets" means all of McREMI's right, title and interest in and to all of the assets of McREMI and all rights of McREMI relating thereto, other than the Excluded McREMI Assets. "McREMI Reduction Amount" means an amount equal to the sum of (i) the product determined by multiplying (A) the Partial McREMI Allocated Value by (B) the sum of the Partnership Percentages for each Excluded McNeil Partnership (if any) and (ii) the sum of the Second McREMI Allocated Values for each Excluded McNeil Partnership. "McREMI Transaction Expenses" means the Transaction Expenses incurred by McREMI on behalf of itself and not on behalf of the McNeil Partnerships or their Seller Subsidiaries. 135 "Merging Partnership" means each McNeil Partnership other than Fairfax and Summerhill. "Merging Private Partnerships" means Hearth Hollow, Midwest Properties and Regency North. "MPLP GP Subsidiaries" means the Subsidiary Partnerships designated as "MPLP GP Subsidiaries" on Annex G hereto. "MPLP Subsidiary Corporation" means the Subsidiary Corporation designated as a "MPLP Subsidiary Corporation" on Annex F hereto. "MULPL" means the Missouri Uniform Limited Partnership Law. "Net McREMI Allocated Value" means an amount equal to the difference determined by subtracting (i) the McREMI Reduction Amount (if any) from (ii) the Total McREMI Allocated Value. "Net Operating Income" means, for any McNeil Partnership, the adjusted net operating income of such McNeil Partnership calculated in accordance with GAAP applied consistently with past practice and in accordance with the methodology set forth in Schedule 10.1(b) of the Seller Disclosure Letter. "NOI Amount" means, with respect to a McNeil Partnership, the amount set forth on Schedule 8.2(h) of the Seller Disclosure Letter in the column entitled "Adjusted NOI" opposite the name of such McNeil Partnership. "Original LLC Agreement" means the limited liability company agreement of the Company dated June 17, 1999, by the Managing Member as the sole member thereof, a true and correct copy of which has been delivered by the Company to Sellers prior to the date hereof. "Participating McNeil Partnership" means, from time to time, a McNeil Partnership which is not an Excluded McNeil Partnership at such time. 136 "Participating Merging Partnership" means each Participating McNeil Partnership other than Fairfax and Summerhill. "Participating Partnership Consideration Amount" means, with respect to each Participating McNeil Partnership, an amount equal to the difference determined by subtracting (i) an amount equal to the absolute value of the Negative Excess Cash Balance (if any) for such Participating McNeil Partnership from (ii) the sum of the LP Allocation Amounts for each class of LP Interests in such Participating McNeil Partnership. "Partnership Break-Up Fee" means, with respect to an Excluded McNeil Partnership, an amount equal to the product determined by multiplying (i) eighteen million dollars ($18,000,000) by (ii) the Partnership Percentage for such McNeil Partnership. "Partnership Percentage" means, with respect to a McNeil Partnership, the percentage set forth below opposite the name of such McNeil Partnership. Hearth Hollow 0.6056% Midwest Properties 1.9645% Regency North 0.8364% Fairfax 0.6451% Summerhill 1.0657% MREF IX 15.4200% MREF X 11.4113% MREF XI 11.8272% MREF XII 9.3507% MREF XIV 6.8073% MREF XV 6.6786% MREF XX 0.9957% MREF XXI 3.1957% MREF XXII 2.1607% MREF XXIII 1.0690% MREF XXIV 2.5304% MREF XXV 7.7808% 137 MREF XXVI 6.9517% MREF XXVII 8.7036% "Per Partnership Transaction Expenses" means, with respect to a McNeil Partnership, the sum of (i) the amount of Transaction Expenses actually incurred by such McNeil Partnership on behalf of itself and its Seller Subsidiaries and (ii) in the case of Transaction Expenses incurred by Sellers that are not specifically identifiable to individual McNeil Partnerships, an amount equal to such McNeil Partnership's ratable share of such Transaction Expenses based on its relative Partnership Percentage. "Per Unit Consideration Amount" means, with respect to an LP Interest in a McNeil Partnership, an amount equal to the difference determined by subtracting (i) an amount equal to the absolute value of the applicable portion of the Negative Excess Cash Balance (if any) for such Participating McNeil Partnership attributable to such LP Interest from (ii) the Per Unit Allocation Amount for such LP Interest. "person" means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, trust, association, unincorporated organization, governmental entity, political subdivision, or an agency or instrumentality of a governmental entity. "Portfolio Advisory Agreement" shall have the meaning ascribed to such term in the LLC Agreement. "Post-Allocation Upstream Amounts" means any and all Upstream Payables accruing in respect of the period commencing on the Stanger Determination Date through to and ending on the Closing Date. "Post-Allocation Upstream Payables" means the excess (if any) of any and all Post-Allocation Upstream Amounts over an amount equal to the product determined by multiplying the number of fiscal months between the Stanger Determination Date (including any fraction thereof) and the Closing Date by one hundred ninety thousand dollars ($190,000). 138 "Pre-Allocation Upstream Payable" means any Upstream Payable accruing in respect of any period prior to the Stanger Determination Date. "Preferred Equity Financing" shall have the meaning ascribed to such term in the LLC Agreement. "Preliminary Excess Cash Balance" shall have the meaning, for a particular McNeil Partnership, ascribed to the term "Excess Cash Balance" on the Excess Cash Balance Schedule for such McNeil Partnership. "Private McNeil Partnership" means each Merging Private Partnership and Summerhill and Fairfax. "Property Employees" means any and all employees of McREMI whose salaries are reimbursed to McREMI in whole or in part by the McNeil Partnership Properties or the owners of the McNeil Partnership Properties. "Related Party Transaction" means any agreement or intercompany account between any Participating McNeil Partnership or its subsidiaries, on the one hand, and any Seller or any of its affiliates or any of their respective officers or directors, or any relative of any of the foregoing, on the other hand; provided, however, that the definition of Related Party Transactions shall not include (i) any Pre-Allocation Upstream Payables, (ii) the Summerhill Note or (iii) any agreement or intercompany account among any Participating McNeil Partnership and any of its subsidiaries, on the one hand, and any one or more Participating McNeil Partnerships and their subsidiaries, on the other hand. "Seller Material Adverse Effect" means a material adverse effect on the business, properties, financial condition or results of operations of the Participating McNeil Partnerships, taken as a whole; provided, however, that the following shall be excluded from the definition of "Seller Material Adverse Effect" and from any determination as to whether such Seller Material Adverse Effect has occurred or may occur: (i) the effects of changes that are generally applicable to (A) the residential real estate industry or the commercial real estate industry or both or (B) any material change in 139 the financial, banking, currency or capital markets in general (either in the United States or any international market); and (ii) any facts or circumstances relating to the Company or its affiliates; provided further, however, that any such adverse effect from and after the date hereof shall also be excluded from such determination if such effect is clearly related to or caused by, the execution of this Agreement, the transactions contemplated hereby or by the other Transaction Documents or the announcement of this Agreement (including the identity of the Company or any of its affiliates or subsidiaries) or the transactions contemplated hereby or thereby. "Seller Reimbursable Expenses" means an amount equal to the lesser of (i) one million five hundred thousand dollars ($1,500,000) and (ii) Sellers' actual, reasonable out-of-pocket expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement (including, without limitation, all attorneys', accountants' and investment bankers' fees and expenses and all Transaction Expenses). "Seller Subsidiaries" means the subsidiary partnerships of the McNeil Partnerships listed on Annex G to this Agreement (the "Subsidiary Partnerships") and the subsidiary corporations listed on Annex F to this Agreement (the "Subsidiary Corporations") which hold GP Interests in certain of the Subsidiary Partnerships. "Shortfall Agreement" shall have the meaning ascribed to such term in the LLC Agreement. "Stanger Determination Date" means the final date prior to which Stanger has taken Upstream Payables into account in determining the Total McREMI Allocated Value or any Allocation. The parties hereto acknowledge and agree that any dispute as to the Stanger Determination Date or whether or not any Upstream Payable has been included in determining the Total McREMI Allocated Value or any Allocation shall be submitted to and decided by Stanger. "Stanger Engagement Letter" means the Amended and Restated Agreement, dated as of May 7, 1999, by and 140 among Stanger and the McNeil Partnerships, as the same may be amended from time to time. "Stanger Opinions" shall have the meaning ascribed to the term "Opinions" in the Stanger Engagement Letter. "subsidiary" of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person. "Superior Acquisition Proposal" means a bona fide Acquisition Proposal made by a third party for one or more of the McNeil Partnerships which the general partner of each such McNeil Partnership determines in good faith to be more favorable to the limited partners of such McNeil Partnership from a financial point of view than the Mergers and the other transactions contemplated by this Agreement with respect to such McNeil Partnership, and which such general partner determines in good faith is reasonably likely to be consummated. "Support Agreements" means any indemnification obligation or agreement relating to one or more Non-Terminated Loans and any other agreement with a lender of a Non-Terminated Loan (or an affiliate of such lender) whereby liability has been assumed on behalf of a Participating McNeil Partnership or its subsidiaries for exceptions to nonrecourse provisions contained in the Non-Terminated Loans. "Transaction Documents" means this Agreement, Ancillary Agreements, the Commitment Letter, the Guarantee and the other documents, instruments and agreements entered into in connection with the transactions contemplated by this Agreement or the Ancillary Agreements, including certain letter agreements dated as of the date hereof between one or more of the parties hereto and all assignment agreements executed in connection with the transactions contemplated by Sections 2.2 and 2.3(a)(i), 2.3(a)(ii) and 2.3(a)(iii) hereof. 141 "Transaction Expenses" means, with respect to any person, the aggregate amount of all costs, fees and expenses incurred by such person with respect to the transactions contemplated by the Transaction Documents. "TRLPA" means the Texas Revised Limited Partnership Act. "Upstream Payables" means any accrued and unpaid asset management amounts, management incentive distributions, deferred distributions, advances, overhead reimbursements or other amounts owed or payable by McREMI, MII, MPLP or any of the McNeil Partnerships to any one or more of McREMI, MII, MPLP or to any of their respective stockholders or general partners (as the case may be), or to any general partner of any McNeil Partnership. "Waiver Letter" means the letter agreement, to be dated the Closing Date, by and among MPLP, Summerhill and Robert A. McNeil, and acknowledged by the Company. Section 10.2 Seller Disclosure Letter. The parties hereto agree that any information provided in any Schedule of the Seller Disclosure Letter is considered disclosed in each and every other Schedule of the Seller Disclosure Letter, and shall qualify the corresponding section of this Agreement, to the extent it is clear from a reading of such information that such information is applicable to such other section. Any disclosure in any Schedule of the Seller Disclosure Letter of any contract, document, liability, default, breach, violation, limitation, impediment or other matter, although the provision for such disclosure may require such disclosure only if such contract, document, liability, default, breach, violation, limitation, impediment or other matter be "material," shall not be construed against any party to this Agreement, as an assertion by such party, that any such contract, document, liability, default, breach, violation, limitation, impediment or other matter is, in fact, material. Section 10.3 Interpretation. When a reference is made in this Agreement to a section, article, paragraph, clause, annex or exhibit, such reference shall be to a reference to this Agreement unless otherwise 142 clearly indicated to the contrary. The descriptive article and section headings herein are intended for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. Whenever the words "transactions contemplated by this Agreement or the other Transaction Documents" (or words of similar import) are used in this Agreement, they shall be deemed not to include the Preferred Equity Financing or any other financing contemplated by the Company or its affiliates either before, concurrently with or following the Closing (it being understood that nothing in this sentence shall affect or be deemed to amend or modify Section 8.2(d)(i) hereof). Whenever the words "include", "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation." The words "hereof," "herein" and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement. The meaning assigned to each term used in this Agreement shall be equally applicable to both the singular and the plural forms of such term, and words denoting any gender shall include all genders. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. The parties have participated jointly in the negotiation and drafting of this Agreement and the other Transaction Documents; consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement and each of the other Transaction Documents shall be construed as if drafted jointly by the parties thereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement or of any of the other Transaction Documents. ARTICLE XI GENERAL PROVISIONS Section 11.1 Nonsurvival of Representations, Warranties and Covenants. Other than the covenants and agreements set forth in Sections 3.3, 3.5, 7.3(c) (except for rights and obligations thereunder with respect to 143 Participating McNeil Partnerships which shall not survive the Effective Time), 7.4(b), 7.6, 7.8(a), 7.9, 7.10, 7.11, 7.14, 9.4, 9.5 and 9.6 hereof and in this Article XI, all of the representations, warranties, covenants, agreements and undertakings set forth in this Agreement or in any instrument delivered pursuant to this Agreement confirming the representations, warranties, covenants, agreements and undertakings set forth in this Agreement shall terminate as of the Effective Time and shall have no further force or effect. The parties hereto hereby agree that, other than the representations and warranties contained in Articles IV and V hereof, no representations or warranties are being made in this Agreement by any party hereto. Section 11.2 Non-Recourse. The Company (on behalf of itself and each Company Person) acknowledges and agrees that notwithstanding anything to the contrary in this Agreement or under applicable law: (i) this Agreement shall not create or be deemed to create or permit any liability or obligation on part of any McNeil Person and no McNeil Person shall be bound or have any liability hereunder (other than Robert A. McNeil solely in respect of Sections 2.2(a), 2.2(b) and 2.2(c)(ii) hereof); and (ii) the Company and each Company Person shall look solely to the assets of Sellers for satisfaction of any liability of Sellers under this Agreement, and neither the Company nor any Company Person shall seek recourse or commence any action against any McNeil Person or any McNeil Person's assets, for the performance or payment of any obligation of Sellers (other than against Robert A. McNeil solely in respect of his obligations under Sections 2.2(a), 2.2(b) and 2.2(c)(ii) hereof) under this Agreement. This Agreement (except with respect to Sections 2.2(a), 2.2(b) and 2.2(c)(ii) hereof), is executed on behalf of certain Sellers by Robert A. McNeil in his capacity, as the case may be, as a general partner, stockholder, officer or director of such Seller, or as a general partner, stockholder, officer or director of a Seller which is a stockholder or general partner of another Seller, and not individually or personally. The Company (on behalf of itself and each Company Person) has conducted its own independent review and analysis of the business, operations, technology, assets, liabilities, results of operations, financial condition and prospects of the business of Sellers and acknowledges that Sellers 144 have provided the Company and the Company Persons with access to certain personnel, properties, premises and books and records of such business for this purpose. In entering into this Agreement, the Company has relied solely upon the investigation and analysis of itself and the Company Persons and the specific representations and warranties of Sellers set forth in Article IV of this Agreement, and the Company (on behalf of itself and each Company Person) acknowledges and agrees (i) that, except for the specific representations and warranties of Sellers contained in Article IV hereof, no Seller or McNeil Person makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information (including any projections, estimates or other forward-looking information) provided (including in any management presentations, information memorandum, supplemental information or other materials or information with respect to any of the above) or otherwise made available to the Company or any Company Person, and (ii) that, to the fullest extent permitted by law, none of the McNeil Persons shall have any liability or responsibility whatsoever to the Company or any Company Person on any basis (including in contract or tort, under federal or state securities laws or otherwise) based upon any information provided or made available, or statements made (or any omissions therefrom), to the Company or any Company Person, including in respect of the specific representations and warranties set forth in Article IV of this Agreement. Notwithstanding anything to the contrary in this Section 11.2, nothing in this Section 11.2 shall be deemed to affect or modify in any way the rights and obligations under the LLC Agreement or the Indemnification Agreement of the parties thereto. Section 11.3 Amendment. This Agreement may be amended in writing by the parties hereto at any time (i) before or after any requisite approvals of the respective partners, limited partners or stockholders, as the case may be, of each of the parties are obtained and (ii) prior to the filing of any of the Merger Certificates with the Secretary of State of any of the states of formation of the McNeil Partnerships set forth on Schedule 4.1(c) of the Seller Disclosure Letter; provided, however, that, after the requisite approvals of the limited partners of any McNeil Partnership are obtained, no such amendment, 145 modification or supplement shall be made which by law requires the further approval of such limited partners without obtaining such further approval. Section 11.4 Extension; Waiver. At any time prior to the Effective Time, the parties may in writing (i) extend the time for the performance of any of the obligations or other acts of any other party, (ii) waive any inaccuracies in the representations and warranties of any other party, or (iii) waive compliance with any of the agreements or conditions of any other party, in each case, contained in this Agreement, the other Transaction Documents or in any document delivered pursuant to this Agreement or the other Transaction Documents. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. Section 11.5 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be delivered personally, sent by overnight courier (providing proof of delivery or refusal of delivery) to the parties or sent by telecopy (providing confirmation of transmission) at the following addresses or telecopy numbers (or at such other address or telecopy number for a party as shall be specified by like notice): (a) if to any McNeil Entity, to: Robert and Carole McNeil 229 Polhemus Avenue Atherton, California 94027 Telecopier No.: (650) 323-0720 with copies to: Robert and Carole McNeil 1001 California Street, #600 San Francisco, California 94018 Telecopier No.: (415) 441-2380 146 and: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: Martha E. McGarry, Esq. Telecopier No.: (212) 735-2000 (b) if to the Company, to: WXI/McN Realty L.L.C. 85 Broad Street New York, New York 10004 Attention: Ralph Rosenberg Telecopier No.: (212) 357-5505 with copies to: Sullivan & Cromwell 125 Broad Street New York, New York 10004 Attention: Gary Israel, Esq. Telecopier No.: (212) 558-3588 All notices shall be deemed given only when actually received. In no event shall the provision of notice pursuant to this Section 11.5 constitute notice for service of any writ, process or summons in any suit, action or other proceeding. Section 11.6 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Section 11.7 Entire Agreement; No Third Party Beneficiaries. This Agreement (including the Seller Disclosure Letter), the other Transaction Documents, the Confidentiality Agreement and the other agreements entered into in connection with the Mergers and the other transactions contemplated by this Agreement (i) constitute the entire agreement and supersede all prior agreements and understandings, both written and verbal, between the 147 parties with respect to the subject matter thereof and (ii) are not intended to confer upon any person (other than the parties to this Agreement and the Contributing Partners) any rights or remedies whatsoever. Immediately following the Closing, the rights and obligations under the Confidentiality Agreement of the parties thereto shall terminate with respect to any Participating McNeil Partnership and the Seller Subsidiaries of such Participating McNeil Partnership. SECTION 11.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. Section 11.9 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. Section 11.10 Consent to Jurisdiction. Each of the parties hereto irrevocably and unconditionally submits to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York or, if such court will not accept jurisdiction, the Supreme Court of the State of New York or any court of competent civil jurisdiction sitting in New York County, New York. In any action, suit or other proceeding, each of the parties hereto irrevocably and unconditionally waives and agrees not to assert by way of motion, as a defense or otherwise any claims that it is not subject to the jurisdiction of the above courts, that such action or suit is brought in an inconvenient forum or that the venue of such action, suit or other proceeding is improper. Each of the parties hereto also agrees that any final and unappealable judgment against a party hereto in connection with any action, suit or other proceeding shall be conclusive and binding on such party and that such award or judgment may be enforced in any court of competent 148 jurisdiction, either within or outside of the United States. A certified or exemplified copy of such award or judgment shall be conclusive evidence of the fact and amount of such award or judgment. Section 11.11 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. Section 11.12 Arbitration. With respect to a determination of the CPA Firm pursuant to Section 2.4(b) hereof and the determination of the Financial Advisor with respect to a Higher Acquisition Proposal, each party hereto agrees that such determination shall be final and binding upon such party. Judgment on the determination may be entered in any court of competent jurisdiction (within and outside the United States). In the event that any party to this Agreement fails to comply, in the case of the determination of the CPA Firm, with the procedures set forth in Section 2.4(b) hereof or the orders of the CPA Firm or the determination of the CPA Firm, or, in the case of the determination of the Financial Advisor, with the orders of the Financial Advisor or the determination of the Financial Advisor and in either case, with this Section 11.2, then such noncomplying party shall be liable for all costs and expenses, including attorneys' fees, incurred by a party in its effort to obtain either an order to compel compliance with such procedures or such orders, or an enforcement of the determination, from a court of competent jurisdiction. 149 IN WITNESS WHEREOF, each of the parties has executed this Master Agreement, or has caused this Master Agreement to be executed on its behalf by its officer thereunto duly authorized, as of the date first above written. WXI/McN Realty L.L.C. By: WXI/MCN Real Estate, L.L.C., its Managing Member By: Whitehall Street Real Estate Limited Partnership XI, its Managing Member By: WH Advisors, L.L.C. XI, its General Partner By: ---------------------------- Name: Jonathan Langer Title: Vice President McNEIL INVESTORS, INC. By: ----------------------------- Name: Robert A. McNeil Title: Chairman of the Board McNEIL REAL ESTATE MANAGEMENT, INC. By: ----------------------------- Name: Robert A. McNeil Title: Co-Chairman of the Board McNEIL PARTNERS, L.P. By: McNeil Investors, Inc., its General Partner By: ----------------------------------- Name: Robert A. McNeil Title: Chairman of the Board on behalf of itself and each of the McNeil Partnerships (other than Regency North, Fairfax and Summerhill) REGENCY NORTH ASSOCIATES, L.P. By: --------------------------------- Name: Robert A. McNeil Title: General Partner FAIRFAX ASSOCIATES II, LTD. By: --------------------------------- Name: Robert A. McNeil Title: General Partner McNEIL SUMMERHILL I, L.P. By: McNeil Summerhill, Inc. its General Partner By: --------------------------- Name: Robert A. McNeil Title: Co-Chairman of the Board McNEIL SUMMERHILL, INC. By: --------------------------------- Name: Robert A. McNeil Title: Co-Chairman of the Board ------------------------------------ Robert A. McNeil EX-99.2 3 LIMITED LIABILITY COMPANY OPERATING AGREEMENT FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF WXI/MCN REALTY L.L.C. THE INTERESTS OF THE MEMBERS ISSUED UNDER THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OR THE DISTRICT OF COLUMBIA. NO RESALE OR TRANSFER OF AN INTEREST BY A MEMBER IS PERMITTED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT AND ANY APPLICABLE FEDERAL OR STATE SECURITIES LAWS, AND ANY VIOLATION OF SUCH PROVISIONS COULD EXPOSE THE SELLING OR TRANSFERRING MEMBER AND THE COMPANY TO LIABILITY. DATED AS OF __________ __, 1999
