-----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, UnQEduPf+hF8oRtY4f4rBirwzJX4P8U/KixUvgrIMzDJbYlNrjcgz3BlesCpGw76 haAffAIBY5VgI+uAsrLQVA== 0000950142-99-000290.txt : 19990416 0000950142-99-000290.hdr.sgml : 19990416 ACCESSION NUMBER: 0000950142-99-000290 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19990415 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE REALTY CO INC /DE CENTRAL INDEX KEY: 0000869446 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 043086485 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-51403 FILM NUMBER: 99594730 BUSINESS ADDRESS: STREET 1: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 8888670100 MAIL ADDRESS: STREET 1: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE COMPANIES LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0001017525 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: LAWRENCE SILVERSTEIN BINGHAM DANA & GOUL STREET 2: 150 FEDERAL STREET CITY: BOSTON STATE: MA ZIP: 02110 SC 13D/A 1 AMENDMENT NO. 2 TO SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 2)* BERKSHIRE REALTY COMPANY, INC. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $.01 PER SHARE - -------------------------------------------------------------------------------- (Title of Class of Securities) 084710 10 2 - -------------------------------------------------------------------------------- (CUSIP Number) James M. Dubin, Esq. Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York, 10019 (212) 373-3000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 13, 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. 250.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [X] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for the 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). SCHEDULE 13D CUSIP No. 084710 10 2 Page 2 of 11 Pages ----------- 1 Names of Reporting Persons I.R.S. Identification Nos. Of Above Persons (entities only) Aptco Gen-Par, 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) OO 5 Check 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 OWNED 8 Shared Voting Power BY EACH REPORTING PERSON 0 WITH 9 Sole Dispositive Power 0 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) OO SCHEDULE 13D CUSIP No. 084710 10 2 Page 2 of 11 Pages ----------- 1 Names of Reporting Persons I.R.S. Identification Nos. Of Above Persons (entities only) Aptco Holdings, 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) OO 5 Check 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 OWNED 8 Shared Voting Power BY EACH REPORTING PERSON 0 WITH 9 Sole Dispositive Power 0 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) OO CUSIP No. 084710 10 2 Page 4 of 11 Pages ----------- Aptco Gen-Par, L.L.C. ("Krupp GP"), Aptco Holdings, L.L.C. ("Krupp LP"), The Berkshire Companies Limited Partnership ("BCLP"), KGP-1, Incorporated ("KGP-1"), KGP-2, Incorporated ("KGP-2"), Douglas Krupp and George Krupp (collectively, the "Reporting Parties") hereby amend the report on Schedule 13D filed by the Reporting Parties other than Krupp GP and Krupp LP on March 4, 1999, as amended by Amendment No. 1 thereto dated March 8, 1999, in respect of the common stock, par value $.01 per share, of Berkshire Realty Company, Inc., a Delaware corporation (the "Schedule 13D"), as set forth below. Item 2. Identity and Background. Item 2 of the Schedule 13D is hereby amended by replacing the first sentence thereof with the following: This statement is being filed jointly by Aptco Gen-Par, L.L.C. ("Krupp GP"), Aptco Holdings, L.L.C. ("Krupp LP"), The Berkshire Companies Limited Partnership ("BCLP"), KGP-1, Incorporated ("KGP-1"), KGP-2, Incorporated ("KGP-2"), Douglas Krupp and George Krupp (collectively, the "Reporting Parties"). 1/ Item 2 of the Schedule 13D is hereby further amended by adding the following paragraphs after the second paragraph thereof: As described in Items 3 and 4 below, on April 12, 1999, Berkshire Realty Holdings, L.P., a Delaware limited partnership ("Berkshire Holdings"), was formed for the purpose of entering into a merger agreement with the Company. The general partners of Berkshire Holdings are Krupp GP, WXI/BRH Gen-Par, L.L.C., an affiliate of Whitehall ("WHGP"), and BRE/Berkshire GP L.L.C., an affiliate of Blackstone ("Blackstone GP"). The limited partners of Berkshire Holdings are Krupp LP, Whitehall, certain entities affiliated with GS&Co. (as defined in Item 5) and GS Group (as defined in Item 5) (the "GS Affiliates") and BRE/Berkshire LP L.L.C., an affiliate of Blackstone ("Blackstone L.P."). As previously disclosed, Whitehall, Blackstone and certain of the Krupp Affiliates had formed Aptco for the purpose of making a merger proposal for the acquisition of Berkshire and related transactions. The partners of Berkshire Holdings have formed Berkshire Holdings for the purpose of consummating the transactions contemplated by the merger agreement described below. As a result, Berkshire Holdings and its affiliates, rather than Aptco, will consummate the transactions described herein. As a result of the formation of Berkshire Holdings, the partners of Berkshire Holdings, including WHGP, the GS Affiliates, Blackstone GP and Blackstone LP be deemed to have joined the "group" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended) that may have been deemed to have - ------------------- 1/ Neither the present filing nor anything contained herein shall be construed as an admission that the Reporting Parties constitute a "person" for any purpose other than Section 13(d) of the Exchange Act (as defined below). CUSIP No. 084710 10 2 Page 5 of 11 Pages ----------- been formed by the Reporting Parties, Whitehall and Blackstone. 2/ Pursuant to Rule 13d-1(k)(2), the Reporting Parties are filing on their own behalf, and not on behalf of any of any other person. Item 2 of the Schedule 13D is hereby further amended by adding the following paragraphs immediately prior to the last paragraph thereof: Set forth below is certain information concerning Krupp GP and Krupp LP: Aptco Gen-Par, L.L.C. --------------------- Krupp GP is a Delaware limited liability company whose principal business is serving as a general partner of Berkshire Holdings. The sole member of Krupp GP is Krupp LP. The principal office and place of business of Krupp GP is One Beacon Street, Suite 1500, Boston, Massachusetts 02108. Aptco Holdings, L.L.C. ---------------------- Krupp LP is a Delaware limited liability company whose principal business is serving as a limited partner of Berkshire Holdings. The sole member of Krupp LP is BCLP. The principal office and place of business of Krupp LP is One Beacon Street, Suite 1500, Boston, Massachusetts 02108. Whitehall and Blackstone have provided the Reporting Parties with the following information in respect of WHGP, Blackstone GP and Blackstone LP: WXI/BRH Gen-Par, L.L.C. WHGP is a Delaware limited liability company formed in connection with the transactions described in Item 4. The business address of WHGP is 85 Broad Street, New York, NY 10004. BRE/Berkshire GP L.L.C. Blackstone GP is a Delaware limited liability company formed in connection with the transactions that are the subject of this Schedule 13D. The business address of Blackstone GP is 345 Park Avenue, New York, NY 10154. BRE/Berkshire LP L.L.C. Blackstone LP is a Delaware limited liability company formed in connection with the transactions that are the subject of this Schedule 13D. The business address of Blackstone GP is 345 Park Avenue, New York, NY 10154. - ----------------- 2/ Neither the present filing nor anything contained herein shall be construed as an admission that the Reporting Parties together with Whitehall, WHGP, the GS Affiliates, Blackstone, Blackstone GP and Blackstone LP constitute a "person" or "group" for any purpose other than what they may be deemed to constitute under Section 13(d) of the Exchange Act. CUSIP No. 084710 10 2 Page 6 of 11 Pages ----------- Item 3. Source and Amount of Funds or Other Consideration. Item 3 of the Schedule 13D is hereby amended by adding the following paragraphs at the end thereof: Berkshire Holdings was formed on April 12, 1999 in connection with the transactions that are the subject of this Schedule 13D. Pursuant to the terms of the Agreement of Limited Partnership of Berkshire Holdings, dated as of April 13, 1999 (the "Partnership Agreement") (attached hereto as Exhibit 8) the partners of Berkshire Holdings have agreed to contribute to Berkshire Holdings up to an aggregate of $316,349,295 in equity capital (as such amount may be reduced (i) to the extent the cash portion of the aggregate merger consideration is reduced as a result of OP Unitholders electing to convert their OP Units into interests in Berkshire Holdings rather than cash and (ii) to take into account the amount of debt financing obtained with respect to the transactions described herein). The Partnership Agreement provides that (i) Krupp GP and Krupp LP (acting together) will contribute to Berkshire Holdings at least 5,416,000 shares of Common Stock and/or OP Units currently owned by the Reporting Parties (having an aggregate value of $66,349,295, or $12.25 per share of Common Stock or OP Unit) and (ii) each of Whitehall and WHGP (acting together) and Blackstone GP and Blackstone LP (acting together) will contribute up to $125,000,000 in cash (as such amount may be reduced (i) to the extent the cash portion of the aggregate merger consideration is reduced as a result of OP Unitholders electing to convert their OP Units into interests in Berkshire Holdings rather than cash and (ii) to take into account the amount of debt financing obtained with respect to the transactions described herein). The partners of Berkshire Holdings expect to finance the transactions proposed herein with their equity contributions and with debt financing. The Commitment Letter has expired in accordance with its terms. However, the partners of Berkshire Holdings have had preliminary discussions with a mortgage broker regarding a financing of a substantial portion of the properties of the Company by the Federal Home Loan Mortgage Corporation ("Freddie Mac") and plan to continue to pursue such Freddie Mac financing with a view toward implementing such financing concurrently with the closing of the transactions described herein. Krupp GP, acting alone, has the authority to implement Freddie Mac financing which meets certain parameters, as set forth in the Partnership Agreement. In the event that Krupp GP is not able to obtain the Freddie Mac financing within such parameters, WHGP and Blackstone GP, acting together, have the authority to obtain alternative financing, subject to the terms of the Partnership Agreement. Each of Whitehall and Blackstone has severally agreed, pursuant to and subject to the terms of a letter, dated April 13, 1999, between Berkshire Holdings, Whitehall and Blackstone (the "Second Commitment Letter") (attached hereto as Exhibit 9), to provide to Berkshire Holdings 50% of an aggregate amount of financing of up to $755 million, but in any case not to exceed 75.5% of the Transaction Value (as defined in the Second Commitment Letter). The information set forth in response to this Item 3 is qualified in its entirety by reference to the Partnership Agreement, the Second Commitment Letter and the Letter Agreement (as defined below) which are expressly incorporated herein by reference. Item 4. Purpose of Transaction. Item 4 of the Schedule 13D is hereby amended by adding the following paragraphs at the end thereof: On April 13, 1999, Berkshire Holdings and BRI Acquisition, LLC, a wholly owned subsidiary of Berkshire Holdings, entered into an Agreement and Plan of Merger, dated as of April 13, 1999, with the Company (the "Merger Agreement") (attached hereto as Exhibit 10) pursuant to which, on the terms and subject to the CUSIP No. 084710 10 2 Page 7 of 11 Pages ----------- conditions set forth therein, among other things, BRI Acquisition, LLC would be merged with and into the Company (provided that, at the option of Berkshire Holdings after certain conditions are met, the Company would be merged with and into Berkshire Holdings) and the stockholders of the Company (other than Berkshire Holdings, its subsidiaries, the Company and stockholders who properly exercise dissenters' rights under Delaware law) would receive in cash $12.25 per share of Common Stock. On April 13, 1999, Berkshire Holdings and BRI Acquisition Sub, LP, a wholly owned subsidiary of Berkshire Holdings, entered into an Agreement and Plan of Merger, dated as of April 13, 1999, with BRI OP (the "OP Merger Agreement") (attached hereto as Exhibit 11) pursuant to which, on the terms and subject to the conditions set forth therein, among other things, BRI Acquisition Sub, LP would be merged with and into BRI OP and holders of outstanding OP Units (other than Berkshire Holdings, the Company or the general partner of BRI OP) would, at their election, be entitled to receive one of the following forms of consideration in respect of each of their outstanding OP Units: (i) one Class A Preferred Unit (as defined in the Partnership Agreement) of Berkshire Holdings, (ii) one Class B Unit (as defined in the Partnership Agreement) of Berkshire Holdings, or (iii) $12.25 in cash. To secure certain of its obligations under the Merger Agreement, Berkshire Holdings has entered into an Escrow Agreement, dated as of April 13, 1999 (the "Escrow Agreement") (attached hereto as Exhibit 12) with the Company, BRI OP and American Stock Transfer and Trust Company (the "Escrow Agent") pursuant to which Berkshire Holdings has deposited a letter of credit (the "Letter of Credit") (attached hereto as Exhibit 13) in favor of the Escrow Agent which, subject to the terms of the Merger Agreement and the Escrow Agreement, may be drawn upon at the direction of the Company to satisfy the obligation of Berkshire Holdings and BRI Acquisition, LLC to pay certain amounts to Berkshire if the Merger Agreement is terminated in certain circumstances. In addition, the partners of Berkshire Holdings have entered into an agreement (the "Letter Agreement") (attached hereto as Exhibit 14), dated as of April 13, 1999, governing certain matters relating to the Partnership Agreement and the transactions described herein. The information set forth in response to this Item 4 is qualified in its entirety by reference to the Merger Agreement and the OP Merger Agreement, which are expressly incorporated herein by reference. Item 5. Interests in Securities of the Issuer. Item 5 of the Schedule 13D is hereby amended by adding the following paragraphs at the end thereof: As of April 15, 1999, none of the Reporting Parties or, to the knowledge of any of the Reporting Parties, David Quade beneficially owns shares of any class of capital stock of the Company other than as set forth in this Item 5. The Reporting Parties have been advised by Whitehall and Blackstone that as of April 15, 1999, none of WHGP, the GS Affiliates, Blackstone GP or Blackstone LP beneficially owns shares of any class of capital stock of the Company. None of the Reporting Parties or, to the knowledge of any of the Reporting Parties, David Quade has effected any transactions in the Common Stock during the 60 day period ending on April 15, 1999. The Reporting Parties have been advised by Whitehall and Blackstone that none of WHGP, the GS Affiliates, Blackstone GP or Blackstone LP has effected any transactions in the Common Stock during the 60 day period ending on April 15, 1999. CUSIP No. 084710 10 2 Page 8 of 11 Pages ----------- Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities. Item 6 of the Schedule 13D is hereby amended by replacing the last paragraph thereof with the following paragraphs: On April 13, 1999, Douglas S. Krupp entered into a voting agreement (the "Voting Agreement") (attached hereto as Exhibit 15) with the Company and BRI OP, pursuant to which Douglas S. Krupp has agreed to, and to cause persons or entities affiliated with him to, (i) vote the Common Stock which they own in favor of adoption of the Merger Agreement and approval of the transactions contemplated thereby and (ii) vote the OP Units which they own in favor of adoption of the OP Merger Agreement and the approval of the transactions contemplated thereby. The information set forth in response to this Item 6 is qualified in its entirety by reference to the Voting Agreement, which is expressly incorporated herein by reference. Except as disclosed in Items 3, 4 and 5 above and in this Item 6, and except for (a) the Joint Filing Agreement, dated February 22, 1999, among BCLP, KGP-1, KGP-2, Douglas Krupp and George Krupp (attached hereto as Exhibit 4), (b) the Power of Attorney of George Krupp dated February 22, 1999 (attached hereto as Exhibit 5) and (c) the Joint Filing Agreement, dated April 15, 1999, among the Reporting Parties (attached hereto as Exhibit 16), none of the Reporting Parties or, to the knowledge of the Reporting Parties, David Quade is a party to any contracts, arrangements, understandings or relationships with respect to any securities of the Company, including but not limited to the transfer or voting of any of the 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. The Exhibit Index incorporated by reference in Item 7 of the Schedule 13D is hereby amended by adding the following immediately at the end thereof: 8. Agreement of Limited Partnership of Berkshire Realty Holdings, L.P., dated as of April 13, 1999, among Krupp GP, Krupp LP, Whitehall, WHGP, the GS Affiliates, Blackstone GP, Blackstone LP and, for the purposes of Section 4.4(c) only, BCLP. 9. Commitment Letter, dated April 13, 1999, among Berkshire Holdings, Whitehall and Blackstone. 