TABLE OF CONTENTS PAGE ---- R E C I T A L S..........................................................................................1 ARTICLE 1. DEFINITIONS.......................................................................................... 1 1.1 Definitions........................................................................ 1 1.2 Terms Generally.................................................................... 16 1.3 Definitions from Master Agreement. ............................................... 16 ARTICLE 2. THE COMPANY AND ITS BUSINESS......................................................................... 17 2.1 Effectiveness of the Agreement; Continuation....................................... 17 2.2 Company Name....................................................................... 17 2.3 Term............................................................................... 17 2.4 Amendments to Certificate of Formation............................................. 17 2.5 Business; Scope of Members' Authority.............................................. 18 2.6 Principal Office; Mailing Address; Registered Agent................................ 18 2.7 Fiscal Year........................................................................ 18 2.8 Company Property................................................................... 18 2.9 No State Law Partnership........................................................... 19 2.10 Names and Addresses of Members..................................................... 19 2.11 Representations by Members......................................................... 19 2.12 Additional Representations by Whitehall............................................ 20 2.13 Additional Representations by McNeil............................................... 21 2.14 Indemnification.................................................................... 21 ARTICLE 3. MANAGEMENT OF COMPANY BUSINESS; MAJOR DECISIONS...................................................... 22 3.1 Management Generally............................................................... 22 3.2 Managers and Officers: Number, Appointment, Removal, Qualifications, Etc.......... 23 3.3 Committees......................................................................... 24 3.4 Managers' Expenses................................................................. 24 3.5 Meetings of Managers............................................................... 24 3.6 Quorum............................................................................. 25 3.7 Voting Requirements................................................................ 25 3.8 Actions Requiring Super Majority Approval.......................................... 25 3.9 Role of the Portfolio Advisor and Limitations on Its Authority..................... 27
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Page ---- ARTICLE 4. RIGHTS AND DUTIES OF MEMBERS AND BOARD OF MANAGERS................................................... 28 4.1 Approved Budget and Business Plan.................................................. 28 4.2 Other Activities of the Members.................................................... 28 4.3 Indemnification.................................................................... 28 4.4 Compensation of Members and their Affiliates; Goldman, Sachs & Co. as Exclusive Financial Advisor.................................................................. 29 4.5 Dealing with Members............................................................... 29 4.6 Use of Company Property............................................................ 30 4.7 Designation of Tax Matters Member.................................................. 30 4.8 Proposed Transactions After Five Years............................................. 30 4.9 McNeil's Right Prior to Bankruptcy Filing.......................................... 31 4.10 Refinancing after Five Years....................................................... 31 4.11 Senior Indebtedness and Preferred Equity Financing................................. 32 4.12 Property Manager................................................................... 32 4.13 Binding Effect of Asset Allocations................................................ 32 4.14 Reservation of Rights.............................................................. 32 4.15 Taxation as a Partnership.......................................................... 32 4.16 Harbour Club Properties............................................................ 32 4.17 Preferred Equity Financing......................................................... 33 ARTICLE 5. BOOKS AND RECORDS; REPORTS........................................................................... 33 5.1 Books and Records.................................................................. 33 5.2 Availability of Books and Records; Return of Books and Records..................... 33 5.3 Reports and Statements; Annual Budgets and Business Plans.......................... 34 5.4 Accounting Expenses................................................................ 34 5.5 Bank Account....................................................................... 34 ARTICLE 6. CAPITAL CONTRIBUTIONS AND LIABILITIES................................................................ 34 6.1 Initial Capital Contributions and Initial Capital Accounts of the Members.......... 34 6.2 Working Capital Contributions and Other Additional Capital Contributions........... 36 6.3 Capital of the Company............................................................. 36 6.4 Distributions as Working Capital Reserves.......................................... 36 6.5 Failure to Fund the McNeil Cash Contribution....................................... 37 6.6 Limited Liability of Members....................................................... 38
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Page ---- ARTICLE 7. CAPITAL ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS........................................................................... 38 7.1 Capital Accounts................................................................... 38 7.2 Profits and Losses................................................................. 39 ARTICLE 8. APPLICATIONS AND DISTRIBUTIONS OF NET CASH FLOW AND NET PROCEEDS FROM CAPITAL TRANSACTIONS........................................................... 41 8.1 Applications and Distributions..................................................... 41 ARTICLE 9. TRANSFER OF COMPANY INTERESTS........................................................................ 45 9.1 Transfers of Interests by Members.................................................. 45 9.2 Transfer Binding on Company........................................................ 46 9.3 Certain Limitations................................................................ 47 9.4 Acceptance of Prior Acts........................................................... 47 ARTICLE 10. DISSOLUTION; WINDING UP AND DISTRIBUTION OF ASSETS................................................... 48 10.1 Dissolution........................................................................ 48 10.2 Winding Up......................................................................... 48 10.3 Distribution of Assets............................................................. 49 10.4 Certificate of Cancellation........................................................ 49 10.5 Claims of the Members.............................................................. 49 ARTICLE 11. AMENDMENTS........................................................................................... 49 11.1 Amendments......................................................................... 49 ARTICLE 12. MISCELLANEOUS........................................................................................ 50 12.1 Further Assurances................................................................. 50 12.2 Notices............................................................................ 50 12.3 Headings and Captions.............................................................. 50 12.4 Variance of Pronouns............................................................... 50 12.5 Counterparts....................................................................... 50 12.6 Governing Law...................................................................... 50 12.7 Waiver of Jury Trial............................................................... 50 12.8 Consent to Jurisdiction............................................................ 51
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Page ---- 12.9 Specific Performance............................................................... 51 12.10 Partition.......................................................................... 51 12.11 Severability....................................................................... 51 12.12 Successors and Assigns............................................................. 51 12.13 Entire Agreement................................................................... 52 12.14 Waivers............................................................................ 52 12.15 Maintenance as a Separate Entity................................................... 52 12.16 Confidentiality.................................................................... 52 12.17 No Third Party Beneficiaries....................................................... 53 12.18 Power of Attorney.................................................................. 53 12.19 Construction of this Agreement..................................................... 53 12.20 Non-Recourse....................................................................... 53
EXHIBITS Exhibit A Form of Portfolio Advisory Agreement Exhibit B Form of Shortfall Agreement SCHEDULES Schedule 1 Allocations pursuant to Section 1.3 of the Master Agreement Schedule 2 Initial Book Values Schedule 3 Commercial Properties Schedule 4 Designated Debt Amounts Schedule 5 Multifamily Properties Schedule 6 Expected Preferred Equity Amounts per Partnership -iv- FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF WXI/MCN REALTY L.L.C. FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT of WXI/McN Realty L.L.C., a Delaware limited liability company, dated as of __________ __, 1999, by and between (i) WXI/MNL Real Estate L.L.C., a Delaware limited liability company ("Whitehall"), and (ii) McNeil Partners, L.P., a Delaware limited partnership ("McNeil"). R E C I T A L S WHEREAS, the Company was formed as a Delaware limited liability company pursuant to the Certificate of Formation on June 17, 1999; and WHEREAS, the Parties hereto desire to continue the Company and to enter into this Agreement, all as contemplated by the Master Agreement. NOW, THEREFORE, in order to carry out their intent as expressed above and in consideration of the mutual agreements hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby covenant and agree as follows: ARTICLE 1. DEFINITIONS 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below: "Additional Capital Contributions" shall mean, with respect to any Member, the amount of any cash contributions (including the Initial Working Capital Contribution) and the value of any non-cash contributions made to the Company by such Member in excess of such Member's Initial Capital Contribution. Notwithstanding anything to the contrary contained herein, if Whitehall would otherwise be entitled to receive a cash distribution of Net Cash Flow or Net Proceeds from Capital Transactions pursuant to Section 8.1(b) or 8.1(c) from the Company, Whitehall may elect to forego receipt of all or a portion of such distribution and have the amount so foregone treated as an Additional Capital Contribution in accordance with Section 6.4. "Affiliate" of any Person shall mean another Person that directly or indirectly controls, is controlled by, or is under common control with, such first Person. "Agreement" shall mean this Limited Liability Company Operating Agreement, as it may hereafter be amended or modified from time to time. "Annual Budget" shall mean the annual operating budget and annual capital budget for the Company as amended from time to time, prepared by the Portfolio Advisor for the approval of the Board of Managers pursuant to the terms of the Portfolio Advisory Agreement and Section 4.1 hereof. "Appraised Value" shall mean the value determined by written agreement between Whitehall and McNeil or, failing such an agreement within 10 days after the appraisal procedure is commenced, (i) in the event that Whitehall and McNeil have agreed upon an investment bank to serve as Appraiser, the value of the non-cash consideration shall be determined by the Appraiser and (ii) in the event that Whitehall and McNeil have requested that their respective investment banks appoint a third investment bank to act as Appraiser, the value of the non-cash consideration shall be determined by the Appraiser's determination of the Independent Value. In the case of clause (ii), the investment bank appointed by Whitehall shall make a determination of the value of the non-cash consideration (the "Whitehall Value") and the investment bank appointed by McNeil shall make a determination of the value of the non-cash consideration (the "McNeil Value"). The Appraiser shall then make its own determination of the value of the non-cash consideration (the "Independent Value"). If the Independent Value is closer to the Whitehall Value, the Appraised Value shall be equal to the Whitehall Value. If the Independent Value is closer to the McNeil Value, the Appraised Value shall be equal to the McNeil Value. If the Independent Value is equally distant to the McNeil Value and the Whitehall Value, the Appraised Value shall be equal to the Independent Value. At the time the Appraiser is appointed, the Members shall direct the Appraiser to determine the Appraised Value within 30 days. "Appraiser" shall mean the nationally recognized investment bank (defined according to Securities Data Co. as one of the top 10 underwriters of equity initial public offerings in the United States during calendar year 1998) or the nationally recognized investment banks selected by the Members to determine the Appraised Value pursuant to Section 4.8(b)(iii). In the event the Members cannot agree on an investment bank to act as Appraiser within 10 days, each Member shall appoint a nationally recognized investment bank and those two investment banks shall appoint a third investment bank to act as Appraiser. In no event shall the Appraiser be Goldman, Sachs & Co., PaineWebber Incorporated or any of their respective Affiliates. "Approved Budget" shall mean the Annual Budget for the Budget Year in question, in each case as approved by the Board of Managers in accordance with the provisions hereof and as any of the same may be amended from time to time in accordance with the provisions of this Agreement. "Archon" shall mean Archon Group, L.P., a Delaware limited partnership. "Asset Allocation" shall mean (A) with respect to the McREMI Assets, the Net McREMI Allocated Value, (B) the Allocations ascribed to (i) each of the Participating McNeil Partnerships, (ii) the general partnership interests (and the rights and assets associated therewith) -2- in each of the Participating McNeil Partnerships, (iii) the limited partnership interests in Fairfax held by MPLP and (iv) the limited partnership interests in Summerhill held by MPLP, all as set forth on Schedule 1 hereto and (C) such property level value allocations as the Board of Managers shall determine in its discretion, consistent with the value set forth in clause (A) above. [Schedule 1 will reflect the Allocations calculated by Stanger pursuant to Section 1.3 of the Master Agreement.] "Average Monthly Balance" for any month shall be an amount equal to the mean of (x) the sum of (i) the aggregate Initial Values of the Company Assets (excluding the McREMI Assets) owned by the Company or its Subsidiaries as of the first day of such month and (ii) the Additional Amount as of the first day of such month and (y) the sum of (i) the aggregate Initial Values of the Company Assets (excluding the McREMI Assets) owned by the Company or its Subsidiaries as of the last day of such month and (ii) the Additional Amount as of the last day of such month. The "Initial Value" of a Company Asset as of any specified date shall be equal to the sum of (1) the initial Book Value of such Company Asset at the time acquired by or contributed to the Company or its Subsidiaries plus (2) the entire amount of capital expenditures (as reflected in the financial statements of the Company or its Subsidiaries) spent by the Company or its Subsidiaries on capital improvements for such Company Asset through such specified date (calculated on a cumulative basis). The "Additional Amount" as of any particular time of determination shall mean an amount equal to the product of (x) $________ [insert the Net McREMI Allocated Value] and (y) a fraction, the numerator of which is the aggregate initial Book Values of all of the Properties owned by the Company and its Subsidiaries as of the date of determination (excluding any Property that is acquired by the Company or any of its Subsidiaries after the Effective Time), and the denominator of which is the aggregate initial Book Values of all of the Properties owned by the Company and its Subsidiaries as of the Effective Time. "Assumption Fees" shall mean any fees payable to any lender of borrowed money secured by one or more Properties owned, directly or indirectly, by one of the Participating McNeil Partnerships in connection with the transactions contemplated in the Master Agreement. "Bankruptcy" shall mean, with respect to the affected party: (i) the entry of an Order for Relief under the Bankruptcy Code; (ii) the admission by such party of its inability to pay its debts as they mature; (iii) the making by it of an assignment for the benefit of creditors; (iv) the filing by it of a petition in bankruptcy or a petition for relief under the Bankruptcy Code or any other applicable federal or state bankruptcy or insolvency statute or any similar law; (v) the expiration of sixty (60) days after the filing of an involuntary petition under the Bankruptcy Code or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other federal or state insolvency law, provided that the same shall not have been vacated, set aside or stayed within such sixty (60)-day period; (vi) an application by such party for the appointment of a receiver for the assets of such party; or (vii) the imposition of a judicial or statutory lien on all or a substantial part of its assets unless such lien is discharged or vacated or the enforcement thereof stayed within thirty (30) days after its effective date. "Bankruptcy Code" shall mean Title 11 of the United States Code, as amended. "Board of Managers" shall have the meaning set forth in Section 3.1(a). -3- "Book Value" shall mean, with respect to any Company Asset, its adjusted basis for federal income tax purposes, except that (i) the initial Book Value of any Company Asset contributed by a Member to the Company or otherwise acquired by the Company in either case pursuant to the Master Agreement shall be an amount equal to the value given such Company Asset in accordance with the Allocations (as defined in the Master Agreement) and otherwise in accordance with the definition of Asset Allocation and (ii) the initial Book Value of any other Company Asset contributed by a Member to the Company shall be the agreed upon gross fair market value of such asset, and in all cases such Book Value shall thereafter be adjusted in a manner consistent with Treasury Regulations Section 1.704-l(b)(2)(iv)(g) for revaluations pursuant to Section 7.1(b) and for the Depreciation taken into account with respect to such asset. The initial Book Value of each of the Company Assets is set forth on Schedule 2 attached hereto. "Budget Year" shall mean (i) the period beginning on the Closing Date and ending on December 31, 1999 and (ii) thereafter, any successive yearly period (beginning January 1 and ending December 31). "Business Plan" shall mean, with respect to each Budget Year, the Approved Budget for such Budget Year in effect together with the annual strategic plan prepared by the Portfolio Advisor and approved by the Board of Managers for such Budget Year in accordance with the terms of the Portfolio Advisory Agreement (as such strategic plan and/or Approved Budget may be modified from time to time by the Board of Managers). "Capital Account" shall mean, when used in respect of any Member, the Capital Account maintained for such Member in accordance with Section 7.1, as said Capital Account may be increased, decreased or adjusted from time to time pursuant to the terms of this Agreement. "Capital Contribution" shall mean, with respect to any Member, the sum of such Member's Initial Capital Contribution and any Additional Capital Contributions made by such Member. "Capital Transaction" shall mean (i) the sale or other disposition of all or any part of the assets of the Company or any of its Subsidiaries, (ii) a casualty (where the proceeds from any casualty insurance will not be used in their entirety to either restore such Property or to repay indebtedness secured by such Property) or condemnation (where the proceeds from such condemnation will not be used in their entirety to either restore such Property or to repay indebtedness secured by such Property) of any Property or any part thereof, or (iii) any refinancing of any indebtedness of the Company or any of its Subsidiaries. "Certificate of Formation" shall mean the Certificate of Formation of the Company as filed with the Secretary of State of the State of Delaware, as the same may hereafter be amended and/or restated from time to time in accordance with the terms and provisions of this Agreement. "Closing Date" shall have the meaning ascribed to such term in the Master Agreement. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any corresponding provision(s) of succeeding law. -4- "Commercial Properties" shall mean those Properties listed on Schedule 3 hereto. [List all properties of all Participating McNeil Partnerships designated as "Commercial Properties" on Annex A to the Master Agreement]. "Company" shall mean WXI/McN Realty L.L.C., a Delaware limited liability company, as said Company may from time to time be hereafter constituted. "Company Assets" shall mean, from time to time, all of the assets of the Company and its Subsidiaries and any property (real, personal, tangible or intangible, including the Properties, the McREMI Assets and the interests in the Participating McNeil Partnerships and their Subsidiaries) or estate acquired in exchange therefor or in connection therewith as of such time. "Company Person" shall mean (i) Whitehall, (ii) the Company, (iii) Whitehall XI, (iv) any and all Affiliates and Subsidiaries of the Company, or of Whitehall or of Whitehall XI and any and all indirect and direct holders of beneficial interests in the Company, or in Whitehall or of Whitehall XI and (v) in respect of each Person specified in clauses (i), (ii), (iii) and (iv), each of their respective directors, officers, partners, members, employees, controlling persons, agents and representatives. "Confidential Information" shall have the meaning set forth in Section 12.15. "control" shall mean, when used with respect to any Person, the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other voting interests, by contract, as trustee or executor or otherwise, and the terms "controlling" and "controlled" shall have the meanings correlative to the foregoing. "Depreciation" shall mean, with respect to any Fiscal Year, all deductions attributable to depreciation or cost recovery with respect to Company Assets, including any improvements made thereto and any tangible personal property located therein, or amortization of the cost of any intangible property or other assets acquired by the Company, which have a useful life exceeding one year; provided, however, that with respect to any Company Asset whose tax basis differs from its Book Value at the beginning of such Fiscal Year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the depreciation, amortization or other cost recovery deduction for such period with respect to such asset for federal income tax purposes bears to its adjusted tax basis as of the beginning of such Fiscal Year; provided further, however, that if the federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal Year is zero, Depreciation shall be determined using any reasonable method selected by the Board of Managers. "Effective Time" shall have the meaning ascribed to such term in the Master Agreement. "Equity Commitment Letter" shall mean that equity commitment letter agreement, dated as of June __, 1999 between Whitehall XI and the Company. -5- "Fiscal Year" shall mean the fiscal year of the Company, which shall be the calendar year; but upon dissolution of the Company, "Fiscal Year" shall mean the period from the end of the last preceding Fiscal Year to the date of such dissolution. "Full Pre Lock-out Payment" shall mean an amount in cash equal to the net present value of the sum of all distributions which would be made to the holders of the McNeil Interest pursuant to Section 8.1(b) (using a discount rate equal to the 30-day Treasury bill rate at the time of the payment of the Full Pre Lock-out Payment) based upon the following assumptions: (1) adequate funds are available to make all such distributions; (2) the distributions to be made pursuant to Sections 8.1(b)(ii) and 8.1(b)(iii) will be timely paid in full such that there is no accrued, unpaid McNeil Class C Return or Preferred 14% Return for each month through and including the fifth anniversary of the Closing Date; and (3) a single distribution will be made pursuant to Sections 8.1(b)(vii), 8.1(b)(viii) and 8.1(b)(ix) on the fifth anniversary of the Closing Date to pay to the holders of the McNeil Interest the Preferred 15% Return (if such holders are entitled to such payment pursuant to Section 8.1(b)(viii)) and to return to the holders of the McNeil Interest the full amount of the McNeil Investment. "Full Post Lock-out Payment" shall mean an amount in cash equal to the full amount required to be distributed in the aggregate to all of the holders of the McNeil Interest pursuant to Section 8.1(c) as of the date of such calculation, which calculation assumes there were sufficient funds to distribute at least one dollar to the holders of the Whitehall Class A Interest under Section 8.1(c)(xi). "Gross Operating Expenses" shall mean with respect to any period, the sum of (i) all costs and expenses incurred by the Company and its Subsidiaries in the operation of the Properties as contemplated by this Agreement (excluding Working Capital Expenses paid from Company reserves or from the Initial Working Capital Contribution), (ii) all costs and expenses incurred by the Company and its Subsidiaries in the operation of the Company's business as contemplated by this Agreement, including, without limitation, the Property Management Fee, and (iii) debt service on, and escrows and other payments under, any indebtedness of the Company or any of its Subsidiaries (including any Senior Indebtedness and any Preferred Equity Financing). "Gross Operating Income" shall mean with respect to any period, all cash receipts of the Company and its Subsidiaries from the operation of its business, including gross rental income received by the Company and its Subsidiaries from tenants at the Properties and including payments by tenants in respect of tenant reimbursable expenses, but excluding proceeds from Capital Transactions, Capital Contributions and Working Capital Reserves. "Harbour Club Phase Four" shall mean the property known as Harbour Club IV, located at 48611 South 1-94 Service Drive, Belleville, Michigan. "Harbour Club Phase One" shall mean the property known as Harbour Club I Apartments, located at 4900 Denton Road, Belleville, Michigan. -6- "immediate family member" shall have the meaning ascribed to such term in Instruction 2 of Item 404(a) of Regulation S-K under the Securities Act. "Indemnification Agreement" shall mean the Indemnification and Pledge Agreement, dated as of the date hereof, among McNeil, Whitehall, the persons listed on Schedule I thereto and Whitehall, as agent for the benefit of the Whitehall Parties (as defined therein). "Initial Capital Contribution" shall mean, with respect to any Member, the aggregate initial capital contribution made by such Member pursuant to Section 6.1. "Initial QNL Amount" shall mean the greater of (i) ten million dollars ($10,000,000) and (ii) the difference determined by subtracting (A) the sum of the Designated Debt Amounts (as defined and set forth on Schedule 4) for the Excluded McNeil Partnerships (if any) from (B) fifty million dollars ($50,000,000). The Initial QNL Amount shall be reduced by McNeil's share of "nonrecourse liabilities" (within the meaning of Treasury Regulation Section 1.752) attributable to indebtedness that is repaid or otherwise extinguished as a result of a foreclosure (including a Preferred Equity Financing Foreclosure), the granting of a deed in lieu of foreclosure, condemnation, casualty or Bankruptcy (in each case, subject to Section 4.9) where such triggering event causes a default with respect to indebtedness secured directly or indirectly by 25% or more by value of the Company Assets at the time of such triggering event. "Initial Working Capital Contribution" shall have the meaning set forth in Section 6.2(a). "Interest" shall mean all of the membership interests of a Member in the Company at any particular time, including the right of such Member to any and all benefits to which a Member may be entitled as provided in this Agreement and under applicable law, together with the obligations of such Member to comply with all the terms and provisions of this Agreement and under applicable law. "Investment" shall mean (i) with respect to McNeil, the McNeil Investment, (ii) with respect to Whitehall, the Whitehall Investment, and (iii) with respect to any other Member, an amount equal to the difference determined by subtracting (A) the sum of all distributions of capital, if any, to such Member pursuant to Sections 8.1(b) and 8.1(c) from (B) the aggregate Capital Contribution of such Member. "IRS" shall mean the Internal Revenue Service and any successor agency or entity thereto. "LLCA" shall mean the Delaware Limited Liability Company Act, as amended from time to time. "Loan Agreements" shall mean those loan agreements, mortgages, pledges, guaranties and the like secured by any Property or by which the Company or any of its Subsidiaries is bound, whether now existing or hereafter entered into. "Losses" shall have the meaning set forth in Section 7.2. -7- "Major Decisions" shall have the meaning set forth in Section 3.1(b). "Manager" shall mean any of the Whitehall Managers or McNeil Managers. "Master Agreement" shall mean the Master Agreement, dated as of ______, 1999, by and among the Company, the McNeil Partnerships (as defined therein), McNeil, McNeil Investors, Inc., McREMI, McNeil Summerhill, Inc. and Robert A. McNeil. "McNeil Class A Interest" shall mean the membership Interests in the Company that entitle the holder thereof to distributions pursuant to Sections 8.1(b)(iii), 8.1(b)(viii), 8.1(b)(ix), 8.1(c)(iv), 8.1(c)(ix) and 8.1(c)(x) in respect of the McNeil Class A Investment. "McNeil Class B Interest" shall mean the membership Interests in the Company that entitle the holder thereof to distributions pursuant to Sections 8.1(b)(iii), 8.1(b)(viii), 8.1(b)(ix), 8.1(c)(iv), 8.1(c)(ix) and 8.1(c)(x) in respect of the McNeil Class B Investment. "McNeil Class C Interest" shall mean the membership Interests in the Company that entitle the holder thereof to distributions pursuant to Sections 8.1(b)(ii), 8.1(b)(vii), 8.1(c)(iii) and 8.1(c)(viii) in respect of the McNeil Class C Investment. "McNeil Class A Investment" shall mean an amount equal to the excess, if any, of (A) the greater of (1) the First McNeil Threshold and (2) the Allocated McNeil Value, over (B) the sum of all distributions made to holders of the McNeil Class A Interest pursuant to Sections 8.1(b)(ix) and 8.1(c)(x), subject to adjustment pursuant to Section 6.5. "McNeil Class B Investment" shall mean an amount equal to the excess, if any, of (A) an amount equal to the difference determined by subtracting (x) the sum of the initial McNeil Class C Investment and the initial McNeil Class A Investment from (y) McNeil's Initial Capital Contribution and any and all Additional Capital Contributions made by McNeil pursuant to Sections 4.9 and 4.16, over (B) the sum of all distributions made to holders of the McNeil Class B Interest pursuant to Sections 8.1(b)(ix) and 8.1(c)(x). "McNeil Class C Investment" shall mean an amount equal to the excess, if any, of (A) the portion of McNeil's Initial Capital Contribution that is in excess of the McNeil Threshold Amount and that is paid in cash, over (B) the sum of all distributions to holders of the McNeil Class C Interest pursuant to Sections 8.1(b)(vii) and 8.1(c)(viii); provided, however, that the McNeil Class C Investment shall equal zero if McNeil's Initial Capital Contribution does not equal or exceed $75,000,000 multiplied by the Value Fraction. "McNeil Class C Return" shall mean, with respect to the holders of the McNeil Class C Interest, a 13% per annum, annually compounded return on the McNeil Class C Investment. To the extent the McNeil Class C Investment varies during a month, the McNeil Class C Return shall be calculated assuming that all decreases or increases in the McNeil Class C Investment occurred on the first day of such month. -8- "McNeil Interest" shall mean collectively, the McNeil Class A Interest, the McNeil Class B Interest and the McNeil Class C Interest. "McNeil Investment" shall mean an amount equal to the excess, if any, of (A) the aggregate Capital Contribution of McNeil, subject, in the case of the McNeil Class A Investment only, to adjustment pursuant to Section 6.5, over (B) the sum of all distributions of capital to holders of the McNeil Interest pursuant to Sections 8.1(b)(vii), 8.1(b)(ix), 8.1(c)(viii) and 8.1(c)(x). "McNeil Managers" shall have the meaning set forth in Section 3.2(a). "McNeil Person" shall mean (i) any and all Affiliates and Subsidiaries of McNeil and any and all indirect and direct holders of beneficial interests in McNeil and (ii) in respect of McNeil and each Person specified in clause (i), each of their respective directors, officers, partners, members, employees, controlling persons, agents and representatives. "McNeil Portion" shall mean an amount equal to the sum of all distributions which would be required to be made to the holders of the McNeil Interest pursuant to Section 8.1(c), calculated as if the amount of funds being distributed pursuant to Section 8.1(c) is equal to the aggregate cash and non-cash consideration (using the Appraised Value) being paid to all of the Members in the Proposed Company Transaction. "McNeil Threshold Amount" shall mean an amount equal to $70,000,000, multiplied by the Value Fraction. "McREMI" shall mean McNeil Real Estate Management, Inc., a Delaware corporation. "McREMI Assets" shall have the meaning ascribed to such term in the Master Agreement. "Member-Funded Debt" shall mean any non-recourse debt of the Company that is loaned or guaranteed by any Member and/or is treated as Member non-recourse debt with respect to a Member under Treasury Regulations Section 1.704-2(b)(4). "Members" shall mean, Whitehall, McNeil and any Person who is admitted as a Member pursuant to Section 9.2 hereof. "Minimum Gain" shall mean an amount equal to the excess of the principal amount of debt, for which no Member is liable ("non-recourse debt"), over the adjusted basis of the Company Assets encumbered by such nonrecourse debt which represents the minimum taxable gain that would be recognized by the Company if the nonrecourse debt were foreclosed upon and the Company Assets were transferred to the creditor in satisfaction thereof, and which is referred to as "minimum gain" in Treasury Regulations Section 1.704-2(b)(2). A Member's share of Minimum Gain shall be determined pursuant to Treasury Regulations Section 1.704-2. -9- "Multifamily Properties" shall mean those Properties listed on Schedule 5 hereto. [List all properties of all Participating McNeil Partnerships not designated as "Commercial Properties" on Annex E to the Master Agreement.] "Net Cash Flow" shall mean, for any period, the excess of Gross Operating Income over Gross Operating Expenses for such period, less Working Capital Reserves and Recurring Replacement Reserves. "Net Proceeds from Capital Transactions" shall mean in the case of any Capital Transaction, the gross proceeds from such Capital Transaction, after deducting therefrom: (i) all costs and fees incurred by the Company in connection with such Capital Transaction, including, without limitation, the Portfolio Advisory Incentive Fee, (ii) reserves for contingent liabilities in connection with such Capital Transaction, the amount of which reserves shall be determined in good faith by the Board of Managers and (iii) Working Capital Reserves and Recurring Replacement Reserves. "Net Working Capital Amount" shall mean, with respect to a Participating McNeil Partnership, the excess of the Positive Excess Cash Balance of such Participating McNeil Partnership over the cash on hand of such Participating McNeil Partnership immediately prior to the Effective Time. "Officers" shall mean the Persons appointed as officers of the Company from time to time by the Board of Managers, but no such Person shall be deemed an Officer after such Person is removed as an Officer, which removal of any Officer is subject to the sole discretion of the Board of Managers with or without cause. "Organizational Document" shall mean, with respect to any Person: (i) in the case of a corporation, such Person's certificate of incorporation and by-laws, and any shareholder agreement, voting trust or similar arrangement applicable to any of such Person's authorized shares of capital stock; (ii) in the case of a partnership, such Person's certificate of limited partnership, partnership agreement, voting trusts or similar arrangements applicable to any of its partnership interests; (iii) in the case of a limited liability company, such Person's certificate of formation or articles of organization, limited liability company operating agreement or other document affecting the rights of holders of limited liability company interest; or (iv) in the case of any other legal entity, such Person's organizational documents and all other documents affecting the rights of holders of equity interests in such Person. "Original LLC Agreement" shall mean the Limited Liability Company Operating Agreement of the Company, dated as of June 17, 1999, by Whitehall as the sole member thereof. "Percentage Interest" shall mean as of any date with respect to any Member, the percentage obtained when such Member's Investment is divided by the aggregate Investment of all Members, as such percentage may be adjusted from time to time pursuant to the terms hereof. "Person" shall mean any individual, partnership, corporation, limited liability company, trust or other legal entity. -10- "Pledged Interests" shall have the meaning ascribed to such term in the Indemnification Agreement. "Portfolio Advisor" shall mean Archon or such other portfolio advisor as the Board of Managers shall select. "Portfolio Advisory Agreement" shall mean the agreement between the Company and the Portfolio Advisor in respect of the management of the assets of the Company as contemplated herein, which agreement shall initially be that certain Portfolio Advisory Agreement, dated as of the date hereof between the Company and Archon, in the form attached hereto as Exhibit A, and any supplement, amendment, renewal or replacement thereof. "Portfolio Advisory Fee" shall mean the fee payable monthly to the Portfolio Advisor pursuant to the Portfolio Advisory Agreement, the amount of which shall be equal to 1.0% per annum of the Average Monthly Balance of the Company Assets. To the extent Net Cash Flow is not sufficient to pay the Portfolio Advisory Fee with respect to a given month in accordance with Section 8.1(b)(iv), the amount not paid shall accrue at a rate equal to six percent (6%) per annum (compounded annually) and shall be paid as provided under Sections 8.1(b)(iv) and 8.1(c)(v). "Portfolio Advisory Incentive Fee" shall mean the fee payable by the Company to the Portfolio Advisor for overseeing the disposition of each Property, which fee shall be in an amount equal to 25 basis points multiplied by the Consideration received by the Company or its Subsidiaries in connection with such disposition. "Consideration" shall mean (x) with respect to the sale of a Property, the gross sales price (i.e., before deduction, for example, but without limitation, of brokerage charges, property or transfer taxes or other similar charges) payable to the Company for such Property, less the amount of any purchase money mortgage loan granted by the Company or its Subsidiaries, and (y) with respect to any purchase money mortgage loan granted by the Company or its Subsidiaries, all payments of principal and interest if and when collected by the Company or its Subsidiaries. "Preferred Equity Financing" shall mean, from time to time, (i) the aggregate amount of debt owed by the Company and/or one or more of its Subsidiaries and secured by equity interests in one or more of the Company's Subsidiaries and (ii) the aggregate amount of preferred equity issued by one or more of the Company's Subsidiaries, which by its terms has a final redemption or maturity date. "Preferred Equity Financing Documents" shall mean those agreements, pledges, guaranties and other documents evidencing the rights of a holder of Preferred Equity Financing. "Preferred Equity Financing Foreclosure" shall mean the exercise of rights or remedies by the holder of any Preferred Equity Financing which may include such holder causing a Proposed Multifamily Transaction, a Tax Event Transaction or a Proposed Company Transaction to occur after such holder has obtained management control over one or more of the Company's Subsidiaries that is the subject of such transaction. -11- "Preferred 14% Return" shall mean, with respect to the holders of the McNeil Class A Interest, the McNeil Class B Interest and the Whitehall Class A Interest, a 14% per annum, annually compounded return on the McNeil Class A Investment, the McNeil Class B Investment and the Whitehall Class A Investment, respectively. To the extent the McNeil Class A Investment, the McNeil Class B Investment and the Whitehall Class A Investment vary during a month, the Preferred 14% Return with respect to such Investment shall be calculated based on the assumption that all decreases or increases in such Investment occurred on the first day of such month. "Preferred 15% Return" shall mean, with respect to the holders of the McNeil Class A Interest, the McNeil Class B Interest and the Whitehall Class A Interest, a 15% per annum, annually compounded return on the McNeil Class A Investment, the McNeil Class B Investment and the Whitehall Class A Investment, respectively. To the extent the McNeil Class A Investment, the McNeil Class B Investment and the Whitehall Class A Investment vary during a month, the Preferred 15% Return with respect to such Investment shall be calculated based on the assumption that all decreases or increases in such Investment occurred on the first day of such month. "Profits" shall have the meaning set forth in Section 7.2. "Property" shall mean each real property now or hereafter owned by the Company or any of its Subsidiaries, together with all buildings and improvements situated thereon and personal property owned by the Company or its Subsidiaries related thereto. "Property Management Fee" shall mean the management fee payable to each Property Manager pursuant to the applicable management agreement. "Property Manager" shall mean with respect to a Property, subject to Section 4.12, Management LLC or such other property manager as the Board of Managers shall select to manage such Property. "Proposed Change of Control Transaction" shall mean any one or a series of the following transactions following the consummation of which shall result in (x) Whitehall owning a Percentage Interest in the Company that is less than 50% of the Percentage Interest in the Company owned by Whitehall on the date hereof or (y) Whitehall not having the right to designate at least three of the five Managers: (i) any Transfer (other than Transfers permitted pursuant to Section 9.1(a)); or (ii) any capital reorganization of the Company (including an extraordinary dividend (other than a cash dividend)), consolidations of Interests, combination or substitution of Interests, Interest exchange, conversion or cancellation of Interests, or securitization and subsequent public offering of Interests. "Proposed Company Transaction" shall mean any one or a series of the following transactions: (i) any merger, consolidation, amalgamation, business combination, -12- recapitalization or reorganization involving the Company or all or substantially all of the Company's Subsidiaries (excluding any such transaction which does not involve third Persons); (ii) any split-up, spin-off or other corporate division involving the Company or all or substantially all of the Company's Subsidiaries; (iii) any transaction similar to those described in clause (i) or (ii) above involving the Company or all or substantially all of the Company's Subsidiaries; or (iv) any sale, assignment, conveyance (other than the granting of a mortgage), lease (other than in the ordinary course of the Company's business), transfer or other disposition of all or substantially all of the Company Assets; provided, however, that a Preferred Equity Financing shall not be considered a Proposed Company Transaction. "Proposed Multifamily Transaction" shall mean any of the following: (i) any merger, consolidation, amalgamation, business combination, recapitalization or reorganization involving one or more Multifamily Properties; (ii) any split-up, spin-off or other corporate division involving one or more Multifamily Properties; (iii) any sale, assignment, conveyance (excluding the granting of a mortgage), lease (excluding leases entered into in the ordinary course of the Company's business), transfer or other disposition, in one or a series of transactions, of one or more of the Multifamily Properties; and (iv) any proposal, plan or intention by or on behalf of the Company to do any of the foregoing or any agreement to engage in any of the foregoing entered into by or on behalf of the Company or otherwise binding upon the Company; provided, however, that a Preferred Equity Financing shall not be considered a Proposed Multifamily Transaction. "Recurring Replacement Reserves" shall mean an amount reserved each month by the Company from its Gross Operating Income and its proceeds from Capital Transactions for the payment of Working Capital Expenses, the amount of which reserve shall be determined in good faith by the Board of Managers but which in no event shall exceed an aggregate amount equal to the sum of (i) $250 per annum per unit contained in the Multifamily Properties and (ii) $0.20 per annum per gross square foot contained in the Commercial Properties. "Senior Indebtedness" shall mean, from time to time, the aggregate amount of debt for borrowed money owed by the Company and/or its Subsidiaries that is secured by one or more of the Properties, secured by any of the other Company Assets or unsecured. "Shortfall Agreement" shall mean the letter agreement between Whitehall XI and MPLP, in the form attached hereto as Exhibit B. "Subsidiary" of (i) the Company shall mean each of the Participating McNeil Partnerships and (ii) any Person (including the Company) shall mean any other Person more than 50% of the equity of which is owned, directly or indirectly, by such first Person or a Subsidiary of such first Person or over which such first Person or a Subsidiary of such first Person directly or indirectly has the right to appoint a majority of the board of directors, the board of managers or other relevant governing body. "Tax Event Transaction" shall mean any of the following: (i) any merger, consolidation, amalgamation, business combination, recapitalization or reorganization involving the Company or one or more of its Subsidiaries (other than (1) any such transaction which does not involve -13- third Persons and (2) any such transaction which is effected solely for the purpose of selling one or more Commercial Properties); (ii) any split-up, spin-off or other corporate division involving the Company or its Subsidiaries (other than any such transactions which is effected solely for the purpose of selling one or more Commercial Properties); (iii) any Transfer (other than Transfers permitted pursuant to Section 9.1(a) or 9.1(b)) or any capital reorganization involving the Company (including without limitation an extraordinary dividend, consolidation of Interests, combination or substitution of Interests, Interest exchange, conversion or cancellation of Interests, or securitization and subsequent public offering of Interests, but excluding any Preferred Equity Financing involving one or more of the Company's Subsidiaries); (iv) any Proposed Change of Control Transaction prior to the fifth anniversary of the Closing Date; and (v) any proposal, plan or intention by or on behalf of the Company or Whitehall to do any of the foregoing or any agreement to engage in any of the foregoing entered into by or on behalf of the Company or Whitehall or otherwise binding upon the Company or Whitehall. "Tax Gross-Up Amount" shall equal the excess of the Tax Amount over the Present Value Amount determined as follows: (a) the "Tax Amount" shall equal the "Gain Amount" multiplied by the highest combined marginal federal, state and local income tax rate applicable to an individual residing in any place of residence of Robert A. McNeil or Carole J. McNeil (taking into account amount and character of the gain) for the taxable year of the Tax Event Transaction or any distributions relating thereto; (b) the "Gain Amount" shall equal income and gain recognized by McNeil (or any Transferee of all or any portion of the McNeil Interest pursuant to Section 9.1) as a result of the Tax Event Transaction or any distributions relating thereto; and (c) the "Present Value Amount" shall equal the present value of a hypothetical Tax Amount, calculated using the following assumptions: (1) the discount rate used to determine the net present value is equal to the 30 day Treasury bill rate at the time of the payment of the Full Pre Lock-out Payment; (2) the Gain Amount consists of the sum of (A) monthly allocations of ordinary income necessary to support the Preferred 14% Return with respect to the McNeil Class A Interest and the McNeil Class B Interest, allocated at the end of each calendar month from the date of the Tax Event Transaction to and including the fifth anniversary of the Closing Date, and (B) the remaining income and gain that would have been recognized by McNeil (or any Transferee of all or any