10. Agreement and Plan of Merger, dated as of April 13, 1999, among Berkshire Holdings, BRI Acquisition, LLC and the Company. 11. Agreement and Plan of Merger, dated as of April 13, 1999, among Berkshire Holdings, BRI Acquisition Sub, LP, Berkshire Apartments, Inc. and BRI OP. CUSIP No. 084710 10 2 Page 9 of 11 Pages ----------- 12. Escrow Agreement, dated as of April 13, 1999, among the Company, BRI OP, Berkshire Holdings and the Escrow Agent. 13. Letter of Credit, dated April 13, 1999, deposited by Berkshire Holdings in favor of the Escrow Agent. 14. Letter Agreement, dated as of April 13, 1999, among the partners of Berkshire Holdings. 15. Voting Agreement, dated as of April 13, 1999, among Douglas S. Krupp, the Company and BRI OP. 16. Joint Filing Agreement, dated April 15, 1999, among the Reporting Parties. CUSIP No. 084710 10 2 Page 10 of 11 Pages ----------- Signatures After reasonable inquiry and to the best of the undersigned|s knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: April 15, 1999 APTCO GEN-PAR, L.L.C. By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: Authorized Signatory APTCO HOLDINGS, L.L.C. By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: Authorized Signatory THE BERKSHIRE COMPANIES LIMITED PARTNERSHIP By: KGP-1, INCORPORATED, its General Partner By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: President KGP-1, INCORPORATED By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: President KGP-2, INCORPORATED By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: President CUSIP No. 084710 10 2 Page 11 of 11 Pages ----------- /s/ Douglas Krupp ----------------- Douglas Krupp * ----------------- George Krupp *By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: Attorney-in-fact EX-8 2 EXHIBIT 8 AGREEMENT OF LIMITED PARTNERSHIP OF BERKSHIRE REALTY HOLDINGS, L.P. THE INTERESTS OF THE GENERAL PARTNERS AND THE LIMITED PARTNERS ISSUED UNDER THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES ACT OF ANY STATE OR THE DISTRICT OF COLUMBIA. NO RESALE OF AN INTEREST BY A LIMITED PARTNER 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 LIMITED PARTNER AND THE PARTNERSHIP TO LIABILITY. Dated as of April 13, 1999 TABLE OF CONTENTS ARTICLE 1. DEFINITIONS 1.1 Definitions...........................................................2 1.2 Terms Generally......................................................14 ARTICLE 2. THE PARTNERSHIP AND ITS BUSINESS 2.1 Partnership Name.....................................................14 2.2 Term.................................................................15 2.3 Filing of Certificate and Amendments.................................15 2.4 Business; Scope of Partners' Authority...............................15 2.5 Principal Office; Registered Agent...................................15 2.6 Names and Addresses of the Partners..................................16 2.7 Representations by the Partners......................................17 2.8 Control of the Berkshire Group.......................................18 2.9 Pre-Closing Costs and Expenses.......................................18 2.10 Compliance with Certain Agreements...................................19 2.11 Miscellaneous........................................................19 ARTICLE 3. MANAGEMENT OF PARTNERSHIP BUSINESS; POWERS AND DUTIES OF THE ADMINISTERING GENERAL PARTNER 3.1 Management and Control...............................................19 3.2 Role of the Administering General Partner and Limitations on its Authority........................................................20 3.3 Majority Decisions...................................................24 3.4 Unanimous Decisions..................................................27 3.5 Consents of General Partners.........................................29 3.6 Meetings of General Partners; etc. .................................30 3.7 No Participation by or Authority of Limited Partners; Limited Rights...............................................................30 3.8 Acts of the Partnership and the Partners; Representatives............31 3.9 Waiver of Rights by the Limited Partners.............................31 3.10 Sales of Certain Properties by WHGP and Blackstone GP................32 ARTICLE 4. RIGHTS AND DUTIES OF PARTNERS 4.1 Duties and Obligations of the Administering General Partner..........32 4.2 Other Activities of the Partners.....................................33 4.3 Indemnification......................................................34 -i- 4.4 Compensation of Partners and their Affiliates; Goldman, Sachs & Co. as Financial Advisor.................................................34 4.5 Dealing with Partners................................................36 4.6 Use of Partnership Property..........................................36 4.7 Designation of Tax Matters Partner...................................36 4.8 Guarantees...........................................................37 ARTICLE 5. BOOKS AND RECORDS; ANNUAL REPORTS 5.1 Books of Account.....................................................39 5.2 Availability of Books of Account.....................................39 5.3 Annual Reports and Statements; Annual Budgets and Business Plans.....39 5.4 Accounting and Other Expenses........................................40 5.5 Bank Account.........................................................41 ARTICLE 6. CAPITAL CONTRIBUTIONS, LOANS AND LIABILITIES 6.1 Initial Capital Contributions of the Partners........................41 6.2 Additional Contributions.............................................43 6.3 Dilution for Failure to Fund Capital Calls...........................44 6.4 Capital of the Partnership...........................................46 6.5 Liability of General Partners........................................46 6.6 Limited Liability of Limited Partners................................46 ARTICLE 7. CAPITAL ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS 7.1 Capital Accounts.....................................................46 7.2 Profits and Losses...................................................47 ARTICLE 8. APPLICATIONS AND DISTRIBUTIONS OF AVAILABLE CASH 8.1 Applications and Distributions.......................................52 8.2 Liquidation..........................................................54 ARTICLE 9. TRANSFER OF COMPANY INTERESTS -ii- 9.1 Limitations on Assignments of Interests by Partners..................54 9.2 Sale of All of the Properties Before the Fifth Anniversary of the Closing Date at the Option of Berkshire..............................57 9.3 Sale of All of the Properties Before the Fifth Anniversary of the Closing Date at the Option of Two General Partners...................62 9.4 Sale of the Properties After the Fifth Anniversary...................63 9.5 Assignment Binding on Partnership....................................64 9.6 Bankruptcy of a Limited Partner......................................64 9.7 Substituted Partners.................................................64 9.8 Acceptance of Prior Acts.............................................65 9.9 Additional Limitations...............................................65 9.10 Purchase of the Berkshire Group's Interest upon the Termination of Douglas Krupp's Employment Under the DK Employment Agreement......65 9.11 Transfers by the Blackstone Group and the Whitehall Group............66 9.12 Purchase of the Class A Preferred Units and Class B Units............67 9.13 Subsequent Transactions..............................................69 ARTICLE 10. DISSOLUTION OF THE PARTNERSHIP; WINDING UP AND DISTRIBUTION OF ASSETS 10.1 Dissolution..........................................................71 10.2 Winding Up...........................................................72 10.3 Distribution of Assets...............................................73 10.4 Special Allocation...................................................73 ARTICLE 11. AMENDMENTS 11.1 Amendments...........................................................74 11.2 Additional Partners..................................................74 ARTICLE 12. MISCELLANEOUS 12.1 Further Assurances...................................................74 12.2 Notices..............................................................74 12.3 Headings and Captions................................................75 12.4 Variance of Pronouns.................................................75 12.5 Counterparts.........................................................75 12.6 Governing Law........................................................75 12.7 Consent to Jurisdiction..............................................75 12.8 Arbitration..........................................................76 12.9 Partition............................................................76 -iii- 12.10 Invalidity...........................................................76 12.11 Successors and Assigns...............................................76 12.12 Entire Agreement.....................................................77 12.13 Waivers..............................................................77 12.14 No Brokers...........................................................77 12.15 Maintenance as a Separate Entity.....................................77 12.16 Confidentiality......................................................77 12.17 No Third Party Beneficiaries.........................................78 12.18 Power of Attorney....................................................78 12.19 Construction of Documents............................................79 12.20 Time of Essence......................................................79 12.21 Default by Partnership...............................................79 -iv- SCHEDULES Schedule 1.1(a) Properties; Preliminary Loan Amounts Schedule 2.6(b) Names and Addresses of Partners Schedule 2.7(c) Shares of Common Stock of BRI Owned by the Berkshire Principals that will not be Contributed to the Partnership Schedule 2.10 Contribution Agreements Schedule 3.2(a)(19) List of Ten Assets to be Sold Schedule 3.2(a)(20) Allocated Acquisition Cost of Each Asset Schedule 3.8 Representatives of the General Partners Schedule 4.2(b) Krupp Affiliated Entities Schedule 4.4(c) Managed Properties Schedule 5.3(b) Initial Annual Budget Schedule 6.1 Initial Capital Contributions of the Partners, Partners; Partnership Percentage Interests; Partnership Units held by the Partners Schedule 9.10 Performance Termination Schedule 9.13(a)(1) 17 Properties Schedule 9.13(a)(2) 22 Properties Schedule 9.13(a)(3) 33 Properties EXHIBITS Exhibit 1 Form of DK Employment Agreement Exhibit 2 Form of Guarantee of Partnership Indebtedness -v- AGREEMENT OF LIMITED PARTNERSHIP OF BERKSHIRE REALTY HOLDINGS, L.P. This AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement"), is made and entered into as of April __, 1999, by and among Whitehall Street Real Estate Limited Partnership XI, a Delaware limited partnership ("Whitehall"), WXI/BRH Gen-Par LLC , a Delaware limited liability company ("WHGP"), Stone Street Real Estate Fund 1998 L.P., a Delaware limited partnership ("Stone Street"), Bridge Street Real Estate Fund 1998 L.P., a Delaware limited partnership ("Bridge Street") and Stone Street WXI/BRH Corp., a Delaware corporation ("Stone Corp"), BRE/Berkshire LP L.L.C., a Delaware limited liability company ("Blackstone LP"), BRE/Berkshire GP L.L.C., a Delaware limited liability company (in its capacity as a general partner hereunder, "Blackstone GP"), Aptco Holdings, L.L.C., a Delaware limited liability company ("Berkshire") and Aptco Gen-Par, L.L.C., a Delaware limited liability company ("BGP"). RECITALS WHEREAS, the Partners desire to form a limited partnership pursuant to the terms and provisions of this Agreement, and in accordance with the statutes and laws of the State of Delaware relating to limited partnerships, including without limitation, the Act; WHEREAS, Berkshire Realty Holdings, L.P., (the "Partnership") intends to acquire by merger Berkshire Realty Company, Inc., a Delaware corporation (Berkshire Realty Company, Inc., together with its subsidiaries, "BRI"); WHEREAS, BRI Acquisition Sub, LP, a Subsidiary of the Partnership, intends to merge with and into BRI OP Limited Partnership, a Delaware limited partnership ("BRI OP"); and WHEREAS, the Partnership intends to supervise the operation of the business conducted by BRI, including the ownership, acquisition, management, renovation and development of multifamily properties (the multifamily properties owned by BRI and any additional multifamily properties (or properties proposed for development) acquired by the Partnership, BRI OP, or any of their respective subsidiaries, being hereinafter referred to as the "Properties" and any of the foregoing individually being hereinafter referred to as a "Property"). 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 hereby agree as follows: ARTICLE 1. DEFINITIONS 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below, which meanings shall be applicable equally to the singular and plural of the terms defined: "Act" shall mean the Delaware Revised Uniform Limited Partnership Act, as amended from time to time. "Additional Capital Call" shall mean a capital call made on the Partners pursuant to Section 6.2. "Additional Contribution" shall mean any amounts contributed by a Partner pursuant to Section 6.2. "Administering General Partner" shall mean (i) BGP, upon the execution and delivery hereof or (ii) if for any reason BGP ceases to be Administering General Partner pursuant to the terms hereof (including Section 3.2(c)), another Person appointed by the General Partners of the Partnership (except that BGP shall not have an approval right with respect to such appointment). "Administrative Services Agreement" shall have the meaning set forth in Section 4.4(c). "Affiliate" shall mean with respect to any Person (i) any other Person that directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with such Person, (ii) any other Person owning or controlling 10% or more of the outstanding voting securities of, or other ownership interests in, such Person, (iii) any officer, director, member or partner of such Person and (iv) if such Person is an officer, director, member or partner, the company for which such Person acts in any such capacity. For purposes of this definition, the term "control," when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" shall mean this Agreement of Limited Partnership, as it may hereafter be amended or modified from time to time. "Annual Budget" shall mean the applicable budget for the Partnership prepared by the Administering General Partner for approval pursuant to Section 5.3(b). "Appraiser" shall have the meaning set forth in Section 9.10(d). -2- "Approved Budget" shall mean (i) for calendar year 1999, the budget previously approved by the General Partners and attached hereto as Schedule 5.3(b) and (ii) for any calendar year thereafter, the Annual Budget for the Budget Year in question, as approved by at least two of the General Partners in accordance with the provisions hereof and as any of the same may be amended from time to time in accordance with the provisions hereof. "Approved Business Plan" shall mean for any Budget Year, the Business Plan for the Budget Year in question, as approved by at least two of the General Partners in accordance with the provisions hereof and as any of the same may be amended from time to time in accordance with the provisions hereof. "Available Cash" shall mean, for any quarterly period or such other period for which computation may be appropriate, the excess, if any, of (A) the sum of (i) the amount of all cash receipts of the Partnership during such period from whatever source and (ii) any cash reserves of the Partnership existing at the start of such period, less (B) the sum of (i) all cash amounts paid or payable (without duplication) in such period on account of expenses and capital expenditures incurred in connection with the Partnership's business and approved in accordance with the provisions hereof (including, without limitation, general operating expenses, taxes, amortization or interest on any debt of the Partnership and expenses incurred in connection with the satisfaction of any refinancing of any of the Properties), and (ii) such cash reserves which may be required for capital expenditures (not to exceed the greater of (x) $400 per apartment unit then owned by the Partnership (directly or indirectly) and (y) amounts included in an Approved Budget for capital expenditures less any amounts actually expended), working capital and future needs of the Partnership in an amount reasonably determined by at least two of the General Partners or, if not yet determined for such period, in an amount equal to 105% of the amounts required for the working capital and future needs of the Partnership as set forth in the Partnership's Approved Budget. "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) an application by such party for the appointment of a receiver for the assets of such party, (vi) an involuntary petition against it 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 the sixty-day period following the filing of such petition 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 sixty (60) days after its effective date. "Bankruptcy Code" shall mean Title 11 of the United States Code, as amended. "Berkshire" shall have the meaning set forth in the first paragraph of this Agreement. -3- "Berkshire Group" shall mean, collectively, Berkshire and BGP together with any assignees or transferees to the extent permitted hereunder, but only so long as any such Person continues in its capacity as a partner in the Partnership. "Berkshire Principals" shall mean Douglas Krupp and George Krupp. "BGP" shall have the meaning set forth in the first paragraph of this Agreement. "Blackstone GP" shall have the meaning set forth in the first paragraph of this Agreement. "Blackstone Group" shall mean, collectively, Blackstone GP and Blackstone LP, together with any assignees or transferees to the extent permitted hereunder, but only so long as any such Person continues in its capacity as a partner in the Partnership. "Blackstone LP" shall have the meaning set forth in the first paragraph of this Agreement. "Book Value" shall mean, with respect to any Partnership Asset, its adjusted basis for federal income tax purposes, except that the initial Book Value of any asset contributed by a Partner to the Partnership shall be an amount equal to the agreed gross fair market value of such asset, and such Book Value shall thereafter be adjusted in a manner consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for revaluations pursuant to Section 7.1(b) and for the Depreciation taken into account with respect to such asset. "BRI Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of April __, 1999 (as such agreement may be amended from time to time), by and among the Partnership, BRI Acquisition LLC and Berkshire Realty Company, Inc. "BRI OP Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of April __, 1999 (as such agreement may be amended from time to time), by and among the Partnership, BRI Acquisition Sub, L.P., Berkshire Apartments, Inc. and BRI OP. "Bridge Loan" shall have the meaning set forth in Section 2.9(c). "Bridge Street" shall have the meaning set forth in the first paragraph of this Agreement. "Budget Year" shall mean the period beginning on the date hereof and ending on December 31, 1999; and beginning January 1, 2000, "Budget Year" shall mean a period beginning on January 1, 2000 and ending on December 31, 2000 and each calendar year thereafter. "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which banks in New York are required or permitted to be closed. "Business Plan" shall mean the applicable business plan for the Partnership prepared by the Administering General Partner for approval pursuant to Section 5.3(b). -4- "Capital Account" shall mean, when used in respect of any Partner, the Capital Account maintained for such Partner in accordance with Section 7.1, as said Capital Account may be increased or decreased from time to time pursuant to the terms of this Agreement. "Capital Contribution" shall mean, (i) with respect to any Investor Group Partner, the aggregate amount of capital actually contributed (and, in the case of Berkshire and BGP only, deemed to be contributed) to the Partnership by such Partner in accordance with Article 6 (regardless of the class of Partnership Units received in respect of such contribution) and (ii) with respect to Class A Preferred Limited Partners and the Class B Limited Partners, the amounts deemed contributed by such Partners pursuant to Section 6.1 hereof and reflected on Schedule 6.1 hereto. "Cause" shall mean, with respect to any Person, the conviction, guilty plea, plea bargain or plea of nolo contendere of such Person with respect to a felony, or the commission of fraud, in each case, other than with respect to the Partnership or its Subsidiaries, Properties, business or personnel. "Certificate" shall mean the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of Delaware on April ___, 1999, as the same may hereafter be amended and/or restated from time to time. "Class A Preferred Limited Partner" shall mean each Limited Partner who is deemed to have made a Capital Contribution pursuant to Section 6.1(c) hereof and who holds Class A Preferred Units, and any transferee of the foregoing to the extent permitted hereunder, but only so long as any such Person continues in its capacity as a partner in the Partnership. "Class A Preferred Percentage Interest" shall mean, with respect to each Class A Preferred Limited Partner, its percentage interest in such class, determined by dividing the Class A Preferred Units owned by such Partner by the total number of Class A Preferred Units then outstanding as specified in Schedule 6.1 attached hereto, as such schedule may be amended and restated from time to time. "Class A Preferred Unit" means a Partnership Unit that is specifically designated, when issued, as being a Class A Preferred Unit under the terms of this Agreement. "Class B Limited Partner" shall mean each Limited Partner who is deemed to have made a Capital Contribution pursuant to Section 6.1(d) hereof and who holds Class B Units, and any transferee of the foregoing to the extent permitted hereunder, but only so long as any such Person continues in its capacity as a partner in the Partnership. "Class B Percentage Interest" shall mean, with respect to each Class B Limited Partner, its percentage interest in such class, determined by dividing the Class B Units owned by such Partner by the total number of Class B Units then outstanding, as specified in Schedule 6.1 attached hereto, as such schedule may be amended and restated from time to time. -5- "Class B Unit" means a Partnership Unit that is specifically designated by the General Partners, when issued, as being a Class B Unit under the terms of this Agreement. "Class C Partner" shall mean each Partner (including each GP) who has made a Capital Contribution pursuant to Section 6.1(a) hereof and who holds Class C Preferred Units, and any transferee of the foregoing to the extent permitted hereunder, but only so long as any such Person continues in its capacity as a partner in the Partnership. The initial Class C Partners shall be WHGP, Whitehall, Blackstone GP, Blackstone LP, Stone Street, Bridge Street and Stone Corp. "Class C Preferred Percentage Interest" shall mean, with respect to each Class C Partner, its percentage interest in such class, determined by dividing the Class C Preferred Units owned by such Partner by the total number of Class C Preferred Units then outstanding, as specified in Schedule 6.1 attached hereto, as such schedule may be amended and restated from time to time. "Class C Preferred Unit" means a Partnership Unit that is specifically designated by the General Partners, when issued, as being a Class C Preferred Unit under the terms of this Agreement. "Class D Partner" shall mean each Partner (including each GP) who has made a Capital Contribution pursuant to Section 6.1(b) hereof and who holds Class D Units, and any transferee of the foregoing to the extent permitted hereunder, but only so long as any such Person continues in its capacity as a partner in the Partnership. The initial Class D Partners shall be BGP and Berkshire. "Class D Percentage Interest" shall mean, with respect to each Class D Limited Partner, its percentage interest in such class, determined by dividing the Class D Units owned by such Partner by the total number of Class D Units then outstanding, as specified in Schedule 6.1 attached hereto, as such schedule may be amended and restated from time to time. "Class D Unit" means a Partnership Unit that is specifically designated by the General Partners, when issued, as being a Class D Unit under the terms of this Agreement. "Class E Limited Partner" shall mean those Partners holding Class E Units who shall be admitted to the Partnership from time to time pursuant to the IMP upon the recommendation of the Administering General Partner and the concurrence of the other General Partners. "Class E Percentage Interest" shall mean, with respect to each Class E Limited Partner, its percentage interest in such class, determined by dividing the Class E Units then owned by such Partner by the total number of Class E Units then outstanding, as specified in Schedule 6.1 attached hereto, as such schedule may be amended and restated from time to time. "Class E Unit" means a Partnership Unit that is specifically designated by the General Partners, when issued, as being a Class E Unit under the terms of this Agreement. "Closing Date" shall mean the date upon which the closing under the BRI Merger Agreement occurs. -6- "Code" shall mean the Internal Revenue Code of 1986, as amended, or any corresponding provision(s) of succeeding law. "Company Cause"shall mean, with respect to any Person, the conviction, guilty plea, plea bargain or plea of nolo contendere of such Person with respect to a felony, or the commission of fraud, wilful misconduct, gross negligence or gross dereliction of duties, in each case, with respect to the Partnership or its Subsidiaries, Properties, business or personnel, provided that, in the case of gross negligence or gross dereliction of duties capable of cure, written notice of such gross negligence or gross dereliction has been provided to such Person and such conduct is not cured within a thirty (30) day period. "Confidential Information" shall have the meaning set forth in Section 12.16. "Contributing Partner" shall have the meaning set forth in Section 6.3(a). "Covered Person" shall have the meaning set forth in Section 4.2. "Depreciation" shall mean, with respect to any Fiscal Year, all deductions attributable to depreciation or cost recovery with respect to Partnership 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 Partnership, which have a useful life exceeding one year; PROVIDED, HOWEVER, that with respect to any Partnership 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, 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 method selected by the General Partners. "DK Employment Agreement" shall have the meaning set forth in Section 4.4(d). "DK IMP" shall mean the right of holders of the Class D Units to receive distributions under Sections 8.1(b)(5)(ii), (6)(i) and (7)(i), and related rights. "Failed Contribution" shall have the meaning set forth in Section 6.3(a). "Fair Market Value" shall have the meaning set forth in Section 9.10(d). "Financing Capital Call" shall have the meaning set forth in Section 6.2(b). "Fiscal Year" shall mean the fiscal year of the Partnership, which shall be the calendar year; but upon termination of the Partnership, "Fiscal Year" shall mean the period from the end of the last preceding Fiscal Year to the date of such termination. -7- "Freddie Mac" shall mean The Federal Home Loan Mortgage Corporation. "Freddie Mac Parameters" shall mean a loan with the following terms: (i) an original principal amount equal to the greater of (A) 75% of the appraised value of the properties listed on Schedule 1.1(a) hereto and (B) $650 million (such principal amount to be reduced by the preliminary loan amounts in respect of any assets sold at or prior to the Closing Date (as set forth on Schedule 1.1(a) hereto) and by the preliminary loan amounts in respect of any assets that are not included in the collateral pool for such financing) (as set forth on Schedule 1.1(a) hereto), (ii) such loan and all amounts payable with respect thereto shall be non recourse in all respects to all Partners (with express exculpation), unless they agree in writing otherwise, (iii) a term equal to seven years, (iv) fixed interest rate of 8% per annum or less, (v) yield maintenance penalty due upon prepayments only during the first five years of the term, (vi) the properties subject to such loan will not be cross-collateralized and individual loans securing such Properties will not be cross-defaulted and (vii) the other terms are no less favorable to the Partnership than the terms of the "Conditional Commitment", dated November 16, 1998, provided by Freddie Mac to the Investor Group Partners. "Funded Portion" shall have the meaning set forth in Section 6.3(a). "General Partner" or "GP" shall mean each of WHGP, Blackstone GP, BGP, and any Person who subsequently becomes a general partner of the Partnership pursuant to the terms of the Agreement, for so long as such Persons shall be general partners of the Partnership; "General Partners"or "GPs", shall mean such Persons, collectively. "Goldman, Sachs & Co." shall mean Goldman, Sachs & Co., a New York limited partnership, and any Person succeeding to its business substantially as an entirety. "GS Group" shall mean The Goldman Sachs Group, L.P. and any Person succeeding to its business substantially as an entirety, together with any assignees or transferees to the extent permitted hereunder. "GSMC" shall have the meaning set forth in Section 2.9(c). "Holder Purchase Date" shall have the meaning set forth in Section 9.12(a). "IMP" shall mean the incentive management participation plan approved