portion of the McNeil Interest pursuant to Section 9.1) as if the Tax Event Transaction had occurred on the fifth anniversary of the Closing Date. "Tax Matters Member" shall mean Whitehall. "Total CapEx Debt to Total CapEx Cost Ratio of the Company" shall mean as of any date of determination, a fraction expressed as a percentage that results from dividing (A) the total amount of all Senior Indebtedness and all Preferred Equity Financing incurred from and after the Effective Time to fund Working Capital Expenses by (B) the sum of (1) all Additional Capital Contributions used to fund Working Capital Expenses and (2) the total amount of all Senior Indebtedness and all Preferred Equity Financing incurred from and after the Effective Time to fund Working Capital Expenses. "Total Debt to Total Cost Ratio of the Company" shall mean as of any date of determination, a fraction expressed as a percentage that results from dividing (A) the total amount of all Senior Indebtedness and all Preferred Equity Financing outstanding as of the -14- Effective Time by (B) the sum of (1) Whitehall's Initial Capital Contribution, (2) McNeil's Initial Capital Contribution and (3) the total amount of all Senior Indebtedness and all Preferred Equity Financing outstanding as of the Effective Time. "Transfer" shall mean with respect to any Member, (i) any transfer, sale, pledge, hypothecation, encumbrance, assignment or other disposition of all or any portion of the Interest of such Member or the proceeds thereof (whether voluntarily, involuntarily, by operation of law or otherwise) and (ii) any transfer, sale, pledge, hypothecation, encumbrance, assignment or other disposition of any stock, partnership interest, beneficial interest or other ownership interest in such Member (whether directly or indirectly or whether voluntarily, involuntarily, by operation of law or otherwise); provided, however, that (1) with respect to the foregoing clause (i), any pledge or hypothecation by a Member of its Interest in connection with a bona fide financing transaction shall not be considered to be a Transfer (it being understood that any foreclosure upon any pledge or hypothecation or comparable collateralization of a Member's Interest shall be deemed to be a Transfer for purposes of this Agreement); and (2) with respect to the foregoing clause (ii), that a Transfer shall not include any transfer, sale, pledge, hypothecation, encumbrance, assignment or other disposition of all or any portion of the direct or indirect ownership interests in (x) Whitehall XI (so long as (A) The Goldman Sachs Group, Inc. and/or its successors and assigns, including any Person that succeeds to all or substantially all of the business currently conducted by The Goldman Sachs Group, Inc. or its Affiliates continues directly or indirectly to control Whitehall XI, and (B) Whitehall XI continues to control Whitehall), (y) Archon and (z) McNeil (provided that the other party in any such transaction is any Person specified in Sections 9.1(b)(i), 9.1(b)(ii), 9.1(b)(iii), 9.1(b)(iv) or 9.1(b)(v)). "Transferee" shall mean any Person to whom a Member (or Transferee) is permitted to Transfer all or a portion of such Member's Interest pursuant to Section 9.1(a) or 9.1(b) hereof. "Treasury Regulations" shall mean the regulations promulgated under the Code, as such regulations are in effect on the Closing Date. "Value Fraction" shall mean a fraction (x) the numerator of which is the amount equal to the sum of the Per Partnership Allocated Values for each Participating McNeil Partnership and (y) the denominator of which is the Total Allocated Partnership Value. "Whitehall" shall have the meaning set forth in the first paragraph of this Agreement. "Whitehall XI" shall mean Whitehall Street Real Estate Limited Partnership XI, a Delaware limited partnership. "Whitehall Class A Interest" shall mean the membership Interests in the Company that entitle the holder thereof to distributions pursuant to Sections 8.1(b)(v), 8.1(b)(viii), 8.1(b)(ix), 8.1(b)(x), 8.1(c)(vi), 8.1(c)(ix), 8.1(c)(x) and 8.1(c)(xi) in respect of the Whitehall Class A Investment. -15- "Whitehall Class B Interest" shall mean the membership Interests in the Company that entitle the holder thereof to distributions pursuant to Sections 8.1(b)(i), 8.1(b)(vi), 8.1(c)(ii) and 8.1(c)(vii) in respect of the Whitehall Class B Investment. "Whitehall Class A Investment" shall mean an amount equal to the excess, if any, of (A) the difference determined by subtracting (x) the sum of (1) the Whitehall Class B Investment as of the Closing Date and (2) that portion of any Additional Capital Contribution made by Whitehall that is included in the Whitehall Class B Investment from (y) Whitehall's Capital Contribution, over (B) the sum of all distributions made to holders of the Whitehall Class A Interest pursuant to Sections 8.1(b)(ix) and 8.1(c)(x). "Whitehall Class B Investment" shall mean that portion of Whitehall's Capital Contribution equal to the excess, if any, of (A) the lesser of (x) the sum of (1) that portion of Whitehall's Initial Capital Contribution that, if treated as Preferred Equity Financing, would cause the Total Debt to Total Cost Ratio of the Company to equal 80% and (2) that portion of any Additional Capital Contribution made by Whitehall used to fund Working Capital Expenses that, if treated as Preferred Equity Financing, would cause the Total CapEx Debt to Total CapEx Cost Ratio of the Company to equal 80% and (y) 105% of the sum of the amounts relating to the Participating McNeil Partnerships set forth on Schedule 6, over (B) the sum of all distributions to holders of the Whitehall Class B Interest pursuant to Sections 8.1(b)(vi) and 8.1(c)(vii). Except for any portion of an Additional Capital Contribution made by Whitehall which is treated as a part of the Whitehall Class B Investment pursuant to clause (A)(x)(2) above, all portions of any Additional Capital Contributions made by Whitehall shall be treated as part of the Whitehall Class A Investment. Notwithstanding anything to the contrary in this definition of "Whitehall Class B Investment", in no event shall the aggregate amount of Capital Contributions included as part of the Whitehall Class B Investment exceed [105% of the sum of the amounts relating to the Participating McNeil Partnerships set forth on Schedule 6]. "Whitehall Class B Return" shall mean, with respect to the holder of the Whitehall Class B Interest, a 14% per annum, annually compounded return on the Whitehall Class B Investment. To the extent the Whitehall Class B Investment varies during a month, the Whitehall Class B Return shall be calculated assuming that all decreases or increases in the Whitehall Class B Investment occurred on the first day of such month. "Whitehall Interest" shall mean collectively, the Whitehall Class A Interest and the Whitehall Class B Interest. "Whitehall Investment" shall mean an amount equal to the excess, if any, of (A) the aggregate Capital Contribution of Whitehall, subject to adjustment, in the case of Whitehall Class A Investment only, pursuant to Section 6.5, over (B) the sum of all distributions of capital to holders of the Whitehall Interest pursuant to Sections 8.1(b)(vi), 8.1(b)(ix), 8.1(c)(vii) and 8.1(c)(x). The Initial Working Capital Contribution with respect to Whitehall and any other Additional Capital Contributions with respect to Whitehall shall not be treated as a Capital Contribution by Whitehall and shall not be included in the calculation of its Whitehall Class B Return, Preferred 14% Return, Preferred 15% Return or Percentage Interest until such amount is funded by Whitehall. -16- "Whitehall Managers" shall have the meaning set forth in Section 3.2(a). "Working Capital Expenses" shall mean costs and expenses incurred by the Company and its Subsidiaries in connection with capital improvements, tenant improvements, leasing commissions, and environmental remediation at the Properties and in connection with debt service shortfalls on any indebtedness of the Company or any of its Subsidiaries or any debt service shortfalls on Preferred Equity Financing. "Working Capital Reserves" shall mean the amount reserved by the Company out of its Gross Operating Income and its proceeds from Capital Transactions each month for the payment of Working Capital Expenses and any other expenses of the Company and its Subsidiaries, the amount of which reserve shall be determined by the Board of Managers in good faith, but which shall be equal to $0 until such time as Whitehall shall have contributed the entire Initial Working Capital Contribution to the capital of the Company. 1.2 Terms Generally. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article (or elsewhere herein) include both the plural and the singular; (b) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (c) the words "including" and "include" and other words of similar import shall be deemed to be followed by the phrase "without limitation;" and (d) when a reference is made in this Agreement to a Section or Article, such reference shall be to a section or article of this Agreement, unless otherwise clearly indicated to the contrary. 1.3 Definitions from Master Agreement. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Master Agreement. ARTICLE 2. THE COMPANY AND ITS BUSINESS 2.1 Effectiveness of the Agreement; Continuation. On June 17, 1999, the Company was formed as a Delaware limited liability company pursuant to the Certificate of Formation executed and filed by Whitehall in the Office of the Secretary of State of the State of Delaware pursuant to the provisions of the LLCA. Notwithstanding anything to the contrary contained herein or in the Original LLC Agreement, this Agreement shall become effective upon the Effective Time. The Original LLC Agreement shall continue in full force and effect and shall -17- govern the operation of the Company at all times prior to the Effective Time. The Members hereby agree to continue the Company as a limited liability company pursuant to the provisions of the LLCA, and all other pertinent laws of the State of Delaware, for the purposes and upon the terms and conditions hereinafter set forth. The Members agree that the rights and liabilities of the Members shall be as provided in the LLCA except as otherwise herein expressly provided. Whitehall (as an authorized person pursuant to the LLCA) shall file and record any amendments and/or restatements to the Certificate of Formation and such other ministerial documents as may be required or appropriate under the laws of the State of Delaware and of any other jurisdiction in which the Company may conduct business as a result of the execution of this Agreement. Whitehall (as an authorized person pursuant to the LLCA) has caused the Certificate of Formation to be filed with the Secretary of State of the State of Delaware. A photocopy of each such document has been delivered to and ratified and approved by each Member. Each Member is hereby admitted as a Member of the Company as of the Effective Time and, by its execution and delivery of this Agreement, agrees to be bound by the Certificate of Formation and the terms and provisions of this Agreement. 2.2 Company Name. The business of the Company shall continue to be conducted under the name of "WXI/McN Realty L.L.C." in the State of Delaware and under such name or such assumed names as the Board of Managers deem necessary or appropriate to comply with the requirements of any other jurisdiction in which the Company may be required to qualify. Legal and beneficial title to any properties, real and personal, which may at any time during the term of the Company be owned or leased by the Company shall be held in the name of the Company or any of its Subsidiaries. 2.3 Term. The term of the Company commenced on June 17, 1999 and shall continue in full force and effect until terminated following dissolution on December 31, 2015 or such earlier date of dissolution as hereinafter provided. 2.4 Amendments to Certificate of Formation. Whitehall shall have the power and authority to execute and file any required amendments to the Certificate of Formation and shall do all other acts requisite for the constitution of the Company as a limited liability company pursuant to the LLCA and other laws of the State of Delaware or any other applicable law; provided, however, that nothing in this Section 2.4 shall, or shall be construed to, grant Whitehall the authority or power to unilaterally amend this Agreement or any term or provision hereof. The Company shall, upon request, provide any Member with copies of each amendment, restatement or other document as executed, filed or recorded, as the case may be. 2.5 Business; Scope of Members' Authority. (a) The Company has been organized solely for the purpose of (i) acquiring, holding, financing, refinancing, maintaining and managing the McREMI Assets, (ii) acquiring, holding, financing, refinancing and managing the interests in the Participating McNeil Partnerships and (iii) directly or indirectly, owning, financing, refinancing, managing, maintaining, operating, improving, leasing, selling and otherwise disposing of the Properties. The Company is empowered under law to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the -18- purposes and business described herein and for the protection and benefit of the Company, including, without limitation, full power and authority, directly or indirectly (including through its Subsidiaries), to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness whether or not secured by any mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop any real property (or any interest therein), and sell, transfer and dispose of any such real property. (b) Except as otherwise expressly and specifically provided in this Agreement, no Member shall have any authority to bind, to act for, to sign for or to assume any obligation or responsibility on behalf of, any other Member. Neither the Company nor any Member shall, by virtue of executing this Agreement, be responsible or liable for any indebtedness or obligation of any other Member incurred or arising either before or after the Effective Time, except that (i) the Company (but not any Member) shall be responsible and liable for those responsibilities, liabilities, indebtedness, and obligations assumed or incurred by the Company at and after the Effective Time pursuant to the terms of the Master Agreement and (ii) Whitehall (and not McNeil) shall be solely responsible and liable for those responsibilities, liabilities, indebtedness and obligations assumed or incurred by the Company prior to the Effective Time other than (1) those responsibilities, liabilities, indebtedness and obligations assumed or incurred by the Company pursuant to Sections 7.6, 7.10 and 7.15 of the Master Agreement and (2) the indebtedness incurred by the Company solely to fund the payment of the Funding Amount (as defined in the Equity Commitment Letter). 2.6 Principal Office; Mailing Address; Registered Agent. The principal office and mailing address of the Company shall be c/o Whitehall Street Real Estate Limited Partnership XI, 100 Crescent Court, Dallas, Texas 75201. The Company may change its place of business or mailing address or both to such location or locations as may at any time or from time to time be determined by Whitehall. The name and address of the registered agent upon whom process against the Company may be served is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. 2.7 Fiscal Year. The Fiscal Year shall end on December 31 in each year; provided, however, that upon dissolution of the Company, the Fiscal Year shall end on the date of such dissolution. 2.8 Company Property. No Company Assets shall be deemed to be owned by any Member individually, but shall be owned by and title shall be vested solely in the Company. The Interests of the Members in the Company shall constitute personal property. 2.9 No State Law Partnership. The Members intend that the Company not be a partnership, limited partnership or joint venture and that no Member be a partner or joint venturer of any other Member for any purposes other than applicable tax laws. This Agreement shall not be construed to suggest otherwise. -19- 2.10 Names and Addresses of Members. The names and addresses of the Members are as follows: WXI/MNL Real Estate, L.L.C. c/o Whitehall Street Real Estate Limited Partnership XI c/o WH Advisors, LLC XI 85 Broad Street New York, New York 10004 Attn: Chief Financial Officer McNeil Partners, L.P. c/o Robert and Carole McNeil 229 Polhemus Avenue Atherton, California 94027 Telecopier No: (650) 323-0720 with copies to: Robert and Carole McNeil 1001 California Street, #600 San Francisco, California 94018 Telecopier No.: (415) 441-2380 and Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: Martha E. McGarry, Esq. Telecopier No.: (212) 735-2000 2.11 Representations by Members. Each Member represents, warrants, agrees and acknowledges as of the date hereof that: (a) it is a corporation, limited partnership or limited liability company, as applicable, duly organized or formed and validly existing and in good standing under the laws of the state of its organization or formation; it has all requisite corporate, limited partnership or limited liability company power and authority to enter into this Agreement, to acquire and hold its Interest and to perform its obligations hereunder; and the execution, delivery and performance of this Agreement by such Member has been duly authorized by all necessary corporate, limited partnership or limited liability company action on the part of such Member; (b) the execution and delivery of this Agreement by such Member and the performance of its obligations hereunder will not (i) conflict with, result in a breach of or -20- constitute a default (or any event that, with notice or lapse of time, or both, would constitute a default) or result in the acceleration of any obligation under any of the terms, conditions or provisions of any other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject, (ii) conflict with or violate any of the provisions of its Organizational Documents, or (iii) violate any statute or any order, rule or regulation of any court or governmental or regulatory agency, body or official applicable to such Member or its property or assets; such Member has obtained each consent, approval, authorization or order of any court or governmental agency or body required for the execution and delivery of this Agreement by such Member and performance by such Member of its obligations hereunder; (c) there is no action, suit or proceeding pending against such Member or, to its knowledge, threatened in any court or by or before any other governmental agency or instrumentality that would prohibit its entering into, or that could have a material adverse effect on its ability to perform its obligations under, this Agreement; (d) assuming the due execution and delivery of this Agreement by the other Member, this Agreement is a binding agreement on the part of such Member enforceable in accordance with its terms against such Member; (e) neither it nor any of its Affiliates has employed any broker or finder, or incurred any liability for any brokerage commission or finder's fee, in connection with the sale or contribution of the McREMI Assets or interests in the Participating McNeil Partnerships to the Company or any of the other transactions contemplated by this Agreement or the Master Agreement except for PaineWebber Incorporated, Eastdil Realty Company and Robert A. Stanger & Co., Inc., whose fees shall be paid by one or more of McNeil and the Participating McNeil Partnerships, and Houlihan, Lokey, Howard & Zukin and Susan Barlow, all of whose fees shall be paid by McNeil; and (f) (i) such Member and each of its beneficial owners is an "accredited investor" (as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended) and (ii) such Member is acquiring its Interest as a member in the Company for its own account, for investment purposes only, and not with a view to the distribution or resale thereof, in whole or in part. Each Member agrees that it will not make any Transfer, or solicit offers to buy from or otherwise approach or negotiate in respect thereof with any Person or Persons whomsoever, all or any portion of its Interest in any manner that would violate or cause the Company or any Member to violate applicable federal or state securities laws. 2.12 Additional Representations by Whitehall. Whitehall further represents, warrants, agrees and acknowledges to McNeil as of the date hereof that: (a) The Company is a limited liability company duly formed and validly existing under the laws of the State of Delaware and has the requisite power and authority to carry on its business as conducted prior to the Effective Time and is duly -21- qualified or licensed to do business and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business prior to the Effective Time or the ownership, leasing or use of its properties makes such qualification or licensing necessary. The Company has delivered to McNeil complete and correct copies of the Original LLC Agreement and the Certificate of Formation, as each has been amended or supplemented to the date of this Agreement. (b) The Company was formed solely for the purpose of engaging in the transactions contemplated by this Agreement and the Master Agreement and has not engaged in any business activities or conducted any operations other than as expressly provided for in the Master Agreement. Other than the Transitory Partnerships and the Company LLCs upon their formation, the Company has never owned any capital stock or other equity interests in any other Person. Prior to the contributions described in Section 2.3(a) of the Master Agreement and in Section 6.1 of this Agreement, the Company will have no assets or liabilities or obligations whatsoever (other than the rights and obligations pursuant to the Master Agreement, this Agreement and the Commitment Letter). 2.13 Additional Representations by McNeil. McNeil further represents, warrants, agrees and acknowledges to Whitehall as of the date hereof that: (a) Immediately prior to the contributions described in Section 2.3(a) of the Master Agreement, MPLP had good and valid title to all of the GP Interests in each Participating McNeil Partnership, the McREMI Assets and the LP Interests in each of Fairfax and Summerhill (to the extent such McNeil Partnerships are Participating McNeil Partnerships) in each case free and clear of all Liens. (b) Upon the occurrence of the contributions described in Section 2.3(a) of the Master Agreement, the GP Interests in each Participating McNeil Partnership, the McREMI Assets and the LP Interests in each of Fairfax and Summerhill (to the extent such McNeil Partnerships are Participating McNeil Partnerships) shall have been contributed, transferred or otherwise assigned, at the direction of the Company, to one or more of the Company or its wholly owned Subsidiaries, in any such case, free and clear of all Liens (other than Liens relating to Non-Terminated Loans). 2.14 Indemnification. The representations, warranties and covenants of the Members set forth in Sections 2.11, 2.12 and 2.13 are made as of the Effective Time and shall survive the Effective Time indefinitely. Each Member agrees to indemnify, defend, and hold the Company and the other Members harmless against all claims, demands, actions, obligations, causes of action, losses and expenses, including reasonable fees and expenses of counsel, suffered or incurred by, or asserted against, any of them relating to or arising from any inaccuracy in or breach of the representations, warranties or covenants made by such Member in Sections 2.11, 2.12 and 2.13. -22- ARTICLE 3. MANAGEMENT OF COMPANY BUSINESS; MAJOR DECISIONS 3.1 Management Generally. (a) The management of the Company shall be vested exclusively in a board of five (5) managers (each manager, a "Manager" and, collectively, the "Board of Managers"). Except as expressly set forth herein to the contrary, the Members, in their capacity as members of the Company, shall have no part in the management or control of the Company and shall have no authority or right to act on behalf of or bind the Company in connection with any matter. Each of the Members agrees that all determinations, decisions, and actions made or taken by or on behalf of the Board of Managers in accordance with the terms of this Agreement and applicable law shall be conclusive and binding upon the Company, the Members, and their respective successors, assigns, and personal representatives. (b) Without in any way limiting the foregoing, but subject to Section 3.8, the Board of Managers shall have the exclusive right to decide (affirmatively or negatively) all material matters relating to the Company, its Subsidiaries and the Properties, including, without limitation, matters (collectively, the "Major Decisions") regarding: (i) the sale, financing or refinancing of any one or more of the Properties; (ii) capital or other expenditures; (iii) terminating or modifying commercial leases and entering into new commercial leases; (iv) concessions granted to tenants (including free rent and tenant improvements) in connection with any commercial lease; (v) subject to Section 4.9, the filing of a petition in Bankruptcy or similar proceedings; (vi) tenant leases and other expenses; (vii) settling any litigation or arbitration; (viii) investments of cash of the Company or any of its Subsidiaries; (ix) entering into service contracts not contemplated by the applicable approved Business Plan; (x) engagement of Property Managers; -23- (xi) approval of the standard lease form used for each Commercial Property and the standard lease form for each Multifamily Property, and approval of any lease that deviates substantially from the applicable standard form; (xii) any call for the making of Additional Capital Contributions by Whitehall; (xiii) subject to the terms and provisions of this Agreement, any decision relating to the distribution of cash and allocation of taxable income and loss; (xiv) modifications to the insurance program required by the applicable approved Business Plan; and (xv) subject to the terms and provisions of this Agreement, setting reserves. 