by the General Partners as a Unanimous Decision, which IMP shall provide the Class E Limited Partners with the distributions under Sections 8.1(b)(5)(iii), 8.1(b)(6)(ii) and 8.1(b)(7)(ii) (it being understood and agreed that none of BGP, Berkshire, Douglas Krupp or any of their respective Affiliates shall be allocated any IMP allocated to the Class E Limited Partners). "Initial Appraisals" shall have the meaning set forth in Section 9.10(d). "Initial Business Plan" shall mean the Business Plan for 1999 to be approved in accordance with Section 5.3 within 30 days after the date hereof. -8- "Initial Capital Contribution" shall mean any Capital Contributions made or deemed made pursuant to Sections 6.1(a)-(d) and 6.1(h). "Institutional Lender" shall mean an Affiliate of any Investor Group Partner (other than Berkshire or BGP) and/or any one or more of the following other entities, PROVIDED that for any such other entity to qualify as an Institutional Lender hereunder, such other entity, together with its Affiliates, must have total assets of at least $5,000,000,000 and stockholders' equity or net worth of at least $250,000,000 (or, in either case, the equivalent thereof in a foreign currency) as of the date the loan is made: a savings bank, a savings and loan association, a commercial bank or trust company, an insurance company subject to regulation by any governmental authority or body, a publicly traded real estate investment trust, a union, governmental or secular employees' welfare, benefit, pension or retirement fund, a pension fund property unit trust (whether authorized or unauthorized), an investment company or trust, a merchant or investment bank or any other entity generally viewed as an institutional lender. In each of the foregoing cases, such Affiliate or other entity shall constitute an Institutional Lender whether (i) acting for itself or (ii) as trustee, in a fiduciary, management or advisory capacity or, in the case of a bank, as agent bank, for any number of lenders, so long as in the case of clause (ii) the day-to-day management decisions relating to the loan are either exercised by or recommended by such Institutional Lender and, during the life of the loan, such Institutional Lender shall only be removed from its clause (ii) capacity if it is replaced by another Institutional Lender also so acting under clause (ii). "Interest" shall mean the entire interest of a Partner in the Partnership at any particular time, including the right of such Partner to any and all benefits to which a Partner may be entitled as provided in this Agreement, together with the obligations of such Partner to comply with all the terms and provisions of this Agreement. An Interest may be expressed as a number of Partnership Units. "Investment" shall mean, relative to any Person (i) any loan or advance made by such Person to any other Person (excluding advances made to officers and employees in the ordinary course of business); (ii) the purchase by such Person of any debt obligation of any other Person; and (iii) any ownership or similar interest held by such Person in any other Person. "Investor Group Partners" shall mean Berkshire, BGP, Whitehall, WHGP, Stone Street, Bridge Street, Stone Corp., Blackstone LP and Blackstone GP, together with any assignees or transferees thereof to the extent permitted hereunder. "IRS" shall mean the Internal Revenue Service and any successor agency or entity thereto. "Krupp Affiliated Entities" shall have the meaning set forth in Section 4.2(a). "Limited Partners" shall mean all Class A Preferred Limited Partners, all Class B Limited Partners, all Class C Partners that hold limited partnership interests, in their capacities as such holders, all Class D Partners that hold limited partnership interests, in their capacities as such holders, all Class E Limited Partners, all other Limited Partners admitted to the Partnership pursuant to the terms hereof, -9- and any transferees of the foregoing permitted hereunder, but only so long as any such Person continues in its capacity as a Partner in the Partnership. "Losses" shall have the meaning set forth in Section 7.2(a). "Majority Decision" shall have the meaning set forth in Section 3.3. "Majority Sales Notice" shall have the meaning set forth in Section 9.3(a). "Majority Third Party Offer" shall have the meaning set forth in Section 9.3(b). "Majority Triggering Parties" shall have the meaning set forth in Section 9.3(b). "Managed Properties" shall have the meaning set forth in Section 4.4(c). "Mandatory Capital Call" shall have the meaning set forth in Section 6.2(a). "Mandatory Capital Call Limit" shall have the meaning set forth in Section 6.2(a). "Maximum Share" shall have the meaning set forth in Section 9.1(a). "Minimum Gain" shall mean an amount equal to the excess of the principal amount of debt, for which no Partner is liable ("non-recourse debt"), over the adjusted basis of the Partnership Assets which represents the minimum taxable gain which would be recognized by the Partnership if the nonrecourse debt were foreclosed upon and the Partnership 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 Partner's share of Minimum Gain shall be determined pursuant to Treasury Regulations Section 1.704-2. "Necessary Expenditure" shall have the meaning set forth in Section 6.2(a). "Non-Contributing Partner" shall have the meaning set forth in Section 6.3(a). "Non-recourse Deductions" for a taxable year means deductions attributable to non-recourse debt (as determined under Treasury Regulation Sections 1.704-2(c) and 1.704-2(i)(2)) for such year. "Non-Triggering Parties" shall have the meaning set forth in Section 9.2(a). "Notice of Sale" shall have the meaning set forth in Section 9.1(a). "Objection Notice" shall have the meaning set forth in Section 5.3(b). "Offer Terms" shall have the meaning set forth in Section 9.1(a). -10- "Offered Interest" shall have the meaning set forth in Section 9.1(a). "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, limited liability company agreement or other document affecting the rights of holders of limited liability company interests, 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. "Partner-Funded Debt" shall mean any non-recourse debt of the Partnership that is loaned or guaranteed by any Partner and/or is treated as Partner non-recourse debt with respect to a Partner under Treasury Regulations Section 1.704-2(b)(4). "Partners" shall mean all Class A Preferred Limited Partners, all Class B Limited Partners, all Class C Partners, all Class D Partners, all Class E Limited Partners and all other Partners admitted to the Partnership pursuant to the terms hereof, and any transferees of the foregoing permitted hereunder, but only so long as any of the foregoing Persons continues in its capacity as a partner in the Partnership; "Partner" shall mean any of the foregoing individually. "Partnership" shall mean Berkshire Realty Holdings, L.P., a Delaware limited partnership, as said Partnership may from time to time be hereafter constituted. "Partnership Assets" shall mean all right, title and interest of the Partnership in and to all or any portion of the assets of the Partnership and any property (real, personal, tangible or intangible) or estate acquired in exchange therefor or in connection therewith. "Partnership Percentage Interest" shall mean, as to a Partner, the percentage obtained by dividing the Partnership Units (other than Class A Preferred Units, Class B Units or Class E Units) owned by such Partner by the total number of Partnership Units (other than Class A Preferred Units, Class B Units or Class E Units) then outstanding as specified in Schedule 6.1 attached hereto, as such exhibit may be amended and restated from time to time. For the avoidance of doubt, the Partnership Percentage Interest of any Class A Preferred Limited Partner, Class B Limited Partner or any Class E Limited Partner shall be deemed zero percent (0%). "Partnership Redemption Date" shall have the meaning set forth in Section 9.12(b). "Partnership Unit" means a fractional, undivided share of the Interests of all Partners issued pursuant to Section 6 hereof, and includes Class A Preferred Units, Class B Units, Class C Preferred Units, Class D Units, Class E Units and any other classes or series of Partnership Units established after the date hereof. The number of Partnership Units outstanding and the Class A Percentage Interests, Class B Percentage Interests, Class C Percentage Interests, Class D Percentage Interests, -11- Class E Percentage Interests and the Partnership Percentage Interests in the Partnership represented by such Partnership Units are set forth in Schedule 6.1 hereto, as such Exhibit may be amended and restated from time to time. "Performance Termination" shall mean a termination of the DK Employment Agreement after the third anniversary of the Closing Date as a result of a determination by WHGP and Blackstone GP that the net operating income of the Properties is not at least $124 million for the full year ending on the third anniversary of the Closing Date (the "Test Year") (it being understood that such net operating income shall be calculated based upon the unaudited financial statements of the Partnership, provided that any of the General Partners may require that the Performance Termination be based on the net operating income shown on audited financial statements). For purposes of calculating the foregoing test, (x) net operating income so derived shall be reduced by (i) the amount of any net operating income attributable to properties acquired by the Partnership after the Closing Date and (ii) the amount of net operating income attributable to properties sold by the Partnership prior to or after the Closing Date to the extent included in the net operating income of the Test Year, and (y) the $124 million threshold shall be reduced by the amount of net operating income attributable to the Properties sold by the Partnership prior to or after the Closing Date, as such attributable amounts are shown on Schedule 9.10 attached hereto. "Permitted Pledge" shall mean, with respect to any member of the Berkshire Group, a pledge of, or security interest in, an equity interest in a legal entity to secure a loan made to the pledgor, provided that, (i) such pledged equity interest may not be transferred to the pledgee by foreclosure, assignment in lieu thereof or other enforcement of such pledge and (ii) the pledgor may pledge only its economic interest in such legal entity and no other rights under such legal entity's Organizational Documents. "Person" shall mean any individual, partnership, corporation, limited liability company, trust or other legal entity. "Pledgee" shall have the meaning set forth in Section 9.1(b). "Pledgor" shall have the meaning set forth in Section 9.1(b). "Profits" shall have the meaning set forth in Section 7.2(a). "Properties" shall have the meaning set forth in the Recitals. "Property" shall have the meaning set forth in the Recitals. "Property Loan" shall mean any bridge, permanent or construction financing assumed or obtained by the Partnership in accordance with the provisions hereof, which may be secured by a mortgage, or similar security in the nature of a mortgage on all or any of the Properties. "Purchaser" shall have the meaning set forth in 9.1(a). -12- "Rate of Return" shall mean, with respect to any Partnership Units held by any Partner, a return of all Capital Contributions made by such Partner with respect to such Partnership Units plus a cumulative, annually compounded, return on such Capital Contributions (and accrued but unpaid return at the specified rate outstanding from time to time) at a rate per annum equal to the applicable percentage specified herein. A Partner shall be deemed to have received a specified Rate of Return with respect to such Partner's Partnership Units when the total Capital Contributions made from time to time by such Partner in respect of such Partnership Units are returned to such Partner together with an annual return thereon equal to such specified percentage calculated commencing on the date such Capital Contributions are made and compounded annually to the extent not paid on a current basis, taking into account the timing and amounts of all previous Capital Contributions by such Partner in respect of such Partnership Units and all previous distributions by the Partnership to such Partner. For purposes of computing such Rate of Return, the periods used to measure capital inflows and outflows shall be monthly and any Capital Contribution made, or deemed made, by such Partner, any forfeiture of any Capital Contribution and any distribution of funds received by such Partner at any time during a month shall be deemed to be made, forfeited or received on the first day of such month. Any calculations shall be based on a 12-month year based on thirty (30) day months. "Restricted Period" shall have the meaning set forth in Section 4.2(a). "Sales Notice" shall have the meaning set forth in Section 9.2(a). "Sales Response Notice" shall have the meaning set forth in Section 9.2(c). "Second Tier Differential" shall mean an amount equal to the excess of (i) the amount distributed by the Partnership necessary to give the holders of Class C Preferred Units a 20% Rate of Return on the aggregate Capital Contributions made in respect of such Class C Preferred Units over (ii) the amount distributed by the Partnership necessary to give the holders of Class C Preferred Units a 17.5% Rate of Return on the aggregate Capital Contributions made in respect of such Class C Preferred Units. "Stone Corp" shall have the meaning set forth in the first paragraph of this Agreement. "Stone Street" shall have the meaning set forth in the first paragraph of this Agreement. "Subsidiaries" shall mean all of the entities in which the Partnership owns (whether as of the date hereof or at any time hereafter), directly or indirectly 51% or more of the ownership interests and "Subsidiary" shall mean any one of them. "Substituted Partner" shall mean any Person admitted to the Partnership as a Partner pursuant to the provisions of Section 9.7. "Targeted Capital Account Balance" shall mean, with respect to any Partner, the balance necessary to produce a Capital Account for each Partner such that if an amount of cash equal to such -13- positive Capital Account were distributed in accordance with such positive Capital Account balances, such distribution would be in the amounts, sequence and priority set forth in Section 10.3. "Tax Matters Partner" shall mean the General Partner designated pursuant to Section 4.7. "Third Appraisal" shall have the meaning set forth in Section 9.10(d). "Third Party Offer" shall have the meaning set forth in Section 9.2(f). "Third Party Offer Price" shall have the meaning set forth in Section 9.2(f). "Third Party Response Notice" shall have the meaning set forth in Section 9.2(g). "Transfer" shall have the meaning set forth in Section 9.1(a). "Transferring Partner" shall have the meaning set forth in Section 9.1(a). "Treasury Regulations" shall mean the regulations promulgated under the Code, as such regulations are in effect on the date hereof. "Triggering Party" shall have the meaning set forth in Section 9.2(a). "Unanimous Decision" shall have the meaning set forth in Section 3.4. "WHGP" shall have the meaning set forth in the first paragraph of this Agreement. "Whitehall" shall have the meaning set forth in the first paragraph of this Agreement. "Whitehall Group" shall mean, collectively, Whitehall, WHGP, Stone Street, Bridge Street and Stone Corp., together with any assignees or transferees to the extent permitted hereunder, but only so long as any such Person continues in its capacity as a partner in the Partnership. 1.2 Terms Generally. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) 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; and (b) the words "including" and "include" and other words of similar import shall be deemed to be followed by the phrase "without limitation." -14- ARTICLE 2. THE PARTNERSHIP AND ITS BUSINESS 2.1 Partnership Name. The business of the Partnership shall be conducted under the name of Berkshire Realty Holdings, L.P. in the State of Delaware and under such name or such assumed names as the Administering General Partner deems necessary or appropriate to comply with the requirements of any other jurisdiction in which the Partnership may be required to qualify. 2.2 Term. The term of the Partnership shall continue in full force and effect until terminated following dissolution on December 31, 2049 or such earlier date of dissolution as hereinafter provided. 2.3 Filing of Certificate and Amendments. The Certificate of Limited Partnership of the Partnership was filed with the Secretary of State of the State of Delaware on April ___, 1999. The Partners hereby agree to execute and file any required amendments to the Certificate and shall do all other acts requisite for the constitution of the Partnership as a limited partnership pursuant to the laws of the State of Delaware or any other applicable law and for enabling the Partnership to conduct business in the jurisdictions in which the Partnership's properties are located. 2.4 Business; Scope of Partners' Authority. (a) The Partnership is organized primarily for the purpose of BRI merging with the Partnership (or a Subsidiary thereof) and, subsequent to such merger, acquiring, owning, financing, refinancing, managing, maintaining, operating, improving, developing, marketing and selling multifamily properties. The Partnership is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, including, without limitation, full power and authority to enter into, perform and carry out contracts of any kind, borrow money, guarantee 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 Partner shall have any authority to bind or act for, or assume any obligations or responsibility on behalf of, any other Partner. Neither the Partnership nor any Partner shall, by virtue of executing this Agreement, be responsible or liable for any indebtedness or obligation of any other Partner incurred or arising on, before or after the execution of this Agreement, except, as to the Partnership, as to those joint responsibilities, liabilities, indebtedness, or obligations expressly assumed by the Partnership as of the date of this Agreement or incurred thereafter pursuant to and as limited by the terms of this Agreement. 2.5 Principal Office; Registered Agent. The principal office of the Partnership shall be c/o The Berkshire Group, One Beacon Street, Suite 1500, Boston, Massachusetts 02108. The -15- Partnership may change its place of business to such location or locations as may at any time or from time to time be determined by the Administering General Partner and consented to by WHGP and Blackstone GP. The mailing address of the Partnership shall be c/o The Berkshire Group, One Beacon Street, Suite 1500, Boston, Massachusetts 02108, or such other address as may be selected from time to time by the Administering General Partner. The address of the registered office of the Partnership in the State of Delaware is c/o Bridge Service Corp., 30 Old Rudnick Lane, Dover, Delaware 19901. The name and address of the registered agent of the Partnership for service of process in the State of Delaware is Bridge Service Corp, 30 Old Rudnick Lane, Dover, Delaware 19901. 2.6 Names and Addresses of the Partners. The names and addresses of the Partners on the date of this Agreement are as follows: Whitehall Street Real Estate Limited Partnership XI 85 Broad Street New York, New York 10004 Attn: Steven M. Feldman WXI/BRH Gen-Par LLC 85 Broad Street New York, New York 10004 Attn: Steven M. Feldman Bridge Street Real Estate Fund 1998 L.P. Stone Street Real Estate Fund 1998 L.P. Stone Street WXI/BRH Corp. 85 Broad Street New York, N.Y. 10004 Attn: Kevin D. Naughton BRE/Berkshire GP L.L.C. 345 Park Avenue, 32nd Floor New York, N.Y. 10154 Attn: Mr. Thomas Saylak BRE/Berkshire LP L.L.C. 345 Park Avenue, 32nd Floor New York, N.Y. 10154 Attn: Mr. Thomas Saylak Aptco Holdings, L.L.C. One Beacon Street, Suite 1500 Boston, Massachusetts 02108 Attn: Mr. Douglas Krupp -16- Aptco Gen-Par, L.L.C. One Beacon Street, Suite 1500 Boston, Massachusetts 02108 Attn: Mr. Douglas Krupp The names and addresses of the other Limited Partners and of such Partners as may be admitted as Partners to the Partnership after the date hereof shall be as set forth on Schedule 2.6(b) hereof, as such Schedule may be amended from time to time. 2.7 Representations by the Partners. (a) Each Partner who is not an individual represents, warrants, agrees and acknowledges that, as of the date hereof: (1) it is a corporation, a limited liability company or partnership, 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 liability company or partnership 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 has been duly authorized by all necessary corporate, limited liability company or partnership action; and (2) its execution and delivery of this Agreement and the performance of its obligations hereunder will not conflict with or violate any of the provisions of its Organizational Documents. (b) Each Partner, whether or not an individual, represents, warrants, agrees and acknowledges that as of the date hereof: (1) its execution and delivery of this Agreement and the performance of its obligations hereunder will not conflict with, result in a breach of or 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 party or by which it is bound or to which any of its property or assets are subject, violate any statute or any order, rule or regulation of any court or governmental or regulatory agency, body or official, that would materially and adversely affect the performance of its duties hereunder; such Partner has obtained any consent, approval, authorization or order of any court or governmental agency or body required for the execution, delivery and performance by such Partner of its obligations hereunder; (2) there is no action, suit or proceeding pending against such Partner or, to its knowledge, threatened in any court or by or before any other governmental agency -17- or instrumentality which would prohibit its entering into or performing its obligations under this Agreement; and (3) this Agreement is a binding agreement on the part of such Partner enforceable in accordance with its terms against such Partner. Further, each Limited Partner represents that it is acquiring its Interest for its own account for investment purposes only and not with a view to the distribution or resale thereof, in whole or in part, in violation of applicable securities laws and agrees that it will not Transfer all or any part of its Interest, 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 Partnership or any General Partner to violate applicable federal or state securities laws. (c) Berkshire and BGP represent, warrant and covenant that (i) they will, on the Closing Date, contribute to the Partnership all shares of common stock of BRI and all partnership interests in BRI OP owned by Berkshire, BGP, the Berkshire Principals (other than the shares listed on Schedule 2.7(c)) or any Affiliate of any of the foregoing as of the date hereof and as of the Closing Date (it being understood that they shall only be required to contribute 72.5% of the BRI OP interests held by Turtle Creek Associates (such percentage representing their entire ownership percentage of Turtle Creek Associates)), (ii) as of the date of this Agreement, Berkshire, BGP, the Berkshire Principals and each Affiliate of any of the foregoing, collectively own 512,203 shares of common stock of BRI (excluding the shares listed on Schedule 2.7(c)) and 4,904,066 Units of partnership interests in BRI OP and (iii) none of Berkshire, BGP, the Berkshire Principals, or any Affiliates of any of the foregoing, shall Transfer any such shares or Units except to the Partnership as the initial Capital Contributions of Berkshire and BGP. Each of BGP and Berkshire further represents and warrants that, except as set forth above and on Schedule 2.7(c), BGP, Berkshire, the Berkshire Principals and their respective Affiliates have no equity interest in BRI or BRI OP (other than the shares listed on Schedule 2.7(c)). 2.8 Control of the Berkshire Group. Berkshire and BGP represent and warrant that the Berkshire Principals control (which control is exercisable without the consent or approval of any other Person) the business and affairs of Berkshire and BGP. 2.9 Pre-Closing Costs and Expenses. (a) Any reasonable out of pocket due diligence, legal and underwriting costs or expenses incurred by an Investor Group Partner or its Affiliate (other than GSMC) relating to the acquisition of BRI or the execution of this Agreement will be reimbursed by the Partnership to such Partner on or promptly after the Closing Date. (b) The Partnership shall not be required to reimburse any Partner for fees payable to any broker or investment banker in connection with the proposed acquisition of BRI, except for the fee payable to Greenhill & Co. in accordance with its existing agreement with The Berkshire Group, which fee shall not be in excess of $4,955,000. Notwithstanding the foregoing, the Partnership may pay fees -18- to brokers or investment bankers in connection with additional equity and/or debt financing as provided in Section 3.4 or Section 4.4(a). (c) The Partnership shall pay (i) all fees and expenses in an amount not to exceed $750,000 related to the bridge financing committed by Goldman Sachs Mortgage Company ("GSMC") in connection with the contemplated merger of the Partnership (or a Subsidiary thereof) and BRI and (ii) all fees and expenses related to the bridge financing committed or provided by Whitehall and Blackstone in connection with the contemplated merger of the Partnership (or a Subsidiary thereof) and BRI (the "Bridge Loan") payable under the commitment letter or definitive agreements relating to such Bridge Loan. (d) In the event that, under the terms of the BRI Merger Agreement, a termination or break-up fee and/or reimbursement of expenses becomes payable to the Partnership, such fee shall be allocated among the Investor Group Partners as follows: (i) first, to reimburse the Investor Group Partners for their actual out of pocket transaction costs and expenses incurred to the date of the payment of such fee and (ii) second, to the Investor Group Partners PRO RATA based upon their respective anticipated initial Partnership Percentage Interests. 2.10 Compliance with Certain Agreements. The Partnership acknowledges that from and after the Closing Date, it will be bound by and will comply (and will cause BRI OP to comply) with the terms of the agreements listed on Schedule 2.10 hereto, as if the Partnership were a party to such agreements and that the Class A Preferred Limited Partners and Class B Limited Partners shall be able to enforce such agreements as third party beneficiaries of such agreements. Nothing in this Agreement shall constitute an amendment to, or diminish or alter any rights or obligations contained in, any of the agreements listed on Schedule 2.10. 2.11 Miscellaneous. The Partnership anticipates that the equity and debt financing expected to be raised in contemplation of the transactions contemplated by the BRI Merger Agreement will be sufficient to pay the purchase price required in connection with such merger and the transaction costs associated therewith (assuming that the transaction costs of BRI and BRI OP incurred in connection with the BRI Merger and the BRI OP Merger (other than severance costs) do not exceed $11,000,000), but no assurance can be made with respect to the foregoing. ARTICLE 3. MANAGEMENT OF PARTNERSHIP BUSINESS; POWERS AND DUTIES OF THE ADMINISTERING GENERAL PARTNER 3.1 Management and Control. (a) Except as limited specifically herein, the powers of the General Partners shall include all powers, statutory and otherwise, possessed by general partners under the laws of the State of Delaware. No General Partner may be removed by the Limited Partners with or without cause. -19- (b) Except as otherwise expressly and specifically provided in this Agreement, no Limited Partner shall have any authority to bind, to act for, to execute any document or instrument on behalf of or to assume any obligation or responsibility on behalf of the Partnership or any other Partner. (c) The provisions of this Agreement relating to the management and control of the business and affairs of the Partnership shall also be construed to be fully applicable to the management and control of each Subsidiary, and any and all matters listed in Section 3.3 shall constitute Majority Decisions for purposes hereof whether such matter relates to the Partnership or any Subsidiary of the Partnership, any and all matters listed in Section 3.4 shall constitute Unanimous Decisions for purposes hereof whether such matter relates to the Partnership or any Subsidiary of the Partnership and the provisions of Section 3.2 shall apply with respect to the Partnership as well as to any Subsidiary of the Partnership. Without limitation of the foregoing, given that the Partnership will, after consummation of the transactions contemplated by the BRI Merger Agreement and the BRI OP Merger Agreement, indirectly control the management of and will own 100% of the sole general partner of BRI OP, each of the General Partners shall have management rights over BRI OP, and the Partnership, in its capacity as the general partner, will not take any actions in respect of "Majority Decisions" or "Unanimous Decisions" without the approval of the required General Partners (as if such decisions were made by the Partnership). 