3.2 Managers and Officers: Number, Appointment, Removal, Qualifications, Etc. (a) The total number of Managers shall at all times equal five. Whitehall shall at all times be entitled to designate three of the five Managers (the "Whitehall Managers") to serve until the first annual meeting of Members and until each such Manager's successor has been elected and qualified and Whitehall shall have the right to elect three Managers upon each annual election of Managers. McNeil shall at all times be entitled to designate two of the five Managers (the "McNeil Managers") to serve until the first annual meeting of Members and until each such Manager's successor has been elected and qualified and McNeil shall have the right to elect two Managers upon each annual election of Managers. (b) No Manager may be removed from office (with or without cause) without the consent of the Member who elected such Manager. Each Member shall have the sole right to remove, at any time and for any reason with or without cause, any Manager appointed by such Member and to appoint a successor Manager to fill any vacancy caused by the removal, resignation, death or incapacity of any Manager appointed by such Member. Each Member agrees to fill any such vacancy as soon as practicable and agrees that it will use its best efforts to fill any such vacancy within 30 days of such vacancy. Each Member agrees to give the Company and the other Member prompt written notice of any appointment or removal of any of its Managers. (c) Whitehall shall have the right to designate one of the five Managers as Chairman of the Board of Managers. The Chairman shall preside over meetings of the Board of Managers. The Chairman shall at all times be a Manager of the Company. Except to preside over meetings of the Board of Managers, the Chairman by virtue of such title shall have no other authority or power not possessed by the other Managers. If no Chairman is designated by Whitehall, or if at any meeting of the Board of Managers the Chairman is not present within fifteen minutes after the time appointed for holding such meeting, any Whitehall Manager present may choose one of their number to preside over such meeting as chairman. -24- (d) The Board of Managers may appoint the Officers of the Company, which may consist of, among other officers, a President, a Secretary and a Treasurer. The Board of Managers may also appoint such other Officers and agents as it shall deem necessary or advisable. All Officers and agents shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Managers. Any two or more offices may be held by the same person. An Officer of the Company shall hold office until his or her successor is duly appointed and qualified or until his or her death, resignation or removal from office. Any Officer appointed by the Board of Managers may be removed at any time, with or without cause, by the affirmative vote of the majority of the Board of Managers. Any vacancy occurring in any office of the Company shall be filled by the Board of Managers. (e) Any Manager designated pursuant to this Section 3.2 shall assume the powers, duties and obligations of a Manager as provided under this Agreement and of a manager under the LLCA and shall be subject to the terms hereof and thereof. (f) The Board of Managers shall have the right to delegate authority to the Officers, provided that the Board of Managers does not delegate the authority to make any decision regarding the matters described in Section 3.1(b)(i), 3.1(b)(v), 3.1(b)(xii), 3.1(b)(xiii), 3.1(b)(xv) or 3.8 or any matter which by the terms of this Agreement requires a Super Majority Vote or the consent of McNeil. 3.3 Committees. The Board of Managers shall not have the power to create committees. 3.4 Managers' Expenses. Except as agreed to between the Members, each Member shall bear all costs incurred by the Managers designated by such Member and no Manager shall be entitled to any compensation from the Company or its Subsidiaries for serving in the capacity as a Manager or as the Chairman of the Board of Managers. 3.5 Meetings of Managers. (a) The Board of Managers shall meet not less frequently than quarterly, upon written notice duly given by any Whitehall Manager to all Managers, provided that any failure to so meet shall not give rise to any presumption or inference that the Members shall have any liability for the obligations of the Company; and provided further that if a meeting has not been called by a Whitehall Manager within 60 days after the last day of the immediately preceding fiscal second quarter or fiscal year end, as the case may be, any McNeil Manager may give notice to all Managers of such meeting. (b) Notwithstanding anything to the contrary contained herein or in the LLCA, subject to the proviso in Section 3.5(a), the Board of Managers shall meet upon the request of any Whitehall Manager conveyed in writing to each other Manager, at a time no fewer than three (3) and no more than ten (10) days after such notice is given and at a place in New York, New York, Dallas, Texas or such other reasonable place as is specified in such notice; provided, however, that attendance at such meeting may be telephonic. -25- (c) To the extent permitted by any applicable law, the Managers, may participate in any meeting of the Board of Managers by means of conference telephone or similar communications equipment by means of which all individuals participating in the meeting can hear and be heard by all other participants, and such participation shall constitute presence in person at such meeting. (d) A waiver of notice signed by a Manager shall be deemed equivalent to notice, whether signed before, at or after the meeting. Attendance at a meeting shall constitute a waiver of notice. (e) Unless otherwise prohibited by law, any action required or permitted to be taken by the Board of Managers may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by all five of the Managers. The resolution and the written consents thereto by the Managers shall be filed with the minutes of the proceedings of the Board of Managers. 3.6 Quorum. At all meetings of the Board of Managers three out of the five Managers shall constitute a quorum for the transaction of business; provided, however, that any Whitehall Manager shall have the right to represent and vote the interests of one or both of the other Whitehall Managers and either McNeil Manager shall have the right to represent and vote the interests of the other McNeil Manager, in which event the absent Managers shall be deemed present for purposes of constituting a quorum. In the event that at any meeting of the Managers a quorum shall not be present, the Managers present may adjourn the meeting from time to time until a quorum shall be present. 3.7 Voting Requirements. When action is to be taken by vote of the Board of Managers, each Manager shall be accorded one vote; provided, however, that any Whitehall Manager shall have the right to represent and vote the interests of one or both of the other Whitehall Managers and either McNeil Manager shall have the right to represent and vote the interests of the other McNeil Manager. Except as provided in Section 3.8, all actions of the Board of Managers must be approved by the affirmative vote of at least three of the five Managers (a "Majority Vote"). 3.8 Actions Requiring Super Majority Approval. Notwithstanding any other provision of this Agreement or applicable law to the contrary, each of the Members hereby agrees that neither the Board of Managers nor the Company shall take, and shall not permit any of the Company's Subsidiaries to take, any of the following actions without the approval of at least four (4) of the five (5) Managers (a "Super Majority Vote") (which approval shall not be delegable to any Manager, any committee of the Board of Managers or any Officers of the Company, notwithstanding any other provision of this Agreement or applicable law to the contrary): (a) Any amendment or repeal of this Agreement or any term or provision hereof. -26- (b) Any Proposed Multifamily Transaction on or prior to the fifth anniversary of the Closing Date, other than (i) a Proposed Multifamily Transaction in which no gain or loss is recognized by McNeil under Section 704(c) of the Code, (ii) as the result of a foreclosure (including a Preferred Equity Financing Foreclosure), the granting of a deed in lieu of foreclosure, condemnation, casualty or Bankruptcy (in each case under this clause (ii), subject to Section 4.9) or (iii) a Proposed Multifamily Transaction that may be deemed to be included in the definition of Tax Event Transaction (which does not involve the disposition of any Commercial Properties). (c) Any Tax Event Transaction on or prior to the fifth (5th) anniversary of the Closing Date, other than (A) any Tax Event Transaction resulting from a Preferred Equity Financing Foreclosure and (B) any Tax Event Transaction that results in the holders of the McNeil Interest receiving in the aggregate an amount of cash (on the date of closing of the Tax Event Transaction) equal to the sum of the Full Pre Lock-out Payment and the Tax Gross-Up Amount. The Company shall notify the holders of the McNeil Interest in writing of a Tax Event Transaction within two (2) business days of signing an agreement with respect to a Tax Event Transaction (the "Notice Date"). (d) Any change in the nature of the Company's business as conducted immediately following the Effective Time. (e) Any repayment, refinancing of or amendment to any Loan Agreement, prior to the fifth (5th) anniversary of the Closing Date, to the extent the same would result in McNeil's share of "nonrecourse liabilities" (within the meaning of Treasury Regulation Section 1.752) and "qualified nonrecourse financing" (within the meaning of Section 465 of the Code) being less than the Initial QNL Amount. (f) A liquidation or dissolution of the Company except following the disposition of all of the Company Assets. (g) Any commencement of Bankruptcy or similar proceedings by the Company or the Board of Managers which involves the Company or a significant number of its Subsidiaries or Properties. (h) (i) The admission of a new Member to the Company (other than in accordance with Article 9), (ii) any Transfer (other than Transfers permitted by Section 9.1(a) or 9.1(b)) or (iii) the admission (through one or a series of transactions) of new members, partners or equity holders to a significant number of the Company's Subsidiaries (except with respect to this clause (iii), in connection with a Preferred Equity Financing approved by a Majority Vote of the Board of Managers). (i) Entering into or amending any transaction or transactions outside of the ordinary course of business with Goldman, Sachs & Co., Whitehall or Whitehall XI, or any Affiliate (excluding any Subsidiary of the Company) of any of the foregoing, other than (i) retaining Goldman, Sachs & Co. (and/or one or more of its Affiliates) as the Company's exclusive financial and sales advisor for the sale, financing, refinancing, -27- merger, combination, disposition or similar transaction with respect to the Company, some or all of its Subsidiaries or some or all of the Properties (excluding the sale of an individual Property or a portfolio of fewer than five Properties) and (ii) services provided by Archon as Portfolio Advisor or, subject to Section 4.12, as a Property Manager. (j) Notwithstanding any exception in clause (i) above, entering into or amending any transaction or transactions with Goldman, Sachs & Co., Whitehall or Whitehall XI, or any Affiliate (excluding any Subsidiary of the Company) of any of the foregoing, which provides for rates or terms (including arrangements relating to compensation, commissions, fees or indemnification) that are not substantially comparable to market rates and terms for comparable services rendered by comparable firms. (k) Any transaction following the consummation of which would result in Whitehall or Whitehall XI or any of their respective Affiliates owning any direct or indirect interest in any Subsidiary of the Company (including the Participating McNeil Partnerships and their respective Subsidiaries), other than as a result of the ownership of Company Interests by Whitehall and as a result of Whitehall or one or more Affiliates being the provider of Preferred Equity Financing. (l) Each of the Members hereby agrees that the Company's execution and delivery of the Portfolio Advisory Agreement does not require a Super Majority Vote. 3.9 Role of the Portfolio Advisor and Limitations on Its Authority. (a) The Board of Managers shall have the right to delegate to the Portfolio Advisor the right and duty to manage the day-to-day operational affairs of the Company and to implement the decisions made on behalf of the Company by the Board of Managers or any Officers in accordance with the terms of this Agreement and applicable laws and regulations and such other rights and powers as are granted to the Portfolio Advisor hereunder or under the Portfolio Advisory Agreement and as the Board of Managers may from time to time expressly delegate to the Portfolio Advisor; provided, however, that the Board of Managers shall not delegate to the Portfolio Advisor the authority to make any decision regarding the matters described in Section 3.1(b)(i), 3.1(b)(v), 3.1(b)(xii), 3.1(b)(xiii), 3.1(b)(xv) or 3.8 or any matter which by the terms of this Agreement requires a Super Majority Vote or the consent of McNeil. (b) Neither McNeil nor any McNeil Manager shall (nor shall McNeil nor any McNeil Manager have any right, power or authority to), without the prior approval of Whitehall, bind or take any action on behalf of or in the name of the Company, or enter into any commitment or obligation binding upon the Company, except for (i) actions authorized under this Agreement, (ii) actions authorized by Whitehall in the manner set forth herein and (iii) actions (excluding the execution of any document on behalf of the Company) which, at the time of the taking of such action, McNeil or any McNeil Manager did not reasonably believe would be binding upon the Company. McNeil shall indemnify and hold harmless the Company and the Members and their Affiliates from and against any and all claims, demands, losses, damages, liabilities, lawsuits and other proceedings, judgments and awards, and costs and -28- expenses (including, but not limited to, reasonable attorneys' fees) arising, directly or indirectly, in whole or in part, out of any breach of the provisions of this Section 3.9(b) by McNeil or any McNeil Manager. ARTICLE 4. RIGHTS AND DUTIES OF MEMBERS AND BOARD OF MANAGERS 4.1 Approved Budget and Business Plan. Prior to the end of each Fiscal Year, the Board of Managers shall review, revise and approve an Annual Budget and a Business Plan for the next succeeding Fiscal Year prepared by the Portfolio Advisor for each Budget Year and any amendments and modifications thereto. 4.2 Other Activities of the Members. (a) Each Member may engage or invest in any other activity or venture or possess any interest therein independently or with others. None of the Members, the Managers, the Officers, the Company or any other Person employed by, related to or in any way affiliated with any Member, any Manager, any Officer or the Company shall have any duty or obligation to disclose or offer to the Company or the Members, or obtain for the benefit of the Company or the Members, any other activity or venture or interest therein. None of the Company, the Members, the creditors of the Company or any other Person having any interest in the Company shall have (A) any claim, right or cause of action against any Member or any other Person employed by, related to or in any way affiliated with, any Member by reason of any direct or indirect investment or other participation, whether active or passive, in any such activity or venture or interest therein or (B) any right to any such activity or venture or interest therein or the income or profits derived therefrom. 4.3 Indemnification. No Member, Manager or Officer shall be liable, responsible or accountable in damages or otherwise to the Company, any third Person or to any other Member for (i) any act performed within the scope of the authority conferred on such Member, Manager or Officer by this Agreement or any act that is in breach of its fiduciary duties except for the gross negligence, fraud or willful misconduct of such Member, Manager or Officer in carrying out its obligations hereunder and except for acts in contravention of an express term of this Agreement, (ii) such Member's, Manager's or Officer's failure or refusal to perform any act, except those required by the terms of this Agreement, (iii) such Member's, Manager's or Officer's performance of, or failure to perform, any act on the reasonable reliance on advice of legal counsel to the Company or (iv) the negligence, dishonesty or bad faith of any agent, consultant or broker of the Company selected, engaged or retained in good faith and with reasonable prudence. In any threatened, pending or completed action, suit or proceeding, each Member, Manager and Officer shall be fully protected and indemnified and held harmless by the Company against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, proceedings, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable attorneys' fees, costs of investigation, fines, judgments and amounts paid in settlement, actually incurred by such Member, Manager or Officer in connection -29- with such action, suit or proceeding) by virtue of its status as Member, Manager or Officer or with respect to any action or omission taken or suffered in good faith, other than liabilities and losses resulting from the gross negligence, fraud or willful misconduct of such Member, Manager or Officer; provided, however, such Member, Manager or Officer shall not be so indemnified for any acts in contravention of an express term of this Agreement. The indemnification provided by this Section 4.3 shall be recoverable only out of the assets of the Company and its Subsidiaries, and no Member, Manager or Officer shall have any personal liability (or obligation to contribute capital to the Company) on account thereof. 4.4 Compensation of Members and their Affiliates; Goldman, Sachs & Co. as Exclusive Financial Advisor. No Member or any Affiliate of any Member, shall be entitled to compensation from the Company in connection with any matter that may be undertaken in connection with the fulfillment of its duties and responsibilities hereunder, except: (i) as provided in this Section 4.4; (ii) as set forth in any agreement or agreements with the Portfolio Advisor or, subject to Section 4.12, with Archon as a Property Manager; or (iii) in connection with a guaranty or other recourse obligation provided or incurred by a Member (or an Affiliate of a Member) to a lender providing financing to the Company, its Subsidiaries, or any Property, the Member (or such Affiliate) providing or incurring such guaranty or other recourse obligation may recover from the Company a reasonable fee, in accordance with market rates (including in respect of commissions and fees) and terms, in exchange for such services. The Members covenant and agree that: (i) the Company will exclusively retain Goldman, Sachs & Co. (as well as such Affiliate(s) as Goldman, Sachs & Co. may designate from time to time) to provide sales advisory services to the Company in connection with any sale, merger, combination, disposition or similar transaction involving the Company or any of its Subsidiaries or Properties or any related series of sales, mergers, combinations, dispositions or other similar transactions (other than sales of individual Properties or portfolios of fewer than five Properties), and (ii) the Company will exclusively retain Goldman, Sachs & Co. (and/or its Affiliates) and will use its best efforts to cause its Subsidiaries to exclusively retain Goldman, Sachs & Co. (and/or its Affiliates) to provide all financial advisory and investment banking services to the Company in connection with any financing, refinancing or similar transaction involving the Company or any of its Subsidiaries or Properties (other than sales of individual Properties or portfolios of fewer than five Properties). If Goldman, Sachs & Co. (and/or its Affiliate(s)) agrees to accept such engagement (as described above), such engagement shall be negotiated on an arms-length basis and Goldman, Sachs & Co. (and/or their respective Affiliate(s)) shall be entitled to receive from the Company fees and commissions for such services in accordance with market rates and terms and indemnification in accordance with market terms for comparable services rendered by comparable firms. -30- 4.5 Dealing with Members. Subject to all other provisions of this Agreement, the fact that a Member, an Affiliate of a Member, or any officer, director, employee, partner, consultant or agent of a Member, is directly or indirectly interested in or connected with any Person employed by the Company to render or perform a service shall not prohibit the Company from employing such Person on an arm's length basis and at market rates (including in respect of commissions and fees) and terms, and neither the Company nor any of the other Members shall have any right in or to any income or profits derived therefrom by reason of this Agreement. 4.6 Use of Company Property. No Member shall make use of the funds or property of the Company or its Subsidiaries, or assign its rights to specific property, other than for the business or benefit of the Company or its Subsidiaries. 4.7 Designation of Tax Matters Member. The Tax Matters Member shall act as the "tax matters partner" of the Company, as provided in the regulations pursuant to Section 6231 of the Code. Each Member hereby approves of such designation and agrees to execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be deemed necessary or appropriate to evidence such approval. To the extent and in the manner provided by applicable Code sections and regulations thereunder, the Tax Matters Member (a) shall furnish the name, address, profits interest and taxpayer identification number of each Member to the IRS and (b) shall inform each Member of administrative or judicial proceedings for the adjustment of Company items required to be taken into account by a Member for income tax purposes. Each Member hereby reserves all rights under applicable law with respect to the activities undertaken by the Tax Matters Member, including the right to retain independent counsel of its choice at its expense. The Company shall indemnify the Tax Matters Member for any liabilities incurred in such capacity. 4.8 Proposed Transactions After Five Years. (a) In the event of any Proposed Change of Control Transaction that is proposed to be consummated after the fifth (5th) anniversary of the Closing Date, then Whitehall shall give McNeil written notice of the Proposed Change of Control Transaction and McNeil shall be "cashed-out" upon the consummation of such Proposed Change of Control Transaction. In exchange for all of the McNeil Interest, the holders of the McNeil Interest shall be paid in the aggregate an amount in cash equal to the Full Post Lock-out Payment upon the closing of such Proposed Change of Control Transaction. (b) In the event of a Proposed Company Transaction that is proposed to be consummated after the fifth (5th) anniversary of the Closing Date the following shall apply: (i) If any portion of the consideration to be received by the Members in connection with any Proposed Company Transaction shall be other than cash, the consideration to be received by the holders of the McNeil Interest shall be of the same type and shall have the same terms as the consideration received by Whitehall. (ii) Except as provided in Section 4.8(b)(iii), Whitehall shall determine the value of any non-cash consideration to be received by the Members in any Proposed -31- Company Transaction and if Whitehall determines that the value of such non-cash consideration plus any cash consideration to be received by the holders of the McNeil Interest is sufficient to provide to the holders of the McNeil Interest a Full Post Lock-out Payment, the holders of the McNeil Interest shall have the right to either (i) exchange all of the McNeil Interest upon the closing of such Proposed Company Transaction for such cash and non-cash consideration having a value (using Whitehall's valuation) equal to the Full Post Lock-out Payment, or (ii) exchange all of the McNeil Interest upon the closing of such Proposed Company Transaction for cash in an amount equal to the Full Post Lock-out Payment. McNeil shall have the right to engage, at the sole expense of the holders of the McNeil Interest, an investment bank or other appraiser to assist the holders of the McNeil Interest in determining whether to take the non-cash consideration or the cash. (iii) If such Proposed Company Transaction involves non-cash consideration (other than publicly traded securities) and Whitehall determines that the value of the non-cash consideration plus any cash consideration to be received by the holders of the McNeil Interest is not sufficient to make the Full Post Lock-out Payment, McNeil shall have the right, at the Company's expense, to commence the process to determine the Appraised Value of such non-cash consideration as set forth in the definitions of "Appraiser" and "Appraisal Value" in Section 1.1. The holders of the McNeil Interest shall have the option, in McNeil's sole discretion, to exchange all of the McNeil Interest upon the closing of such Proposed Company Transaction for such cash and non-cash consideration having a value (using the Appraised Value) equal to the McNeil Portion or to receive cash in the amount equal to the McNeil Portion. 4.9 McNeil's Right Prior to Bankruptcy Filing. Notwithstanding anything to the contrary contained in this Agreement, none of the Company, the Members or the Board of Managers shall commence, take any action to commence, or cause to be commenced by the Company or by any one or more of the Company's Subsidiaries, any Bankruptcy unless (i) at least thirty (30) days prior thereto, the Board of Managers shall have given McNeil written notice of such contemplated commencement of a Bankruptcy, (ii) the Board of Managers shall have given McNeil the opportunity during such thirty (30) day period to make any Additional Capital Contribution as the Board of Managers shall reasonably and in good faith determine is necessary to prevent such commencement or action and (iii) prior to the expiration of such thirty (30) day period, McNeil shall not have made such Additional Capital Contribution. 4.10 Refinancing after Five Years. If at any time following the fifth (5th) anniversary of the Closing Date the Company elects to repay, refinance or otherwise alter, modify or amend the terms of any indebtedness, including without limitation any Loan Agreement, to which the Properties are subject, and such repayment, refinancing or other alteration, modification or amendment would result in McNeil's share of "nonrecourse liabilities" (within the meaning of Treasury Regulation Section 1.752) and "qualified nonrecourse financing" (within the meaning of Section 465 of the Code) being less than an amount equal to (x) the Initial QNL Amount multiplied by (y) a fraction the numerator of which shall equal the aggregate initial Book Value of all of the Properties owned by the Company after such refinancing, repayment or alteration (excluding Commercial Properties) and the denominator of which shall equal the aggregate -32- initial Book Values of all of the Properties owned by the Company as of the Closing Date (excluding the Commercial Properties), then (i) such repayment, refinancing or other alteration, modification or amendment shall be discussed at a meeting of the Board of Managers prior to any action being taken to repay, refinance or otherwise alter, modify or amend the terms of any indebtedness, including without limitation any Loan Agreement, to which the Properties are subject, and (ii) the Company shall allocate, to the extent allocable all (or the maximum portion allocable under applicable laws) of the Company's "nonrecourse liabilities" and "qualified nonrecourse financing" to McNeil provided that such allocation does not and may not result in any adverse economic effect on Whitehall at the time of such allocation or at any future time, as the same may be determined by Whitehall in Whitehall's sole discretion. Notwithstanding anything to the contrary contained in this Agreement, at no time shall McNeil be allocated less than its Percentage Interest of "nonrecourse liabilities" and "qualified nonrecourse financing". If at any time, McNeil's share of "nonrecourse liabilities" or "qualified nonrecourse financing" is less than the amount determined pursuant to the first sentence of this Section 4.10, then, at the request of a McNeil Manager, the Board of Managers shall discuss the matter, McNeil agreeing that the Company and the Board of Managers shall have no obligation to take any action in connection therewith. 4.11 Senior Indebtedness and Preferred Equity Financing. The Board of Managers shall have the authority to obtain, on behalf of the Company and its Subsidiaries, any or all of the Company's and its Subsidiaries' financing (including Senior Indebtedness and Preferred Equity Financing) from Goldman, Sachs & Co. and/or its Affiliates (as lender) at market rates and terms and/or from any other non-affiliated lender as the Board of Managers in good faith deems appropriate. 4.12 Property Manager. The Property Manager will be responsible for property management. For the Multifamily Properties, the Property Manager will be Management LLC for the period ending on December 31st of the calendar year following the calendar year in which the Closing occurs and thereafter may be Management LLC or an appropriate third-party property management agent which may include Archon. For the Commercial Properties, the Board of Managers will select Management LLC as Property Manager or an appropriate third-party property management agent which may include Archon. All property management services will be performed on an arm's-length basis and at market fees. 4.13 Binding Effect of Asset Allocations. The Asset Allocations shall be binding on the Company and the Members and shall be adhered to by the Company and the Members for the purposes of reporting the book and tax basis of the Company Assets. 4.14 Reservation of Rights. Notwithstanding anything to the contrary contained in this Agreement, nothing in this Agreement shall (or shall be construed to) constitute a waiver by any Member of its rights under applicable law and its right to retain independent counsel of its choice at such Member's expense. 4.15 Taxation as a Partnership. The Members intend and shall take, or shall cause the Company to take, any and all reasonable actions to ensure that the Company shall be treated as a partnership for income tax purposes and that any of the Subsidiaries of the Company that have -33- been partnerships, joint ventures, disregarded entities or limited liability companies since formation shall continue to qualify, as partnerships or disregarded entities for income tax purposes. 4.16 Harbour Club Properties. (a) Each of the Members covenants and agrees to make an Additional Capital Contribution to the Company in accordance with such Member's Percentage Interest, determined immediately prior to the making by any Member of any Additional Capital Contribution pursuant to this Section 4.16(a), to fund the purchase price of Harbour Club Phase Four if the Company elects to purchase Harbour Club Phase Four. The Additional Capital Contribution made by McNeil pursuant to this Section 4.16(a) shall be included as part of the McNeil Class B Investment. The Additional Capital Contribution made by Whitehall pursuant to this Section 4.16(a) shall be included as part of the Whitehall Class A Investment. The Company or one of its Subsidiaries will hold Harbour Club Phase Four as a Company Asset until the Board of Managers decides to dispose of such asset. If either Member shall fail to make its required Capital Contribution pursuant to this Section 4.16(a), the other Member may purchase Harbour Club Phase Four directly and not through the Company. (b) In the event that the Company exercises its option to purchase Harbour Club Phase One, pursuant to Section 7.14 of the Master Agreement, each of the Members covenants and agrees to make an Additional Capital Contribution to the Company in accordance with such Member's Percentage Interest, determined immediately prior to the making by any Member of any Additional Capital Contribution pursuant to this Section 4.16(b), to fund the purchase price of Harbour Club Phase One. The Additional Capital Contribution made by McNeil pursuant to this Section 4.16(b) shall be included as part of the McNeil Class B Investment. The Additional Capital Contribution made by Whitehall pursuant to this Section 4.16(b) shall be included as part of the Whitehall Class A Investment. The Company or one of its Subsidiaries will hold Harbour Club Phase One as a Company Asset until the Board of Managers decides to dispose of such asset. If either Member shall fail to make its required Capital Contribution pursuant to this Section 4.16(b), the other Member may purchase Harbour Club Phase One directly and not through the Company. 4.17 Preferred Equity Financing. The Company shall, and shall cause its Subsidiaries to, use reasonable efforts to achieve financing with respect to those Properties that are security for Non-Terminated Loans by replacing each such Non-Terminated Loan with mortgage or Preferred Equity Financing on commercially reasonable terms when each such Non-Terminated Loan becomes prepayable without any penalty. ARTICLE 5. BOOKS AND RECORDS; REPORTS 5.1 Books and Records. At all times during the existence of the Company, the Board of Managers shall keep or cause to be kept true and complete books and records of the -34- Company and its Subsidiaries (including all records that the Company may be required to maintain by the LLCA or other provisions of applicable law) in which shall be entered fully and accurately each transaction of the Company and its Subsidiaries. Such books and records shall be kept on the basis of the Fiscal Year in accordance with the accrual method of accounting, and shall reflect all transactions of the Company and its Subsidiaries in accordance with generally accepted accounting principles. 5.2 Availability of Books and Records; Return of Books and Records. All of the books and records referred to in Section 5.1 (which shall include an executed copy of this Agreement and the Certificate of Formation, and any amendments thereto) shall at all times be maintained at the principal office of the Company or such other location as the Board of Managers may determine (which other location shall be communicated to all of the Members), and shall be open to the inspection and examination of the Members or their representatives during reasonable business hours. 5.3 Reports and Statements; Annual Budgets and Business Plans. Prior to the end of each Fiscal Year, the Board of Managers shall review, revise and approve an Annual Budget for the succeeding Fiscal Year. For each Fiscal Year, the Board of Managers shall cause to be sent to each Person who was a Member at any time during such Fiscal Year, by no later than February 15 of the succeeding Fiscal Year, an annual report of the Company including an annual balance sheet, profit and loss statement and a statement of changes in financial position, and a statement showing distributions to the Members all as prepared in accordance with generally accepted accounting principles consistently applied and audited by the Company's independent public accountants, which shall be a nationally recognized accounting firm (as the Board of Managers shall decide), and a statement showing allocations to the Members of taxable income, gains, losses, deductions and credits, as prepared by such accountants (it being acknowledged that the Board of Managers' obligations hereunder are not to guaranty timely delivery of audits, tax returns or similar third-party work product). For each quarter of each Fiscal Year, the Board of Managers shall cause to be sent to each Person that was a Member at any time during such quarter, within forty-five (45) days after the end of such quarter, (i) quarterly financial statements of the Company, including a quarterly balance sheet, profit and loss statement and a statement of changes in financial position, and a statement showing distributions to the Members, all as prepared in accordance with generally accepted accounting principles consistently applied and (ii) such tax estimates as any such Member shall reasonably request. In addition, the Board of Managers shall cause to be sent to each Member (i) by no later than February 15 (or as soon thereafter as practicable) of each Fiscal Year, completed IRS Schedules K-1 prepared by the Company's accountants and (ii) such other information concerning the Company and reasonably requested by any Member as is necessary for the preparation of each Member's federal, state and local income or other tax returns. 5.4 Accounting Expenses. All out-of-pocket expenses payable in connection with the keeping of the books and records of the Company and the preparation of audited or unaudited financial statements and federal and local tax and information returns required to implement the provisions of this Agreement or required by any governmental authority with jurisdiction over the Company shall be borne by the Company as an ordinary expense of its business. -35- 5.5 Bank Account. The Company shall, as soon as reasonably practicable, establish and maintain segregated bank accounts in the Company's name and for the Company's business, which accounts shall, to the extent reasonably practicable, be interest-bearing. ARTICLE 6. CAPITAL CONTRIBUTIONS AND LIABILITIES 6.1 Initial Capital Contributions and Initial Capital Accounts of the Members. (a) Immediately prior to the Effective Time, MPLP was required to contribute to the Company (or to one or more of its Subsidiaries, at the direction of the Company) (i) the McREMI Assets, (ii) the general partnership interests (and the rights and assets associated therewith) in each of the Participating McNeil Partnerships, (iii) the limited partnership interests in Fairfax held by MPLP at such time if Fairfax was a Participating McNeil Partnership, (iv) the limited partnership interests in Summerhill held by MPLP at such time if Summerhill was a Participating McNeil Partnership and (v) the McNeil Cash Contribution. McNeil has also contributed the Capitalized McNeil Expenses [and additional cash equal to the Additional McNeil Contribution]; provided, however, that any McNeil Class C Investment may only be funded by McNeil or an Affiliate of McNeil and may not be funded, in whole or in part, by a third-party investor; provided, further, that any Whitehall Class B Investment may only be funded by Whitehall or an Affiliate of Whitehall and may not be funded in whole or in part, by a third party investor. (b) Immediately prior to the Effective Time, Whitehall was required to contribute to the Company (i) cash in the amount of $_______________ [insert an amount equal to the Funding Amount (as defined in the Equity Commitment Letter)] as required by the Equity Commitment Letter, and has also contributed (ii) $___________ representing all of the costs incurred and paid by Whitehall on behalf of the Company in connection with the negotiation, documentation, due diligence and consummation of the transactions described in this Agreement and the Master Agreement. (c)(i) As of the Effective Time, each Member's Initial Capital Contribution is in the amount set forth below: MEMBER INITIAL CAPITAL CONTRIBUTION ------ ---------------------------- Whitehall $ McNeil $ Total $ (ii) As of the Effective Time, the Members shall have the initial Capital Account balances and the initial Percentage Interests as set forth below: -36- MEMBER INITIAL CAPITAL ACCOUNT PERCENTAGE INTEREST Whitehall $ McNeil $ Total $ (iii) As of the Effective Time the McNeil Class A Investment, the McNeil Class B Investment, the McNeil Class C Investment, the Whitehall Class A Investment and the Whitehall Class B Investment are in the amounts set forth below: McNeil Class A Investment $ McNeil Class B Investment $ McNeil Class C Investment $ Whitehall Class A Investment $ Whitehall Class B Investment $ 6.2 Working Capital Contributions and Other Additional Capital Contributions. (a) Whitehall shall make additional cash capital contributions to the Company in an aggregate amount (the "Initial Working Capital Contribution") equal to the difference determined by subtracting (x) the sum of the Net Working Capital Amounts for each Participating McNeil Partnership from (y) the product of $40,000,000 multiplied by the Value Fraction. The Initial Working Capital Contribution shall be contributed to the capital of the Company by Whitehall from time to time as the Board of Managers deems necessary in its reasonable discretion to pay for Working Capital Expenses. All contributions made by Whitehall on account of the Initial Working Capital Contribution shall be included within the definition of Additional Capital Contributions. (b) After Whitehall has fully funded the Initial Working Capital Contribution, Whitehall may, at any time or times, make in cash Additional Capital Contributions to the Company that the Board of Managers determines are necessary or desirable to conduct the business of the Company in the event Working Capital Reserves and Recurring Replacement Reserves are not sufficient to pay for such cost or expense. (c) Except as provided in Sections 4.9 and 4.16, McNeil shall have no right or obligation to make any Additional Capital Contributions to the Company. (d) Notwithstanding anything to the contrary in this Agreement, if a Member shall guarantee any indebtedness of the Company, such Member shall not receive any credit to its Capital Account as a result of such guarantee and such guarantee shall not be considered to be -37- a Capital Contribution unless, and only to the extent that, such Member makes a payment in respect of that guarantee and such payment is not immediately reimbursed by the Company. 6.3 Capital of the Company. Except as otherwise expressly provided herein, no Member shall be entitled to withdraw or receive any interest or other return on, or return of, all or any part of its Capital Contribution, or to receive any property of the Company (other than cash) in return for its Capital Contributions. 6.4 Distributions as Working Capital Reserves. Notwithstanding anything to the contrary contained herein, if Whitehall would otherwise be entitled to receive a cash distribution of Net Cash Flow or Net Proceeds from Capital Transactions pursuant to Section 8.1(b) or 8.1(c) from the Company, Whitehall may elect to forego receipt of all or a portion of such distribution and have the amount so foregone treated as part of the Initial Working Capital Contribution (or, after the Initial Working Capital Contribution has been funded in full, as an Additional Capital Contribution; provided the Board of Managers shall have determined in good faith (by Majority Vote) that such Capital Contribution is required for use by the Company within a reasonable period of time following the date upon which such distribution of cash would otherwise have been made to Whitehall. In such event Whitehall will be treated as if it had (i) received distributions equal to the amount it would have received pursuant to Section 8.1(b) or 8.1(c) had Whitehall not foregone such distribution and (ii) made an Additional Capital Contribution in such amount (any such Additional Capital Contribution shall first be treated as part of the Initial Working Capital Contribution until the Initial Working Capital Contribution has been fully funded). 6.5 Failure to Fund the McNeil Cash Contribution. (a) If McNeil shall fail to make the McNeil Cash Contribution in the full amount required pursuant to the Master Agreement (the "Failed Contribution") at the Effective Time, then Whitehall may, but shall not be obligated to, fund all or part of such Failed Contribution. At any time after funding all or part of a Failed Contribution, Whitehall may elect either of the following: (i) Whitehall may at any time (even after first electing to proceed under paragraph (ii) below, but after termination of the Partner Loan) elect to treat the portion (the "Funded Portion") of the Failed Contribution funded by Whitehall as a Capital Contribution (which shall be deemed part of Whitehall's Initial Capital Contribution and the Whitehall Class A Investment) by Whitehall with the dilution of McNeil provided for in Section 6.5(b) below. (ii) Whitehall may elect to treat the Funded Portion as a loan (a "Partner Loan") by Whitehall to McNeil, which Partner Loan shall be treated as (i) a demand loan made by Whitehall to McNeil (bearing interest at 20% per annum, compounded annually) followed by (ii) a Capital Contribution by McNeil to the Company. Any such Partner Loan (to the extent of unpaid principal and interest) shall be recourse only to the McNeil Class A Interest and shall be repaid directly by the Company on behalf of McNeil from amounts otherwise distributable to McNeil pursuant to Section 8.1 or 10.3 hereof. Any such distributions used to repay such Partner Loan shall be applied first to accrued but unpaid interest and then to principal of the Partner Loan. Whitehall may, at -38- any time prior to the full repayment of such Partner Loan, elect to terminate such Partner Loan and have the McNeil Class A Investment, McNeil's Percentage Interest and, at the election of Whitehall, McNeil's Capital Account diluted as set forth in Section 6.5(b) below, with the amount of the entire outstanding principal and accrued but unpaid interest (as of the date of such termination) of the Partner Loan treated as the amount of the Funded Portion and not as a Capital Contribution of McNeil, and the McNeil Class A Investment, the Whitehall Class A Investment, the McNeil and Whitehall Percentage Interests and, at the election of Whitehall, the McNeil and Whitehall Capital Accounts, adjusted accordingly. (b) If Whitehall elects to make a Capital Contribution for McNeil (instead of a Partner Loan) or elects to terminate a Partner Loan and have the provisions of this Section 6.5(b) apply then the adjustments set forth in clauses (i) and (ii) and, only upon the election of Whitehall, clause (iii) shall be made: (i) The Percentage Interest of Whitehall shall be increased so that it is equal to the percentage (rounded up to the nearest one hundredth of one percent) obtained by dividing (A) the sum of (1) all Capital Contributions made by Whitehall other than the Funded Portion and (2) the product of (x) 2.0 and (y) the Funded Portion by (B) the sum of all Members' Capital Contributions as of such date (including the Funded Portion), and the Percentage Interest of McNeil shall be decreased by the amount of the increase in Whitehall's Percentage Interest. (ii) The Whitehall Class A Investment shall be increased by an amount equal to the product of (A) 2.0 and (B) the Funded Portion and the McNeil Investment shall be reduced by an amount equal to the Funded Portion; provided, however, that this clause (ii) shall not cause an adjustment to the Percentage Interests of Whitehall and McNeil which has already been effected pursuant to Section 6.5(b)(i). (iii) Whitehall's Capital Account shall be increased as required under Section 7.1(b), and shall be further increased by an amount equal to the Funded Portion; and McNeil's Capital Account shall be reduced by an amount equal to the Funded Portion. 6.6 Limited Liability of Members. No Member shall be bound by, nor be personally liable for, the expenses, liabilities, indebtedness or obligations of the Company. The liability of each Member shall be limited solely to the amount of its Capital Contribution; provided, however, that after a Member has received a distribution from the Company, such Member may be liable to the Company for the amount of the distribution but only to the extent required by Section 18-607 of the LLCA. -39- ARTICLE 7. CAPITAL ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS 7.1 Capital Accounts. (a) The Company shall establish and maintain a Capital Account for each Member in accordance with federal income tax accounting principles. Each Member's Capital Account as of the Effective Time initially will be equal to the value of its Initial Capital Contribution. (b) The Capital Account of each Member shall be increased by (i) the amount of any cash and the agreed Book Value of property (net of liabilities encumbering the property) as of the date of contribution of any property subsequently contributed as a capital contribution to the capital of the Company by such Member, (ii) the amount of any Profits allocated to such Member and (iii) such Member's pro rata share (determined in the same manner as such Member's share of Profits pursuant to Section 7.2) of income of the Company that is exempt from tax. The Capital Account of each Member shall be decreased by (i) the amount of any Losses allocated to such Member, (ii) the amount of distributions to such Member and (iii) such Member's pro rata share (determined in the same manner as such Member's share of Losses pursuant to Section 7.2) of any other expenditures of the Company that are not deductible in computing Company Profits or Losses and which are not chargeable to capital account. In all respects, the Member's Capital Accounts shall be determined in accordance with the detailed capital accounting rules set forth in Treasury Regulations Section 1.704-1(b)(2)(iv) and shall be adjusted upon the occurrence of certain events as provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(f). (c) A Transferee of all (or a portion) of an Interest shall succeed to the Capital Account (or portion of the Capital Account) attributable to the transferred Interest. 