3.2 Role of the Administering General Partner and Limitations on its Authority. (a) In addition to such powers and rights of the Administering General Partner as are expressly set forth herein, and subject to the express restrictions set forth in Sections 3.3 and 3.4, the Administering General Partner shall have the right and the duty to manage the business of the Partnership, to execute documents and to implement the decisions made on behalf of the Partnership by the General Partners in accordance with the terms hereof and applicable laws and regulations, and such other rights and powers as are granted to the Administering General Partner hereunder and as the other General Partners may from time to time expressly delegate to the Administering General Partner (PROVIDED, that any such obligations or responsibilities that are delegated to the Administering General Partner shall be subject to the Administering General Partner's acceptance to the extent not set forth herein). The Administering General Partner shall devote such time to the Partnership and its business as shall be reasonably necessary to conduct the business of the Partnership in an efficient manner and to carry out the Administering General Partner's responsibilities as set forth herein. Without limiting the generality of the foregoing but subject to WHGP's and Blackstone GP's rights with respect to Majority Decisions and Unanimous Decisions, the Administering General Partner shall have the right and duty to do, accomplish and complete, using Partnership funds at all times except where expressly provided to the contrary in this Agreement, for and on behalf of the Partnership with reasonable diligence and in a prompt and businesslike manner, exercising such care and skill as a prudent owner with sophistication and experience in owning, operating and managing property like the Properties would exercise in dealing with its own property, all of the following: (1) applying for and using diligent efforts to obtain any and all necessary consents, approvals and permits required for the construction, occupancy and operation of the Properties; -20- (2) paying, before delinquency and prior to the addition of interest or penalties, all taxes, assessments and other impositions applicable to the Properties, and retaining counsel to initiate any action or proceeding seeking to reduce such taxes, assessments or other impositions; (3) verifying that appropriate insurance (including any required by the terms of any Property Loan) is maintained by each contractor performing work on the Properties; (4) assisting in obtaining any and all necessary financing required to carry out the purposes of the Partnership; (5) procuring and arranging all necessary insurance to the extent available at commercially reasonable rates for the Partnership in accordance with the insurance program adopted by the Partnership from time to time pursuant to Section 3.3(12) below; causing the Investor Group Partners to be named as additional insureds on all liability policies maintained by the Partnership; delivering to the General Partners copies of all insurance policies maintained by the Partnership from time to time, including renewals or replacements of any expiring policies prior to the expiration thereof; (6) demanding, receiving, acknowledging and instituting legal action for recovery of any and all revenues, receipts and considerations due and payable to the Partnership, in accordance with prudent business practices; (7) executing and delivering leases and other legal documents necessary to carry out the business of the Partnership (which leases and legal documents shall have first been approved by either one or both of the other two General Partners if their approval is required pursuant to this Agreement, including without limitation, Sections 3.3 and 3.4 below, or shall otherwise be in accordance with the relevant Approved Budget and Approved Business Plan); (8) keeping all books of account and other records of the Partnership and delivering all reports in the manner provided in Article 5 below; (9) maintaining all funds of the Partnership in a Partnership bank account in the manner provided in Article 5 below, which funds shall not be commingled with the funds of any other Person; (10) protecting and preserving the title and interests of the Partnership in the Properties, and including keeping the Properties free from mechanics' and materialmen's liens; (11) preparing for approval by the General Partners and implementing once the same shall have been approved in accordance herewith, all Approved Budgets and Approved Business Plans, including negotiating all contracts and expending funds in accordance therewith; (12) opening and maintaining bank accounts to the extent required or permitted by Section 5.5; -21- (13) coordinating the defense of any claims, demands, suits or legal proceedings made or instituted against the Partnership by other parties, through legal counsel for the Partnership engaged in accordance with the terms of this Agreement; giving WHGP and Blackstone GP prompt notice of the receipt of any material claim or demand or the commencement of any suit or legal proceeding and promptly providing WHGP and Blackstone GP all information relevant or necessary thereto; (14) monitoring and complying with (i) the terms and provisions of any restrictive covenants or easement agreements affecting the Properties or any portion thereof, and any and all contracts entered into or assumed by the Partnership, including, without limitation, the exceptions noted in any title policy, and (ii) the terms and provisions of any note, mortgage and other loan documents assumed or executed by the Partnership, including any Property Loan documents; (15) delivering to the General Partners copies of any notices received from lenders, or other persons with whom the Partnership has material contractual obligations, alleging any material deficiencies or defaults by the Partnership under the said contractual arrangements; (16) paying (or causing to be paid), prior to delinquency, all insurance premiums, debts and other obligations of the Partnership, including amounts due under any loans of the Partnership and costs of construction, operation and maintenance of the Properties; (17) subject to the provisions of this Agreement, developing, operating, maintaining and otherwise managing the Properties in an efficient manner and in accordance with the relevant Approved Budget and Approved Business Plan; (18) promptly complying with all present and future laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments, courts, departments, commissions, boards and officers, the requirements of any insurance policy (or any insurer thereunder) covering the Properties (and any improvements thereon), any national or local Board of Fire Underwriters, or any other body exercising functions similar to those of any of the foregoing, which may be applicable to any of the Properties (and any improvements thereon) and the operation and management thereof, and when and to the extent approved by the General Partners, the Administering General Partner shall contest or assist the Partners in contesting the validity or application of any such law, ordinance, order, rule, regulation or requirement; (19) provided that Douglas Krupp (or, if the last paragraph of this Section 3.2 applies, George Krupp) is still acting as chairman and chief executive officer of the Partnership, selling the ten (10) assets listed on Schedule 3.2(a)(19) hereto within the time period contemplated by the Approved Business Plan to parties which are not Affiliated with the Berkshire Group and in which the Berkshire Group and its Affiliates have no continuing interest, for prices that yield the Partnership net proceeds (after all transaction costs, transfer or similar taxes and debt prepayment fees and expenses) equal to, in respect of each such Property, at least 95% of the amounts set forth on Schedule 3.2(a)(19) hereto opposite such Property, provided that the aggregate amount of all such net sale proceeds shall not be less than 97.5% of the aggregate of all such amounts set forth on Schedule 3.2(a)(19) hereto; -22- (20) provided that Douglas Krupp (or, if the last paragraph of this Section 3.2 applies, George Krupp) is still acting as chairman and chief executive officer of the Partnership, selling certain individual assets in any calendar year not in excess of $100 million in gross proceeds, provided that (i) the price for each sold asset yields the Partnership net proceeds (after all transaction costs, transfer or similar taxes and debt prepayment fees and expenses) equal to at least 103% of the allocated acquisition cost of such asset as set forth on Schedule 3.2(a)(20) hereto and (ii) if any such assets are held by an entity that is a REIT (other than any REIT that holds a single Property), independent tax counsel approved by a majority of the General Partners renders an opinion that such sale will not be a "prohibited transaction" within the meaning of Section 857 of the Code; (21) (i) in the event the Partnership draws down the Bridge Loan, incurring indebtedness on or prior to May 1, 2000 to refinance all or part of the Bridge Loan, provided that such indebtedness satisfies the Freddie Mac Parameters or (ii) in the event the Partnership determines not to draw down the Bridge Loan, incurring indebtedness satisfying the Freddie Mac Parameters contemporaneously with the Closing Date (provided that a commitment letter relating to indebtedness satisfying the Freddie Mac Parameters is obtained by July 15, 1999, definitive agreements relating to such indebtedness are executed by September 1, 1999, and at no time after July 15, 1999 do WHGP and Blackstone GP reasonably conclude that there is a material risk the indebtedness satisfying the Freddie Mac Parameters will not be agreed to, closed and funded on or prior to the anticipated Closing Date); (22) implementing, in the form approved pursuant to the terms of this Agreement, Unanimous Decisions and Majority Decisions approved by the General Partners pursuant to the terms of this Agreement (including, without limitation, Approved Business Plans); (23) performing all other services reasonably necessary or required for the ownership, development, maintenance, marketing and operation by the Partnership of the Properties or otherwise required to be performed by the Administering General Partner pursuant to this Agreement and not otherwise prohibited hereunder; and (24) retaining legal firms to represent the Partnership and its Subsidiaries provided that such firms are selected with due care and are recognized as having expertise in the area for which they have been retained. (b) The Administering General Partner shall not (and shall not have any right, power or authority to), without the prior approval of either WHGP or Blackstone GP, or of both WHGP and Blackstone GP, as applicable, bind or take any action on behalf of or in the name of the Partnership or any Subsidiary, or enter into any commitment or obligation binding upon the Partnership or any Subsidiary, except for actions authorized under this Agreement (including all actions authorized by Section 3.2(a)) or actions authorized by WHGP, Blackstone GP or the General Partners in the manner set forth herein. Neither WHGP nor Blackstone GP shall have the authority to take any action on behalf of or in the name of the Partnership or any Subsidiary except for actions authorized under this Agreement. -23- (c) (1) Notwithstanding anything contained herein to the contrary, BGP shall be removed as Administering General Partner and as a General Partner, and be relieved of its obligations as same, and shall have no further rights with respect to approvals of or consent to any Majority Decision or Unanimous Decision in the event that (i) Berkshire, BGP or any of their respective Affiliates Transfers any of its interests in the Partnership in violation of the terms of this Agreement, (ii) the Partnership or any member of the Blackstone Group or the Whitehall Group acquires the Interest of the Berkshire Group pursuant to the terms of Section 9.10 of this Agreement or (iii) a default by Berkshire, BGP or one of their respective Affiliates of a loan secured by interests of Berkshire, BGP or an Affiliate in the Partnership and such loan becomes due as a result of such default. (2) Notwithstanding anything contained herein to the contrary, BGP shall be removed as Administering General Partner and as a General Partner in the event that Douglas Krupp is removed as chief executive officer of the Partnership for Cause or Company Cause at any time or Douglas Krupp resigns as chief executive officer of the Partnership prior to the fifth anniversary of the Closing Date, and in connection with such removal or resignation, (i) the general partnership Interest of BGP shall automatically (and without any notice or other action) be converted into a new class of limited partnership interest (and there shall be no other limited partnership interests of such class), (ii) such limited partnership Interest shall be entitled (by means of a class vote or similar mechanism) to exercise the rights that BGP had under this Agreement as a General Partner (provided, that BGP shall not have the right to vote with respect to the Unanimous Decisions described in clauses (5)(it being understood and agreed that upon such removal or resignation and such conversion of Interests, the Berkshire Group shall not be obligated to fund any Additional Capital Call made pursuant to such clause (5) but shall be subject to dilution as set forth in Section 6.3), (10), (14) and (16) of Section 3.4 and shall not be entitled to vote in respect of any Majority Decision (other than the Majority Decisions described in clauses (4), (7) and (16) of Section 3.3, as to which BGP shall have the right to vote) and (iii) from and after the date of such removal, the remaining General Partners shall then have the right to sell the Partnership or all or substantially all of the assets of the Partnership (including by means of a merger, consolidation or other business combination) provided that, as a result of such sale, the members of the Berkshire Group receive, in the aggregate, an amount equal to the greater of (x) the Fair Market Value of the Berkshire Group's Interest (excluding the DK IMP which shall be forfeited upon the occurrence of any of such events) on the date of such termination or resignation or (y) the amount equal to the aggregate amount of Capital Contributions made by the Berkshire Group prior to the date of such termination or resignation less any prior distributions made to the Berkshire Group. In the event that Douglas Krupp ceases to be chief executive officer of the Partnership as a result of the death or disability of Douglas Krupp (but not as the result of the termination by the Partnership of Douglas Krupp's employment by the Partnership or as a result of the resignation by Douglas Krupp of his employment by the Partnership), the Partnership will offer George Krupp, Douglas Krupp's brother, the opportunity to serve as chief executive officer of the Partnership on the same terms and conditions as Douglas Krupp is employed as the chief executive officer of the Partnership pursuant to this Agreement and the DK Employment Agreement. -24- 3.3 Majority Decisions. Notwithstanding anything to the contrary in this Agreement, no act shall be taken, sum expended, decision made or obligation incurred by the Partnership or any Subsidiary, the Administering General Partner or any of the General Partners with respect to a matter within the scope of any of the Majority Decisions except as expressly reserved as Unanimous Decisions or Administering Partner Decisions pursuant to Section 3.2 or Section 3.4, unless and until the prior written consent of at least two General Partners shall have been obtained pursuant to and in accordance with this Section 3.3 and Section 3.5. Any two of the General Partners shall have the full and complete right, power, authority and discretion to decide, and take all actions necessary to implement, any Majority Decision: The "Majority Decisions" are: (1) making a Mandatory Capital Call pursuant to the terms of Section 6.2(a) or a Financing Capital Call pursuant to the terms of Section 6.2(b); (2) approving any Annual Budget or Business Plan or modifying or deviating from or making expenditures (whether operating or capital in nature) or incurring any obligations in excess of any of the foregoing except to the extent the Administering General Partner is so permitted by Section 3.2 or by this Section 3.3; PROVIDED, HOWEVER, that, so long as Douglas Krupp (or if the last paragraph of Section 3.2 applies, George Krupp) is still acting as chairman and chief executive officer of the Partnership, the Administering General Partner may, without the approval of any other General Partner, (i) incur payroll expenses which do not exceed 105% of the annual amount for such item on the Approved Budget and (ii) make additional expenditures or incur additional obligations which, in the aggregate, do not exceed 105% of annual expenses (other than payroll expenses) as set forth in the Approved Budget; and provided further that without the consent of the Administering General Partner no line item in an Approved Budget may provide for expenditures (other than capital items or reserves relating thereto) of more than 105% of the corresponding line item in the previous Approved Budget. (3) without limiting the Administering General Partner's ability to take action under 3.2(a)(19), (20) or (21), taking any action in respect of the Properties relating to environmental matters; PROVIDED, HOWEVER, that any General Partner is hereby authorized upon prior notice to the other General Partners to take such action as may be reasonably required to mitigate or eliminate any material environmental condition that poses imminent danger to human health or safety; PROVIDED FURTHER, that such emergency expenses referred to in the preceding clause shall not, without the approval of all of the General Partners, exceed $100,000 in the aggregate in any Budget Year; (4) subject to the provisions of