7.2 Profits and Losses. (a) The profits and losses of the Company ("Profits" and "Losses") shall be the net income or net loss (including capital gains and losses), respectively, of the Company determined for each Fiscal Year in accordance with the accounting method followed for federal income tax purposes except that in computing Profits and Losses, all depreciation and cost recovery deductions shall be deemed equal to Depreciation and gains or losses shall be determined by reference to Book Value rather than tax basis. (b) Whenever a proportionate part of the Profits or Losses is allocated to a Member, every item of income, gain, loss, deduction or credit entering into the computation of such Profits or Losses or arising from the transactions with respect to which such Profits or Losses were realized shall be credited or charged, as the case may be, to such Member in the same proportion; provided, however, that "recapture income", if any, shall be allocated to the Members who were allocated the corresponding depreciation deductions. -40- (c) If any Member transfers all or any part of its Interest during any Fiscal Year or its Interest is increased or decreased, Profits and Losses attributable to such Interest for such Fiscal Year shall be apportioned between the transferor and transferee or computed as to such Member, as the case may be, ratably on a daily basis, provided in all events that any apportionment described above shall be permissible under the Code and applicable regulations thereunder. (d) For all purposes, including federal, state and local income tax purposes, Profits shall be allocated in each Fiscal Year among all the Members pursuant to this Section 7.2(d) for the current period (i) first, to the holders of the Whitehall Class B Interest in an amount equal to the distributions made pursuant to Sections 8.1(b)(i) and 8.1(c)(ii) and (ii) thereafter, in proportion to the aggregate distributions of cash paid to such Member in respect of such period. In no instance, however, shall McNeil or any Affiliate of McNeil be allocated Profits in a given year greater than the cash distributed to them during that year. (e) For all purposes, including federal, state and local income tax purposes, Losses shall be allocated each Fiscal Year among all the Members in accordance with their Percentage Interests. (f) Notwithstanding Sections 7.2(d) and (e) hereof: (i) For federal income tax purposes but not for purposes of crediting or charging Capital Accounts, depreciation or gain or loss realized by the Company with respect to any property that was contributed to the Company or that was held by the Company at a time when the Book Value of the Company Assets was adjusted pursuant to the third sentence of Section 7.1(b) shall, in accordance with the "traditional method" under Section 704(c) of the Code and Treasury Regulations Sections 1.704-1(b)(2)(iv)(d) and (f), be allocated among the Members in a manner which takes into account the differences between the adjusted basis for federal income tax purposes to the Company of its interest in such property and the fair market value of such interest at the time of its contribution or revaluation. (ii) If there is a net decrease in the Minimum Gain of the Company during a taxable year (including any Minimum Gain attributable to Member-Funded Debt), each Member at the end of such year shall be allocated, prior to any other allocations required under this Article 7, items of gross income (including net gain) for such year (and, if necessary, for subsequent years) in the amount and proportions described in Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(4). (iii) In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulations Sections 1.704-(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit of such Member's Capital Account (as determined under Treasury Regulations Section 1.704-1) as quickly as possible, provided that an allocation pursuant to this subsection 7.2(f)(iii) -41- shall be made only if and to the extent that such Member would have such Capital Account deficit after all other allocations provided for in Section 7.2 have been tentatively made as if this subsection 7.2(f)(iii) were not in this Agreement. (iv) In the event any Member has a deficit balance in such Member's Capital Account (as determined after crediting such Capital Account for any amounts that such Member is obligated to restore or is deemed obligated to restore pursuant to (a) any provision of this Agreement and (b) the penultimate sentences of Treasury Regulations Section 1.704-(g)(1) and 1.704-2(i)(5), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate such deficit (as so determined) of such Member's Capital Account as quickly as possible; provided, however, that an allocation pursuant to this Section 7.2(f)(iv) shall be made only if and to the extent that such Member would have such Capital Account deficit (as so determined) after all other allocations provided for in Section 7.2 (other than Section 7.2(f)(iii)) have been tentatively made as if this Section 7.2(f)(iv) were not in this Agreement. (v) Notwithstanding the allocations provided for in sub-section (i) of this Section 7.2(f) and Sections 7.2(d) and (e), if there is a net increase in Minimum Gain of the Company during a taxable year of the Company that is attributable to Member-Funded Debt then first Depreciation, to the extent the increase in such Minimum Gain is allocable to depreciable property, and then a proportionate part of other deductions and expenditures described in Section 705(a)(2)(B) of the Code, shall be allocated to the lending or guaranteeing Member (and to joint lenders or guarantors in proportion to their relative obligations), provided that the total amount of deductions so allocated for any year shall not exceed the increase in Minimum Gain attributable to such Member-Funded Debt in such year. (vi) Any special allocation under Sections 7.2(f)(ii) through (v) shall be taken into account in computing subsequent allocations of Profits and Losses of any item thereof pursuant to this Article 7 so that the net amount of any items so allocated and the Profits, Losses and all items thereof allocated to each Member pursuant to this Article 7 shall, to the extent permissible under Section 704(b) of the Code and the Treasury Regulations promulgated thereunder, be equal to the net amount that would have been allocated to each Member pursuant to this Article 7 if such special allocation had not occurred. (vii) The Members intend that the provisions of this Article 7 be interpreted, to the extent permissible under Section 704(b) of the Code and the Treasury Regulations promulgated thereunder, to produce liquidating distributions pursuant to Section 10.3(b) hereof that do not differ from the distributions that would have been made had liquidating distributions been controlled by Article 8 hereof, and the Board of Managers shall be entitled to the extent permissible under Section 704(b) of the Code and the Treasury Regulations promulgated thereunder, to specially allocate items of income, gain and loss to the Members to achieve this result. -42- (g) No Member shall be responsible to restore or repay to the Company or any other Member any deficit in such Member's Capital Account existing at any time. ARTICLE 8. APPLICATIONS AND DISTRIBUTIONS OF NET CASH FLOW AND NET PROCEEDS FROM CAPITAL TRANSACTIONS 8.1 Applications and Distributions. (a) Distributions of Net Cash Flow shall be made to the Members by the Company in accordance with Section 8.1(b) within twenty-five (25) days after the end of each month, subject to the terms of any Loan Agreements to the contrary. Net Proceeds from Capital Transactions shall be made to the Members by the Company as soon as practicable after the closing of the Capital Transaction that generated such Net Proceeds from Capital Transactions, subject to the terms of any Loan Agreement or Preferred Equity Financing Document to the contrary. (b) Net Cash Flow with respect to each calendar month shall be distributed to the Members and paid to the Portfolio Advisor in the following order of priority (and the calculations described in the following clauses shall be made as of the last date of each month), subject to the other terms of this Article 8: (i) First, to the holders of the Whitehall Class B Interest until such holders have received payment of an amount equal to the excess, if any, of (A) the Whitehall Class B Return payable by the Company to such holders from the Effective Time to the date of such distribution over (B) the sum of all prior distributions to the holders of the Whitehall Class B Interest pursuant to this Section 8.1(b)(i) and Section 8.1(c)(ii). (ii) Second, to holders of the McNeil Class C Interest until such holders have received payment of an amount equal to the excess, if any, of (A) the McNeil Class C Return payable by the Company to such holders from the Effective Time to the date of such distribution over (B) the sum of all prior distributions to holders of the McNeil Class C Interest pursuant to this Section 8.1(b)(ii) and Section 8.1(c)(iii). (iii) Third, to holders of the McNeil Class B Interest and the McNeil Class A Interest pro rata (based on the McNeil Class B Investment and the McNeil Class A Investment, respectively) until such holders have received payment of an amount equal to the excess, if any, of (A) the Preferred 14% Return with respect to the McNeil Class A Investment and the McNeil Class B Investment, respectively, payable by the Company to such holders from the Effective Time to the date of such distribution over (B) the sum of all prior distributions to such holders pursuant to this Section 8.1(b)(iii) and Section 8.1(c)(iv). -43- (iv) Fourth, to the Portfolio Advisor until the Portfolio Advisor has received the portion of the Portfolio Advisory Fee payable for such month and any accrued and unpaid portion of the Portfolio Advisory Fee plus all accrued interest thereon. (v) Fifth, to holders of the Whitehall Class A Interest until such holders have received payment of an amount equal to the excess, if any, of (A) the Preferred 14% Return with respect to the Whitehall Class A Investment payable by the Company to such holders from the Effective Time to the date of such distribution over (B) the sum of all prior distributions to such holders pursuant to this Section 8.1(b)(v) and Section 8.1(c)(vi). (vi) Sixth, to holders of the Whitehall Class B Interest to return the Whitehall Class B Investment. (vii) Seventh, to holders of the McNeil Class C Interest to return the McNeil Class C Investment; provided, however, that for a period of five years commencing on the Closing Date, such holders may elect not to receive amounts payable pursuant to this Section 8.1(b)(vii). (viii) Eighth, in the event that the amount of McNeil's Initial Capital Contribution is equal to or greater than the McNeil Threshold Amount, to holders of the McNeil Class B Interest, the McNeil Class A Interest and the Whitehall Class A Interest pro rata (based on the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment, respectively) until such time as such holders have each received aggregate distributions to achieve a Preferred 15% Return with respect to the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment, respectively, payable by the Company to each of such holders from the Effective Time to the date of such distribution over (A) with respect to holders of the McNeil Class B Interest and the McNeil Class A Interest, respectively, the sum of all prior distributions to such holders pursuant to Section 8.1(b)(iii), Section 8.1(c)(iv), this Section 8.1(b)(viii) and Section 8.1 (c)(ix) and (B) with respect to holders of the Whitehall Class A Interest, the sum of all prior distributions to such holders pursuant to Section 8.1(b)(v), Section 8.1(c)(vi), this Section 8.1(b)(viii) and Section 8.1(c)(ix). Such pro rata distributions to holders of the McNeil Class B Interest, the McNeil Class A Interest and the Whitehall Class A Interest shall be in proportion to the balances of the unpaid amount necessary to achieve such Preferred 15% Return with respect to the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment, respectively, for each Member holding such Interests (i.e., each such Member would receive a portion of the distribution equal to the product determined by multiplying (A) the aggregate amount of funds subject to distribution pursuant to this clause (viii) by (B) a fraction the numerator of which shall be equal to the amount necessary for such Member to achieve the Preferred 15% Return with respect to the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment, respectively, held by such Member and the denominator of which shall be equal to the aggregate amount necessary for each Member holding such Interests to -44- achieve the Preferred 15% Return with respect to the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment held by such Member). (ix) Ninth, to holders of the McNeil Class B Interest, the McNeil Class A Interest and the Whitehall Class A Interest pro rata to return the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment, respectively, in proportion to the balances of the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment (i.e., each Member holding such Interests would receive a portion of the distribution equal to the product determined by multiplying (A) the aggregate amount of funds subject to distribution pursuant to this clause (ix) by (B) a fraction the numerator of which shall be equal to the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment of such Member, as applicable, and the denominator of which shall be equal to the sum of the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment. (x) Thereafter, 100% to holders of the Whitehall Class A Interest. (c) Net Proceeds from Capital Transactions shall be distributed to the Members and paid to the Portfolio Advisor in the following order of priority (and the calculations described in the following clauses shall be made as of the date of each distribution), subject to the other terms of this Article 8: (i) First, to repay all outstanding Senior Indebtedness secured by the Property or Properties which are the subject of such Capital Transaction and any other amount required to be paid as a result of such Capital Transaction pursuant to the terms of any Loan Agreement or Preferred Equity Financing Document to which the Company or any Subsidiary is a party. (ii) Second, to the holders of the Whitehall Class B Interest until such holders have received all accrued but unpaid amounts payable to such holders pursuant to Section 8.1(b)(i). (iii) Third, to holders of the McNeil Class C Interest until such holders have received all accrued but unpaid amounts payable to such holders pursuant to Section 8.1(b)(ii). (iv) Fourth, to holders of the McNeil Class B Interest and the McNeil Class A Interest pro rata (based on the McNeil Class B Investment and the McNeil Class A Investment, respectively) until such holders have received all accrued but unpaid amounts payable to such holders pursuant to Section 8.1(b)(iii). (v) Fifth, to the Portfolio Advisor until the Portfolio Advisor has received all accrued but unpaid amounts payable to the Portfolio Advisor pursuant to Section 8.1(b)(iv). -45- (vi) Sixth, to holders of the Whitehall Class A Interest until such holders have received all accrued but unpaid amounts payable to such holders pursuant to Section 8.1(b)(v). (vii) Seventh, to holders of the Whitehall Class B Interest to return the Whitehall Class B Investment. (viii) Eighth, to holders of the McNeil Class C Interest to return the McNeil Class C Investment; provided, however, that for a period of five years commencing on the Closing Date, such holders may elect not to receive amounts payable pursuant to this Section 8.1(c)(viii). (ix) Ninth, in the event that the amount of McNeil's Initial Capital Contribution is equal to or greater than the McNeil Threshold Amount, to holders of the McNeil Class B Interest, the McNeil Class A Interest and the Whitehall Class A Interest pro rata (based on the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment, respectively) until such time as such holders have each received aggregate distributions to achieve a Preferred 15% Return with respect to the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment, respectively, payable by the Company to each of such holders from the Effective Time to the date of such distribution over (A) with respect to holders of the McNeil Class B Interest and the McNeil Class A Interest, the sum of all prior distributions to such holders pursuant to Sections 8.1(b)(iii), 8.1(c)(iv), 8.1(b)(viii) and this Section 8.1(c)(ix) and (B) with respect to holders of the Whitehall Class A Interest, the sum of all prior distributions to such holders pursuant to Sections 8.1(b)(v), 8.1(c)(vi), 8.1(b)(viii) and this Section 8.1(c)(ix). Such pro rata distributions to holders of the McNeil Class B Interest, the McNeil Class A Interest and the Whitehall Class A Interest shall be in proportion to the balances of the unpaid amount necessary to achieve such Preferred 15% Return with respect to the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment, respectively, for each Member holding such Interests (i.e., each such Member would receive a portion of the distribution equal to the product determined by multiplying (A) the aggregate amount of funds subject to distribution pursuant to this clause (ix) by (B) a fraction the numerator of which shall be equal to the amount necessary for such Member to achieve the Preferred 15% Return with respect to the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment held by such Member and the denominator of which shall be equal to the aggregate amount necessary for each Member holding such Interests to achieve the Preferred 15% Return with respect to the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment held by such Member). (x) Tenth, to holders of the McNeil Class B Interest, the McNeil Class A Interest and the Whitehall Class A Interest pro rata to return the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment, respectively, in proportion to the balances of the McNeil Class B Investment, the McNeil -46- Class A Investment and the Whitehall Class A Investment (i.e., each Member holding such Interests would receive a portion of the distribution equal to the product determined by multiplying (A) the aggregate amount of funds subject to distribution pursuant to this clause (x) by (B) a fraction the numerator of which shall be equal to the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment of such Member, as applicable, and the denominator of which shall be equal to the sum of the McNeil Class B Investment, the McNeil Class A Investment and the Whitehall Class A Investment). (xi) Thereafter, 100% to holders of the Whitehall Class A Interest. (d) Upon the making of any distribution pursuant to Article 8 to any Member of the Company, all Members shall be given reasonably detailed information in writing by the Company identifying the amount of such distribution and the Sections and clauses of this Article pursuant to which such distribution was made. ARTICLE 9. TRANSFER OF COMPANY INTERESTS 9.1 Transfers of Interests by Members. (a) Whitehall and any Transferee of any of the Whitehall Interest pursuant to this Section 9.1(a) shall have the right to Transfer all or any portion of its Interest to (i) any Affiliate of Whitehall (provided such Person at all times remains an Affiliate of Whitehall), or (ii) to any other Person upon obtaining a Super Majority Vote of the Board of Managers, in the case of each of clause (i) and (ii), subject to Sections 9.1(c), 9.1(d), 9.2, 9.3, and 9.4. In addition, on or after the fifth (5th) anniversary of the Closing Date, Whitehall and any Transferee of any of the Whitehall Interest pursuant to this Section 9.1(a) shall have the right to Transfer all or any portion of its Interest to any Person, provided Whitehall complies with Section 4.8(a), and otherwise subject to Sections 9.1(c), 9.1(d), 9.2, 9.3 and 9.4. Whitehall shall have no other right to make any Transfer of all or any portion of its Interest. (b) McNeil and any Transferee of any of the McNeil Interest pursuant to this Section 9.1(b) shall have the right to Transfer all or any portion of its Interest to (i) Robert A. McNeil, Carole J. McNeil, or immediate family members of Robert A. McNeil or Carole J. McNeil or both, (ii) one or more trusts or other estate planning vehicles established for the benefit of immediate family members of Robert A. McNeil or Carole J. McNeil or both, (iii) any Affiliate of Robert A. McNeil or Carole J. McNeil or both (provided such Person at all times remains an Affiliate of Robert A. McNeil or Carole J. McNeil), (iv) any Person approved by the Board of Managers and (v) any Person, as the result of testamentary laws or instruments of inheritance, in the case of each of clauses (i) through (v), subject to Sections 9.1(c), 9.1(d), 9.2, 9.3 and 9.4. McNeil shall have no other right to make any Transfer of all or any portion of its Interest. Any Transfer (including any pledge or hypothecation) of the Pledged Interests shall be made explicitly subject to the Indemnification Agreement. -47- (c) Except as provided in Sections 9.1(a) and (b), all Transfers are prohibited. Any purported Transfer in violation of this Article 9 shall be void ab initio, and shall not bind the Company or the other Members, and the Member whose Interest was directly or indirectly Transferred shall indemnify and hold the Company and the other Members harmless from and against any federal, state or local income taxes, or transfer taxes, including transfer gains taxes, arising as a result of, or caused directly or indirectly by, such purported Transfer. (d) Any Transferee desiring to make a further Transfer shall become subject to all of the provisions of this Article 9 and of this Agreement to the same extent and in the same manner as any Member desiring to make any Transfer. (e) The giving of any consent to a Transfer by the Super Majority Vote of the Board of Managers or by any Member in any one or more instances shall not limit or waive the need for such consent in any other or subsequent instance. 9.2 Transfer Binding on Company. (a) No Transfer permitted to be made under this Agreement shall be binding upon the Company, and no Transferee of all or any part of a Member's Interest shall be admitted to the Company as a Member, unless and until: (i) any consent to the Transfer required by this Agreement (including without limitation any Super Majority Vote) shall have been obtained; (ii) in the case of a Transfer of a Member's Interest, a duplicate original of such instrument of Transfer, duly executed and acknowledged by the transferor, has been delivered to the Company, and such instrument evidences (1) the written acceptance by the Transferee of all of the terms and provisions of this Agreement, and (2) the Transferee's representation that such Transfer was made in accordance with all applicable laws and regulations; (iii) in the case of a Transfer of a Member's Interest, the Board of Managers has entered such Transferee as a Member on the books and records of the Company, which the Board of Managers is hereby directed to do upon satisfaction of such requirements; and (iv) in the case of a Transfer of a Member's Interest, such Transferee shall have paid all reasonable legal fees and filing costs in connection with the substitution as a Member. (b) Notwithstanding anything to the contrary contained in this Agreement, no Transfer of all or a portion of an Interest shall be made, and the Board of Managers shall have the right to prohibit and may refuse to accept any Transfer, unless: (i) registration is not required under the Securities Act of 1933, as amended, in respect of such Transfer; (ii) such Transfer does not violate any applicable federal or state securities, real estate syndication, or comparable laws; (iii) such Transfer will not be subject to, or such Transfer, when aggregated with prior Transfers -48- will not result in the imposition of, any state, city or local transfer taxes, including, without limitation, any transfer gains taxes, unless such transferor pays such taxes; and (iv) such Transfer will not cause the Company to be treated as a "publicly-traded partnership" within the meaning of Section 7704 of the Code. The Board of Managers may elect prior to any Transfer to require an opinion of counsel with respect to any of the foregoing matters. (c) Subject to Section 9.3, a Transferee who has become a Member in accordance with this Section 9.2 has, to the extent of the transferred Interest, all of the rights, powers and benefits of and is subject to the restrictions and liabilities of a Member under this Agreement and the LLCA with respect to such transferred Interest. Upon admission of a Transferee as a Member, the transferor of the Interest so held by such new Member shall cease to be a Member of the Company to the extent of such transferred Interest. 9.3 Certain Limitations. Unless and until a Transferee is admitted as a Member pursuant to Section 9.2, a Transferee of a Member's Interest in whole or in part shall not be entitled to designate one or more Managers to serve on the Board of Managers (to the extent such right has been Transferred to such Transferee) or to become or to exercise the rights of a Member, including the right to require any information or accounting of the Company's business or the right to inspect the Company's books and records. Such Transferee shall only be entitled to receive, to the extent of the Interest transferred to such Transferee, the share of distributions and Profits and Losses, including distributions with respect to the return of Capital Contributions, to which the Transferee would otherwise be entitled in respect of the transferred Interest. The transferor of such Interest shall have the right to designate one or more Managers to serve on the Board of Managers (to the extent such transferor had such right prior to such Transfer) until such Transferee is admitted to the Company as a Member pursuant to Section 9.2 with respect to the Transferred Interest (but only if such right to designate one or more Managers to the Board of Managers was Transferred to such Transferee). 9.4 Acceptance of Prior Acts. Any Transferee who becomes a Member in accordance with Section 9.2, by so becoming a Member, accepts, ratifies and agrees to be bound by all actions duly taken pursuant to the terms and provisions of this Agreement by the Company prior to the date it became a Member and, without limiting the generality of the foregoing, specifically ratifies and approves all agreements and other instruments as may have been executed and delivered on behalf of the Company prior to such date and which are in force and effect on such date. ARTICLE 10. DISSOLUTION; WINDING UP AND DISTRIBUTION OF ASSETS 10.1 Dissolution. The Company shall be dissolved and its affairs shall be wound up upon the first to occur of the following: (i) December 31, 2015; -49- (ii) subject to Section 3.8, the written direction of the Board of Managers; (iii) the Bankruptcy, death, dissolution, expulsion, incapacity or withdrawal of any Member or the occurrence of any other event that terminates the continued membership of any Member, unless within one hundred eighty (180) days after such event the remaining Members agree in writing to continue the business of the Company, provided, however, that, notwithstanding the foregoing, no Member shall have the right to (i) withdraw or resign as a Member of the Company, (ii) redeem, or request redemption of, its Interest or any part thereof or (iii) dissolve itself voluntarily; (iv) any event that makes it unlawful for the Company's business to be continued; or (v) the entry of a decree of judicial dissolution under Section 18-802 of the LLCA. 10.2 Winding Up. (a) In the event of the dissolution of the Company pursuant to Section 10.1, the Board of Managers shall wind up the Company's affairs; provided, however, that a reasonable time shall be allowed for the orderly liquidation of the Company and the satisfaction of all liabilities to creditors so as to enable the Members to minimize the normal losses attendant upon a liquidation. The Members shall continue to share Profits and Losses during liquidation in the same proportion, as specified in Section 7.2 hereof, as before liquidation. Each Member shall be furnished with a statement audited by the Company's accountants that shall set forth the assets and liabilities of the Company as of the date of dissolution. Each Member (and its Affiliates) shall pay to the Company all amounts then owing by it (and them) to the Company). (b) Upon dissolution of the Company, Whitehall may, in the name of, and for and on behalf of, the Company, prosecute and defend suits, whether civil, criminal or administrative, settle and close the Company's business, dispose of and convey the Company's property, discharge or make reasonable provision for the Company's liabilities, and distribute to the Members in accordance with Section 10.3 any remaining assets of the Company, all without affecting or increasing any liability or obligation of the Members, including the Member participating in the winding up of the Company's affairs and shall comply with the provisions of Section 18-804(b) of the LLCA. 10.3 Distribution of Assets. Upon the winding up of the Company, the assets shall be distributed as follows: (a) to creditors of the Company, including Members who are creditors, to the extent permitted by law, in satisfaction of liabilities of the Company, whether by payment or by establishment of adequate reserves, other than liabilities for distributions to Members and former members under Section 18-601 or Section 18-604 of the LLCA; and -50- (b) to the Members in accordance with their respective Capital Account balances after allocation of Profits and Losses for the period ending immediately prior to such distribution and after giving effect to all contributions, distributions and allocations for all periods. For the purpose of making liquidating distributions required by this Section 10.3, the Board of Managers may determine whether to distribute all or any portion of the Company Assets in-kind or to sell all or any portion of the Company Assets and distribute the proceeds therefrom. To the extent that the Board of Managers determines that all or any portion of the Company Assets shall be sold, such Company Assets shall be sold as promptly as practicable, in a commercially reasonable manner. 10.4 Certificate of Cancellation. Within ninety (90) days following the dissolution and the commencement of winding up of the Company, or at any time there are no Members, certificates of cancellation shall be filed with the Secretary of State of the State of Delaware under Section 18-203 of the LLCA. 10.5 Claims of the Members. The Members shall look solely to the Company Assets for the return of their Capital Contributions, and if the Company Assets remaining after payment of or due provision for all debts, liabilities and obligations of the Company are insufficient to return such Capital Contributions, the Members shall have no recourse against the Company or any other Member or any other Person. No Member with a negative balance in such Member's Capital Account shall have any obligation to the Company or to the other Members or to any creditor or other Person to restore such negative balance upon dissolution or termination of the Company or otherwise. ARTICLE 11. AMENDMENTS 11.1 Amendments. This Agreement may not be amended or supplemented, and no provisions hereof may be modified or waived, except by an instrument in writing signed by all of the Members. ARTICLE 12. MISCELLANEOUS 12.1 Further Assurances. Each party to this Agreement agrees to execute, acknowledge, deliver, file and record such further certificates, amendments, instruments and documents, and to do all such other acts and things, as may be required by law or as, in the reasonable judgment of the Board of Managers, may be necessary or advisable to carry out the intent and purpose of this Agreement. -51- 12.2 Notices. Unless otherwise specified in this Agreement, all notices, demands, elections, requests or other communications that any party to this Agreement may desire or be required to give hereunder shall be in writing and shall be given by hand by depositing the same in the United States mail, first class postage prepaid, certified mail, return receipt requested, or by a recognized overnight courier service providing confirmation of delivery, to the addresses set forth in Sections 2.6 and 2.10, or at such other address as may be designated by the addressee thereof (which in the case of the Company, shall be designated by the Board of Managers) upon written notice to all of the Members. All notices given pursuant to this Section 12.2 shall be deemed to have been given (i) if delivered by hand on the date of delivery or on the date delivery was refused by the addressee or (ii) if delivered by United States mail or by overnight courier, on the date of delivery as established by the return receipt or courier service confirmation (or the date on which the return receipt or courier service confirms that acceptance of delivery was refused by the addressee). Except as specified in Section 2.6, in no event shall the provision of notice in accordance with this Section 12.2 constitute notice for service of any writ, process or summons in any suit, action or other proceeding. 12.3 Headings and Captions. All headings and captions contained in this Agreement and the table of contents hereto are inserted for convenience only and shall not be deemed a part of this Agreement. 12.4 Variance of Pronouns. All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the Person or entity may require. 12.5 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one Agreement. 12.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 12.7 WAIVER OF JURY TRIAL. EACH OF THE MEMBERS (ON BEHALF OF ITSELF, ITS AFFILIATES, AND THE HOLDERS OF INDIRECT AND DIRECT BENEFICIAL INTERESTS IN ITSELF) AND THE COMPANY, HAVING CAREFULLY CONSIDERED THE ISSUE, AND HAVING SOUGHT AND OBTAINED THE ADVICE OF COUNSEL, KNOWINGLY, INTENTIONALLY AND IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. 12.8 Consent to Jurisdiction. Each Member and the Company hereby irrevocably consents and agrees, for the benefit of each Member, that any legal action, suit or proceeding against it with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Agreement and with respect to the enforcement, modification, vacation or -52- correction of an award rendered in an arbitration proceeding may be brought in any federal or state court located in New York City (each a "New York Court"), and hereby irrevocably accepts and submits to the exclusive jurisdiction of each such New York Court, as the case may be, with respect to any such action, suit or proceeding. Each Member and the Company hereto waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions, suits or proceedings brought in any such New York Court and hereby further waives and agrees not to plead or claim in any such New York Court that any such action, suit or proceeding brought therein has been brought in an inconvenient forum. 12.9 Specific Performance. Each Member and the Company recognizes and agrees that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy. Accordingly, each Member and the Company agrees that, in addition to any other available remedies, each Member shall be entitled to an injunction restraining any violation or threatened violation of the provisions of this Agreement without the necessity of posting a bond or other form of security. In the event that any action should be brought in equity to enforce the provisions of this Agreement, no party will allege, and each party hereby waives the defense, that there is an adequate remedy at law. 12.10 Partition. The Members hereby agree that no Member nor any successor-in-interest to any Member shall have the right to have the Company Assets partitioned, or to file a complaint or institute any proceeding at law or in equity to have the Company Assets partitioned, and each Member, on behalf of himself, his successors, representatives, heirs and assigns, hereby waives any such right. 12.11 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 12.12 Successors and Assigns. This Agreement shall be binding upon the Members and their respective successors, executors, administrators, legal representatives, heirs, legal assigns and assigns permitted hereunder and shall inure to the benefit of the Members, and, except as otherwise provided herein, their respective successors, executors, administrators, legal representatives, heirs, legal assigns and assigns permitted hereunder. No Person other than the Members and their respective successors, executors, administrators, legal representatives, heirs, legal assigns and permitted assigns shall have any rights or claims under this Agreement. 12.13 Entire Agreement. This Agreement supersedes all prior agreements among the parties with respect to the subject matter hereof and contains the entire Agreement among the parties with respect to such subject matter. -53- 12.14 Waivers. No waiver of any provision hereof by any party hereto shall be deemed a waiver by any other party nor shall any such waiver by any party be deemed a continuing waiver of any matter by such party. 12.15 Maintenance as a Separate Entity. The Company shall maintain books and records and bank accounts separate from those of its Affiliates (other than the Company's Subsidiaries); shall at all times hold itself out to the public as a legal entity separate and distinct from any of its Affiliates (other than the Company's Subsidiaries) (including in its operating activities, in entering into any contract, in preparing its financial statements, and on its stationery and any signs it posts), and shall cause its Affiliates (other than the Company's Subsidiaries) to do the same and to conduct business with it on an arm's-length basis; shall not commingle its assets with assets of any of its Affiliates (other than the Company's Subsidiaries); shall not guarantee any obligation of any of its Affiliates (other than the Company's Subsidiaries); shall cause its business to be carried on by the Board of Managers; and shall keep minutes of all meetings of the Members. 12.16 Confidentiality. (a) The Members agree not to disclose or permit the disclosure of any of the terms of this Agreement or of any other confidential, non-public or proprietary information relating to the Company, the Company's Subsidiaries, any Property or the business of the Company (collectively, "Confidential Information"), provided that such disclosure may be made (i) to any Person who is a partner, officer, director or employee of such Member or counsel to or accountants of such Member solely for their use and on a need-to-know basis, provided that such Persons are notified of the Members' confidentiality obligations hereunder, (ii) with the prior written consent of Whitehall, (iii) subject to Section 12.16(b), pursuant to a subpoena or order issued by a court, arbitrator or governmental body, agency or official, (iv) to any lender providing financing to the Company, or (v) if in the opinion of counsel to the Member seeking to disclose such Confidential Information, such disclosure is required under the federal securities laws or the rules of regulation of any relevant exchange. (b) In the event that a Member shall receive a request to disclose any Confidential Information under a subpoena or order, such Member shall (i) promptly notify the other Members thereof, (ii) consult with the Board of Managers on the advisability of taking steps to resist or narrow such request and (iii) if disclosure is required or deemed advisable by the Board of Managers, cooperate with the Board of Managers in any attempt it may make to obtain an order or other assurance that confidential treatment will be accorded the Confidential Information that is disclosed. In the event such Member is compelled to disclose such Confidential Information, such Member shall use all reasonable efforts to cause disclosure only of such minimal amount of Confidential Information as is required to deemed advisable to be so disclosed. (c) Except to satisfy requirements of law and only to the extent of such requirements, no Member shall issue or publish any press release, tombstone or other public communication about the formation or existence of the Company without the express written consent of the other Members. -54- 12.17 No Third Party Beneficiaries. This Agreement is not intended and shall not be construed as granting any rights, benefits or privileges to any Person not a party to this Agreement. Without limiting the generality of the foregoing, no creditor of the Company, or of any Member shall have any right whatsoever to require any Member to contribute capital to the Company. 12.18 Power of Attorney. Each Member does hereby irrevocably constitute and appoint the Board of Managers with full power of substitution, as its true and lawful attorney, in its name, place and stead, to execute, acknowledge, swear to, deliver, record and file, as appropriate and in accordance with this Agreement (i) all amendments to the original Certificate of Formation required or permitted by law or the provisions of this Agreement and (ii) all certificates and other ministerial instruments requiring execution by the Members or any of them and deemed necessary or advisable by the Board of Managers to qualify or continue the Company as a company wherein the members have limited liability in the jurisdictions where the Company may be conducting its operations. 12.19 Construction of this Agreement. The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties thereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. 12.20 Non-Recourse. (a) Whitehall (on behalf of itself and the other Company Persons) acknowledges and agrees that notwithstanding anything to the contrary in this Agreement or under applicable law: (i) this Agreement shall not create or be deemed to create or permit any liability or obligation on the part of any McNeil Person, and no McNeil Person shall be bound or have any liability hereunder; and (ii) any and all Company Persons shall look solely to the assets of McNeil for satisfaction of any liability of McNeil under this Agreement, and no Company Person shall seek recourse or commence any action against any McNeil Person's assets, for the performance or payment of any obligation of McNeil under this Agreement. Whitehall (on behalf of itself and the other Company Persons) acknowledges and agrees that the Company Persons have conducted their own independent review and analysis of the business, operations, technology, assets, liabilities, results of operations, financial condition and prospects of the business of the McNeil Partnerships and acknowledge that they have received access to certain personnel, properties, premises and books and records of such business for this purpose. In entering into this Agreement, Whitehall has relied solely upon its own investigation and analysis and the specific representations and warranties of McNeil made in this Agreement, and (i) acknowledges that, except for the specific representations and warranties of McNeil contained in this Agreement, neither McNeil nor any other McNeil Person makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information (including any projections, estimates or other forward-looking information) provided (including in any management presentations, information memorandum, supplemental information or other materials or information with respect to any of the above) or otherwise made available to Company Persons in connection with the transactions contemplated -55- by this Agreement and (ii) agrees, to the fullest extent permitted by law, that: (i) none of the McNeil Persons shall have any liability or responsibility whatsoever to any Company Person under this Agreement on any basis (including in contract or tort, under federal or state securities laws or otherwise) based upon any information provided or made available, or statements made (or any omissions therefrom), to any Company Person in connection with the transactions contemplated by this Agreement; and (2) that McNeil shall not have any liability or responsibility whatsoever to any Company Person under this Agreement on any basis (including in contract or tort, under federal or state securities laws or otherwise (other than fraud or willful misrepresentation)) based upon any information provided or made available, or statements made (or any omissions therefrom), to any Company Person in connection with the transactions contemplated by this Agreement, except as and only to the extent expressly set forth in this Agreement and subject to any limitations and restrictions contained in this Agreement. (b) Notwithstanding anything to the contrary in Section 12.20(a), nothing in Section 12.20(a) shall be deemed to affect or modify in any way the rights and obligations under the Master Agreement and the Indemnification Agreement of the parties thereto. 12.21 Setoff. Whitehall acknowledges and agrees (on behalf of itself and each other Company Person) that no Company Person shall have any right hereunder or pursuant to Law to offset or retain any amounts due or owing by any McNeil Person against any amounts due or owing (or to become due or owing) to any Company Person under any other agreement, contract or understanding (including, without limitation, the Master Agreement); provided, however, that nothing in this Section 12.21 shall be deemed to affect or modify in any way the rights and obligations under the Indemnification Agreement of the parties thereto. 12.22 Arbitration. With respect to a determination of the Appraised Value by the Appraiser in accordance with the terms of this Agreement, each Member agrees that the determination of the Appraised Value by the Appraiser shall be final and binding upon such party. Judgment on the determination may be entered in any court of competent jurisdiction (within and outside the United States). In the event that any Member fails to comply with the procedures set forth in this Agreement relating to the determination of the Appraised Value, or this Section 12.22, then such noncomplying Member shall be liable for all costs and expenses, including attorneys' fees, incurred by a party in its effort to obtain either an order to compel compliance with such procedures or such orders, or an enforcement of the determination, from a court of competent jurisdiction. [SIGNATURE PAGE FOLLOWS] -56- IN WITNESS WHEREOF, the parties hereto have executed this First Amended and Restated Limited Liability Company Operating Agreement as of the day and year first above written. MEMBERS: WXI/MNL REAL ESTATE, L.L.C. By: Whitehall Street Real Estate Limited Partnership XI, its Managing Member By: WH Advisors, L.L.C. XI, its General Partner By: ------------------------------- Name: Jonathan Langer Title: Vice President McNEIL PARTNERS, L.P. By: McNeil Investors, Inc. its General Partner By: ---------------------------------- Name: Robert A. McNeil Title: Chairman of the Board SCHEDULE 4 Excluded McNeil Partnership Designated Debt Amount - --------------------------- ---------------------- MREF IX ............................................................ $8,000,000 MREF X ............................................................. $5,000,000 MREF XI ............................................................ $6,000,000 MREF XII ........................................................... $8,000,000 MREF XIV ........................................................... $3,000,000 MREF XV ............................................................ $2,000,000 MREF XX ............................................................ $1,000,000 MREF XXI ........................................................... $1,000,000 MREF XXII .......................................................... $1,000,000 MREF XXIII ......................................................... $1,000,000 MREF XXIV .......................................................... $1,000,000 MREF XXV ........................................................... $3,000,000 MREF XXVI .......................................................... $2,000,000 MREF XXVII ......................................................... $3,000,000 Hearth Hollow ...................................................... $1,000,000 Midwest Properties ................................................. $1,000,000 Regency North ...................................................... $1,000,000 Fairfax ............................................................ $1,000,000 Summerhill ......................................................... $1,000,000 EXPECTED PREFERRED EQUITY AMOUNTS PER PARTNERSHIP SCHEDULE 6 - -------------------------------------------------------------------------------- Amounts - -------------------------------------------------------------------------------- McNeil Real Estate Fund IX, Ltd. $ 7,608,897 McNeil Real Estate Fund X, Ltd. $21,901,614 McNeil Real Estate Fund XI, Ltd. $16,083,389 McNeil Real Estate Fund XII, Ltd. $10,907,069 McNeil Real Estate Fund XIV, Ltd. $ 8,414,324 McNeil Real Estate Fund XV, Ltd. $11,245,957 McNeil Real Estate Fund XX, L.P. $ 3,226,007 McNeil Real Estate Fund XXI, L.P. $ 6,089,257 McNeil Real Estate Fund XXII, L.P. $0 McNeil Real Estate Fund XXIII, L.P. $0 McNeil Real Estate Fund XXIV, L.P. $0 McNeil Real Estate Fund XXV, L.P. $0 McNeil Real Estate Fund XXVI, L.P. $ 2,444,138 McNeil Real Estate Fund XXVII, L.P. $0 Fairfax Associates II, Ltd. $0 Hearth Hollow Associates, L.P. $0 McNeil Midwest Properties I, L.P. $0 Regency North Associates, L.P. $0 McNeil Summerhill I, L.P. $0 - -------------------------------------------------------------------------------- Total Amount $91,309,470 - -------------------------------------------------------------------------------- EX-99.3 4 JOINT FILING AGREEMENT Exhibit 3 --------- JOINT FILING AGREEMENT Each of the Reporting Persons hereby agrees to make this joint filing pursuant to Rule 13d-1(k) of the Exchange Act of 1934. Dated: August 16, 1999 WXI/McN REALTY L.L.C. By: WXI/McN Real Estate, L.L.C., its Managing Member By: Whitehall Street Real Estate Limited Partnership XI, its Managing Member By: WH Advisors, L.L.C. XI, its General Partner By: /s/ Roger S. Begelman ---------------------------- Name: Roger S. Begelman Title: Attorney-in-Fact WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP XI By: WH Advisors, L.L.C. XI, its general partner By: /s/ Roger S. Begelman ------------------------------------------- Name: Roger S. Begelman Title: Attorney-in-Fact WH ADVISORS, L.L.C. XI By: /s/ Roger S. Begelman ------------------------------------------- Name: Roger S. Begelman Title: Attorney-in-Fact THE GOLDMAN SACHS GROUP, L.P. By: /s/ Roger S. Begelman ------------------------------------------- Name: Roger S. Begelman Title: Attorney-in-Fact GOLDMAN, SACHS & CO. By: /s/ Roger S. Begelman ------------------------------------------- Name: Roger S. Begelman Title: Attorney-in-Fact EX-99.4(A) 5 POWER OF ATTORNEY POWER OF ATTORNEY This power of attorney will expire on December 31, 2000. KNOW ALL PERSONS BY THESE PRESENTS that GOLDMAN, SACHS & CO. (the "Company") does hereby make, constitute and appoint each of Hans L. Reich and Roger S. Begelman, acting individually, its true and lawful attorney, to execute and deliver in its name and on its behalf whether the Company is acting individually or as representative of others, any and all filings required to be made by the Company under the Securities Exchange Act of 1934, as amended, giving and granting unto each said attorney-in-fact power and authority to act in the premises as fully and to all intents and purposes as the Company might or could do if personally present by one of its authorized signatories, hereby ratifying and confirming all that said attorney-in-fact shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly subscribed these presents as of December 21, 1998. GOLDMAN, SACHS & CO. By: The Goldman, Sachs & Co. L.L.C. By:/s/ Robert J. Katz - --------------------------------- Name: Robert J. Katz Title: Executive Vice President EX-99.4(B) 6 POWER OF ATTORNEY POWER OF ATTORNEY This power of attorney will expire on May 31, 2001. KNOW ALL PERSONS BY THESE PRESENTS that THE GOLDMAN SACHS GROUP, INC. (the "Company") does hereby make, constitute and appoint each of Hans L. Reich and Roger S. Begelman, acting individually, its true and lawful attorney, to execute and deliver in its name and on its behalf whether the Company is acting individually or as representative of others, any and all filings required to be made by the Company under the Securities Exchange Act of 1934, as amended, giving and granting unto each said attorney-in-fact power and authority to act in the premises as fully and to all intents and purposes as the Company might or could do if personally present by one of its authorized signatories, hereby ratifying and confirming all that said attorney-in-fact shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly subscribed these presents as of May 7, 1999. THE GOLDMAN SACHS GROUP, INC. By:/s/ Robert J. Katz - --------------------------------- Name: Robert J. Katz Title: Executive Vice President and General Counsel EX-99.4(C) 7 POWER OF ATTORNEY POWER OF ATTORNEY This power of attorney will expire on February 31, 2001. KNOW ALL PERSONS BY THESE PRESENTS that WH ADVISORS, L.L.C. XI (the "Company") does hereby make, constitute and appoint each of Hans L. Reich and Roger S. Begelman, acting individually, its true and lawful attorney, to execute and deliver in its name and on its behalf whether the Company is acting individually or as representative of others, any and all filings required to be made by the Company under the Securities Exchange Act of 1934, as amended, giving and granting unto each said attorney-in-fact power and authority to act in the premises as fully and to all intents and purposes as the Company might or could do if personally present by one of its authorized signatories, hereby ratifying and confirming all that said attorney-in-fact shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly subscribed these presents as of February 3, 1999. WH ADVISORS, L.L.C. XI By:/s/ Edward M. Siskind - --------------------------------- Name: Edward M. Siskind Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----