Article 9 hereof, dissolving and winding-up the Partnership or electing to continue the Partnership or electing to continue the business of the Partnership; (5) incurring, renewing, refinancing or paying or otherwise discharging (or agreeing to do any of the foregoing) indebtedness of the Partnership (other than paying or discharging indebtedness secured by an asset with proceeds from sales of such asset, which the Administering General Partner shall have authority to do without the need to obtain approval of another General -25- Partner) provided that the Administering General Partner (in addition to WHGP and Blackstone GP acting jointly) may incur (i) indebtedness expressly authorized by an Approved Business Plan or an Approved Budget or (ii) indebtedness to Freddie Mac, or another institutional lender, satisfying the Freddie Mac Parameters on or prior to the applicable time periods specified in Section 3.2(a)(21). Notwithstanding the foregoing, in the event (i) the Administering General Partner does not obtain financing satisfying the Freddie Mac Parameters on or prior to May 1, 2000 (if the Bridge Loan is drawn upon) or (ii) the Administering General Partner does not obtain a commitment letter relating to indebtedness satisfying the Freddie Mac Parameters by July 15, 1999 or definitive agreements relating to such indebtedness have not been executed by September 1, 1999 (or if at any time after July 15, 1999 WHGP and Blackstone GP reasonably conclude that there is a material risk the indebtedness satisfying the Freddie Mac Parameters will not be agreed to, closed and funded on or prior to the anticipated Closing Date), two General Partners may take action necessary to incur, refinance, pay and otherwise discharge up to $650,000,000 of indebtedness on terms other than the Freddie Mac Parameters as if such incurrence were a Majority Decision PROVIDED that, (A) the General Partners use commercially reasonable efforts to obtain financing on terms as close as possible to the Freddie Mac Parameters, (B) any such financing shall be fixed rate or be subject to appropriate hedging arrangements and (C) the recourse of any lender of such financing permitted to be incurred pursuant to this sentence shall be limited to the Partnership Assets (and shall not be recourse to any Partner without such Partner's approval); (6) modifying (i) any loan documentation executed by the Partnership or (ii) any other material agreement, except if such modification is contained in an Approved Business Plan; (7) instituting proceedings to adjudicate the Partnership a bankrupt, or consenting to the filing of a bankruptcy proceeding against the Partnership, or filing a petition or answer or consent seeking reorganization of the Partnership under the Bankruptcy Code or any other similar applicable federal, state or foreign law, or consenting to the filing of any such petition against the Partnership, or consenting to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Partnership or of its property, or making an assignment for the benefit of creditors of the Partnership, or admitting in writing the Partnership's inability to pay its debts generally as they become due; (8) taking any action that would constitute an event of default under any loan agreement to which the Partnership is a party; (9) organizing or forming any Subsidiary of the Partnership, except as otherwise expressly provided herein; (10) approving or filing any tax return or tax report on behalf of the Partnership (it being understood and agreed that the Administering General Partner shall prepare the first draft of such tax returns and deliver such drafts to the other General Partners by no later than February 1 of each year and that such tax returns shall be completed before February 15 of each year); -26- (11) approving an insurance program for the Partnership or any of the Properties or making a material change to such approved insurance program; (12) settling a property insurance claim or condemnation action involving a claim in excess of one hundred thousand dollars ($100,000) or that, when added to all other insurance or condemnation claims during a single calendar year, exceeds two hundred fifty thousand dollars ($250,000); (13) making or agreeing to any material changes to the zoning of any of the Properties or approving the terms and provisions of any material restrictive covenant or material easement agreement affecting any of the Properties or any portion thereof (other than utility easements and the like granted or released in the ordinary course); (14) establishing any reserves for the Partnership (in addition to capital expenditure reserves) in excess of $250,000 in the aggregate but less than $2,000,000 in the aggregate unless set forth in the Approved Budget; (15) except as expressly set forth in an Approved Business Plan, approving or disapproving of a creditors' plan, the filing of an involuntary petition of bankruptcy or the dismissal or discharge of a claim of bankruptcy in connection with bankruptcy proceedings involving any Person contracting with the Partnership other than contractors against whom the Partnership's claim is less than $100,000; (16) taking any action that involves or relates to, or entering into any agreement with, any General Partner or any Affiliate thereof (it being understood and agreed that such General Partner shall recuse itself from the consideration of any such matter); (17) executing, modifying, accepting the surrender of or terminating any non-residential lease or other arrangement involving the rental, use or occupancy of more than 5,000 square feet of the Properties (provided that the subleasing a portion of BRI's current principal office at One Beacon Place Boston, Massachusetts may be effected by the Administering General Partner as if such decision were permitted under Section 3.2), except in accordance with the applicable Approved Business Plan; PROVIDED, HOWEVER, that the Administering General Partner may modify a lease of all or any portion of the Properties if such lease would still satisfy the applicable Approved Business Plan as modified; and PROVIDED FURTHER, HOWEVER, that the Administering General Partner may terminate any lease (and bring eviction and legal proceedings against the tenant thereunder) where the tenant has defaulted in its rent payments or is otherwise in material default; (18) unless required pursuant to the terms of any ground lease or mortgage encumbering any of the Properties, deciding whether to repair or rebuild in case of material damage to any of the improvements on any Property, or any part thereof, arising out of a casualty or condemnation (except such emergency repairs as may be necessary to protect such Property); -27- (19) except as otherwise expressly set forth in Sections 3.2(a), 3.10 and Article 9 of this Agreement, selling any of the Partnership Assets or Properties; (20) entering into hedging, interest rate protection or similar arrangements with respect to up to 50% of the anticipated amount of debt financing to be incurred by the Partnership or its Subsidiaries in connection with the BRI Merger and the BRI OP Merger; (21) exercising any rights by the Partnership under the DK Employment Agreement or Section 9.10 hereof; and (22) any action that is not a Unanimous Decision or that the Administering General Partner has the authority to effect pursuant to Section 3.2(a) (it being understood that in the case of any inconsistency between Sections 3.2(a)(19), 3.2(a)(20) and 3.2(a)(21) and this Section 3.3, the foregoing Sections will prevail); provided that two General Partners may modify Section 3.2(a) (other than clauses (19), (20) and (21) thereof) to provide that any such actions set forth in Section 3.2(a) shall constitute Majority Decisions. 3.4 Unanimous Decisions. Notwithstanding anything to the contrary in this Agreement, no act shall be taken, sum expended, decision made or obligation incurred by the Partnership, the Administering General Partner or any of the General Partners with respect to a matter within the scope of any of the Unanimous Decisions, unless and until the prior written consent of all of the General Partners shall have been obtained pursuant to and in accordance with this Section 3.4 and Section 3.5. The General Partners, acting unanimously, shall have the full and complete right, power, authority and discretion to decide, and take all actions necessary to implement, any Unanimous Decision. The "Unanimous Decisions" are: (1) taking any action in contravention of, amending, modifying or waiving any of the provisions of this Agreement or the Certificate; (2) except as permitted by Article 9, approving the admission to the Partnership of a successor or a new Partner, removing any Partner, designating or approving the classification of any new class of Partners (and establishing the designations, preferences and relative rights and duties of each class of Partners), or making any public or private offering for the sale of equity interests or securities issued by the Partnership; (3) except as provided in Article 9, merging or consolidating the Partnership with or into another Person (or engaging in any other transaction having substantially the same effect); it being agreed that the terms of Section 17-211(g) of the Act shall be applicable such that the General Partners acting pursuant to this Section 3.4 shall have the right to effect any amendment to this Agreement or effect the adoption of a new partnership agreement for a limited partnership if it is the surviving or resulting limited partnership on the merger or consolidation (except as may be expressly prohibited under Section 3.7(b) or Section 3.7(c)); -28- (4) altering the nature of the business of the Partnership from the businesses permitted by Section 2.4(a); (5) making an Additional Capital Call other than pursuant to Sections 6.2(a) and 6.2(b); (6) disposing of all or any portion of the property known as Berkshire Towers or the subsidiary that owns such property prior to the fifth anniversary of the Closing Date, PROVIDED, HOWEVER, that such disposition shall be a Majority Decision if it is made in a tax deferred transaction; (7) acquiring any real property or interest therein or other material assets; (8) except as set forth in Article 9, selling the Partnership or all or substantially all of the Partnership Assets prior to the date which is forty-two months after the Closing Date; (9) changing, amending or terminating the BRI Merger Agreement or the BRI OP Merger Agreement; executing the foregoing documentation or any documents related thereto or executed in connection therewith; or accepting any closing deliveries, or making any election or granting any consents, approvals or waivers of conditions to the Partnership's obligation to close the merger with BRI pursuant to the foregoing documentation or any documents related thereto or executed in connection therewith; (10) approving the IMP (and the persons to whom such IMP is allocated) and admitting or removing any Class E Limited Partner; (11) incurring, refinancing, paying and otherwise discharging indebtedness in connection with the financing of the transactions contemplated by the BRI Merger Agreement and the BRI OP Merger Agreement if the all-in, blended interest rate for such financing exceeds a per annum rate equal to 10%; (12) selecting or varying depreciation and accounting methods and making or revoking any other decisions or elections with respect to federal, state, local or foreign tax matters or other financial purposes; (13) establishing reserves for the Partnership (in addition to capital expenditure reserves) in an amount equal to or in excess of $2,000,000 in the aggregate unless set forth in the Approved Budget; (14) changing the Partnership's accountants and independent auditors from PriceWaterhouse Coopers (it being agreed and understood that the General Partners intend that PriceWaterhouse Coopers shall act as the Partnership's initial accountants); making any accounting decisions for the Partnership (other than those specifically provided for in, or necessary to carry out, other sections of this Agreement); or approving any financial statements prepared by the Partnership's auditors; -29- (15) using Partnership funds to extend credit, make an Investment, make a loan or become a guarantor or surety for debt of another party; (16) except as provided in Section 4.2(b), entering into any property management, leasing, development or similar agreement; (17) entering into hedging, interest rate protection or similar arrangements with respect to an amount of the debt financing to be incurred by the Partnership or its Subsidiaries in connection with the BRI Merger and the BRI OP Merger in excess of 50% of such indebtedness; and (18) except as expressly set forth in the Approved Business Plan, taking any action that reasonably would be expected to have a material adverse effect on the assets, liabilities, income or expenses of the Properties. Notwithstanding anything else to the contrary herein, but subject to Section 3.7(b), Article 9 and Section 11.1, any action or decision that is not a Unanimous Decision or a decision permitted pursuant to Section 3.2 to be taken by the Administering General Partner without the consent of any other General Partner shall be deemed to be a Majority Decision and may be taken or made by the General Partners acting together without the consent or approval of any other Partner. 3.5 Consents of General Partners. If BGP consents to any Majority Decision or Unanimous Decision in its capacity as the Administering General Partner, BGP need not also give its consent to such Majority Decision or Unanimous Decision in its capacity as a General Partner. In the event of any need for consent of the General Partners to any Majority Decision or Unanimous Decision, the Administrating General Partner, or the requesting General Partner as the case may be, shall make such request of the General Partners and shall provide the General Partners with any information reasonably necessary for the General Partners to make an informed decision. If a General Partner does not respond within ten (10) Business Days after receipt of such request for consent to a Majority Decision or Unanimous Decision, such General Partner shall be deemed to have rejected such request; provided that a request pursuant to Section 3.3(a)(12), shall be deemed to be approved by a General Partner that does not respond within such ten Business Day period. Each General Partner (including the Administering General Partner) shall use its good faith reasonable efforts to respond promptly to requests for consent and to keep the other General Partners informed of the status of any matter regarding which such General Partner intends to request the General Partners' consent under Section 3.3 or Section 3.4. No General Partner shall be permitted to enter into a separate agreement with another General Partner regarding the voting of its General Partner interests or the granting of its consent to any Majority Decision or Unanimous Decision. 3.6 Meetings of General Partners; etc. The Administering General Partner shall from time to time, but no less frequently than every fiscal quarter, meet with WHGP and Blackstone GP at WHGP's or Blackstone GP's request to discuss the business and affairs of the Partnership or to discuss any particular matter reasonably requested by WHGP or Blackstone GP. WHGP and Blackstone GP shall promptly inform BGP of actions taken by WHGP and Blackstone GP with respect to any Majority Decision. No General Partner shall be responsible to the Partners for any adverse -30- consequences, of actions taken in accordance with the terms of this Agreement or without its consent. Notice of meetings of the General Partners shall be given in the manner provided in Section 12.2 hereof at least seventy-two (72) hours before the time of such meeting (unless each General Partner waives such notice). No action may be taken at any meeting of the General Partners unless a quorum of at least two (2) General Partners shall be present thereat; and no action may be taken at any such meeting at which less than all of the General Partners are present unless such action was included in the notice for such meeting. The General Partners may act by written consent in lieu of a meeting. 3.7 No Participation by or Authority of Limited Partners; Limited Rights. (a) No Limited Partner shall have the right to participate in the management or conduct of the Partnership. No Limited Partner shall transact business for the Partnership, nor shall any Limited Partner have power to sign, act for or bind the Partnership, all of such powers being vested solely and exclusively in the General Partners. Except as required by law or as expressly provided in this Section 3.7, no holder of Limited Partnership Interests shall be entitled to vote at any meeting of the Partners or for any other purpose or otherwise to participate in any action taken by the Partnership or the Partners, or to receive notice of any meeting of the Partners. When entitled to vote on a matter being submitted to holders of Partnership Interests of more than one class or series, all classes of Interests in the Partnership shall vote together as one class with each interest in the Partnership having a vote equal to the Partnership Percentage Interest related to such Interest. (b) Notwithstanding anything in this Agreement to the contrary, so long as any Class A Preferred Units are outstanding, the Partnership shall not, without the prior approval of the holders of at least a majority of the outstanding Class A Preferred Units held by Persons other than the General Partners and their respective Affiliates, (i) amend any provisions of this Agreement in any manner that (x) adversely affects the holders of the Class A Preferred Units disproportionately with respect to the rights of holders of other classes of Partnership Units or (y) alters the preferences, rights, privileges or powers of, or restrictions provided for the benefit of, the Class A Preferred Units (it being understood and agreed that this Section 3.7(b) shall not prevent the Partnership from authorizing or creating any class of Partnership Units on a parity with the Class A Preferred Units or junior to the Class A Preferred Units as to distributions or liquidations), (ii) authorize or create any class of Partnership Units with a priority as to distributions or liquidations over the Class A Preferred Units (it being understood and agreed that this Section 3.7(b) shall not prevent the Partnership from issuing any debt securities), (iii) issue any additional Class A Preferred Units or (iv) except as expressly provided herein, redeem or repurchase any Interests (other than the Interests of Class E Limited Partners which may be redeemed at any time). (c) Notwithstanding anything in this Agreement to the contrary, so long as any Class B Units are outstanding, the Partnership shall not, without the prior approval of the holders of at least a majority of such outstanding Class B Units held by Persons other than the General Partners and their respective Affiliates, amend any provisions of this Agreement in any manner that (i) adversely affects such holders of such Class B Units disproportionately with respect to the rights of holders of other classes of Partnership Units or (ii) alters the preferences, rights, privileges or powers of, or restrictions provided for the benefit of, the Class B Units (it being understood and agreed that this Section 3.7(c) -31- shall not prevent the Partnership from authorizing or creating any class of Partnership Units, whether on a parity, junior or senior to the Class B Units as to distributions or liquidations). 3.8 Acts of the Partnership and the Partners; Representatives. (a) Whenever in this Agreement or elsewhere it is provided that consent is required of, a demand shall be made by, or acts shall be performed by or at the direction of the Administering General Partner, all such consents, demands and acts are to be made, given or performed upon the consent of any of the Persons listed on Schedule 3.8 attached hereto (as the same may be amended from time to time by the Administering General Partner) under the heading "Representatives of the Administering General Partner" who shall be vested with the authority of the Administering General Partner, until such time, as any, as the General Partners shall receive a notice from the Administering General Partner designating one or more new representatives. (b) Whenever in this Agreement or elsewhere it is provided that consent is required of, a demand shall be made by, or acts shall be performed at the direction of WHGP, all such consents, demands and acts are to be made, given or performed upon the consent of any of the Persons listed on Schedule 3.8 attached hereto (as the same may be amended from time to time by WHGP) under the heading "Representatives of WHGP" who shall be vested with the authority of WHGP, until such time, as any, as the Administering General Partner and Blackstone GP shall receive a notice from WHGP designating one or more new representatives. (c) Whenever in this Agreement or elsewhere it is provided that consent is required of, a demand shall be made by, or acts shall be performed at the direction of Blackstone GP, all such consents, demands and acts are to be made, given or performed upon the consent of any of the Persons listed on Schedule 3.8 attached hereto (as the same may be amended from time to time by Blackstone GP) under the heading "Representatives of Blackstone GP" who shall be vested with the authority of Blackstone GP, until such time, as any, as the Administering General Partner and WHGP shall receive a notice from Blackstone GP designating one or more new representatives. 3.9 Waiver of Rights by the Limited Partners. To the fullest extent permitted by law, subject to Sections 3.7(b) and (c) and subject to compliance with the agreements referenced in Section 2.10, each of the Limited Partners hereby (a) waives any rights it may have to (i) consent to, (ii) request statutory appraisal rights with respect to or (iii) otherwise approve, any merger, combination, sale of Partnership Assets, cross-collateralized financing or refinancing or other similar transaction with respect to the Partnership and (b) releases each Partner of the Whitehall Group, the Berkshire Group and the Blackstone Group from any claims that the Limited Partners might have had with respect to such rights had they not been waived (it being understood and agreed that such waivers shall not constitute a waiver of fiduciary duties owed to the Limited Partners). -32- 3.10 Sales of Certain Properties by WHGP and Blackstone GP. (a) In the event that the Administering General Partner does not sell the ten (10) assets as set forth in Section 3.2(a)(19) within the time period contemplated by the initial Business Plan the WHGP and Blackstone GP, acting together as if such decision were a Majority Decision, may cause the Partnership to sell (or to enter into an agreement to sell) such assets during the immediately succeeding six (6) month period to parties that are not Affiliated with either the Whitehall Group or the Blackstone Group and in which neither the Whitehall Group nor the Blackstone Group have a continuing interest, PROVIDED that such sales would satisfy the requirements of Section 3.2 (a)(19) had the Administering General Partner effected such sales. (b) In the event that the Administering General Partner does not sell Properties in any calendar year for gross proceeds of at least $50,000,000 pursuant to Section 3.2(a)(20), during the six months following such calendar year, WHGP and Blackstone GP, acting together as if such decision were a Majority Decision, may cause the Partnership to sell Properties for an amount of gross proceeds equal to the lesser of (i) $50,000,000 or (ii) the excess of $100,000,000 over the gross proceeds received by the Partnership in respect of Property sales during the preceding calendar year pursuant to Section 3.2(a)(20); PROVIDED that such Property sales pursuant to this clause (b) would satisfy the requirements of Section 3.2(a)(20) had they been effected by the Administering General Partner. ARTICLE 4. RIGHTS AND DUTIES OF PARTNERS 4.1 Duties and Obligations of the Administering General Partner. In addition to such duties as are described elsewhere in this Agreement, the Administering General Partner shall (i) prepare and deliver to WHGP and Blackstone GP (or cause to be prepared and delivered to WHGP and Blackstone GP) the Business Plan for each Budget Year, (ii) deliver to WHGP and Blackstone GP promptly upon its receipt, copies of all (x) summonses and complaints served on the Partnership, or the Administering General Partner (as a general partner of the Partnership) and (y) notices of default on any loan or other indebtedness of the Partnership or on any liens against any Partnership Asset, (iii) monitor compliance by the Partnership with any loan agreements, mortgages, purchase agreements and other material agreements to which the Partnership is bound (and take appropriate steps to cure any non-compliance to the extent permitted under this Agreement or otherwise promptly notify WHGP and Blackstone GP of any noncompliance of which it has obtained knowledge) and (iv) manage the Partnership and the Partnership Assets with the same care as it would use if it owned the Partnership Assets individually. -33- 4.2 Other Activities of the Partners. (a) So long as Douglas Krupp or George Krupp shall be the chief executive officer of the Partnership, or BGP or another Affiliate of Douglas Krupp or George Krupp is the Administering General Partner (the "Restricted Period"), Berkshire and BGP shall comply, and shall cause the Berkshire Principals and their respective Affiliates (including, without limitation, (i) any immediate family members of the Berkshire Principals or trusts established for the benefit of such family members of the Berkshire Principals and (ii) any public or private partnership or other entities (other than BRI) in which any Berkshire Principals or any of their Affiliates owns, directly or indirectly, a general partner interest or an economic interest (as limited partner, member or stockholder) of 50% or more (the "Krupp Affiliated Entities")) (any of the foregoing, a "Covered Person") to comply with the provisions of this Section 4.2. Berkshire and BGP acknowledge that this covenant is a material inducement to Whitehall, WHGP, Blackstone LP and Blackstone GP entering into this Agreement and that a material breach of this covenant that is not cured after written notice and a reasonable period to cure shall constitute a material breach of this Agreement entitling such Partners to exercise all remedies available to them at law or in equity. Berkshire and BGP represent that all of the Krupp Affiliated Entities are identified on Schedule 4.2(b). (b) During the Restricted Period, no Covered Person may, directly or indirectly, develop a new multifamily property (other than development that completes previously commenced construction or a multifamily property that is a part of a portfolio of multifamily property acquired by such Covered Person) located within a one mile radius of any Property held by the Partnership. (c) During the Restricted Period each Covered Person shall offer the Partnership the opportunity to act as property manager for each multifamily property owned by such Covered Person that is not managed by a third party property manager unaffiliated with the Partnership or any Covered Person for a management fee equal to the amount (or percentage) that is market at such time. (d) Subject to this Section 4.2, each Partner may engage or invest in any other activity or venture or possess any interest therein independently or with others. Subject to this Section 4.2, none of the Partners, the Partnership or any other Person employed by, related to or in any way affiliated with any Partner or the Partnership shall have any duty or obligation to disclose or offer to the Partnership or the Partners, or obtain for the benefit of the Partnership or the Partners, any other activity or venture or interest therein including, without limitation, any multifamily property. Except in the event of a breach of the limitations set forth in subparagraph (a) or (b) above, none of the Partnership, the Partners, the creditors of the Partnership or any other Person having any interest in the Partnership shall have (A) any claim, right or cause of action against any Partner or any other Person employed by, related to or in any way affiliated with, any Partner 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. (e) During the Restricted Period Berkshire and BGP agree to give written notice to the Partnership and each of the General Partners of the acquisition by any Covered Person of a -34- multifamily property promptly following the acquisition by such Covered Person of any such property or any direct or indirect interest therein (but in no event more than sixty (60) days following such acquisition). 4.3 Indemnification. (a) Notwithstanding anything in this Agreement to the contrary, no Partner, or General Partner or tax matters partner shall be liable, responsible or accountable in damages or otherwise to the Partnership, any third party or to any other Partner for (i) any act performed within the scope of the authority conferred on such Partner or General Partner by this Agreement except for the gross negligence or willful misconduct of such Partner or General Partner in carrying out its obligations hereunder or any act that is in breach of its fiduciary duties, (ii) such Partner's or General Partner's failure or refusal to perform any act, except those required by the terms of this Agreement, (iii) such Partner's or General Partner's performance of, or failure to perform, any act on the reasonable reliance on advice of legal counsel to the Partnership or (iv) the negligence, dishonesty or bad faith of any agent, consultant or broker of the Partnership selected, engaged or retained in good faith. In any threatened, pending or completed action, suit or proceeding, each Partner, General Partner and tax matters partner shall be fully protected and indemnified and held harmless by the Partnership 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 Partner or General Partner in connection with such action, suit or proceeding) by virtue of its status as Partner, General Partner or tax matters partner or with respect to any action or omission taken or suffered in good faith, other than liabilities and losses resulting from the gross negligence or willful misconduct of such Partner, General Partner or tax matters partner. The indemnification provided by this Section 4.3 shall be recoverable only out of the assets of the Partnership, and no Partner or General Partner shall have any personal liability (or obligation to contribute capital to the Partnership) on account thereof. (b) Each General Partner shall defend and indemnify the Partnership and the other Partners against, and shall hold it and them harmless from, any damage, loss, liability, or expense, including reasonable attorneys' fees, as and when incurred by the Partnership or the other Partners in connection with or resulting from such indemnifying General Partner's gross negligence, malfeasance, fraud, breach of fiduciary duty or willful misconduct. 4.4 Compensation of Partners and their Affiliates; Goldman, Sachs & Co. as Financial Advisor. (a) No General Partner nor any other Partner, nor any of their respective Affiliates, shall be entitled to compensation from the Partnership in connection with any matter that may be undertaken in connection with the fulfillment of its duties and responsibilities hereunder, except as provided in this Section 4.4, or as set forth in an approved Business Plan. -35- (b) For so long as Whitehall is a Partner of the Partnership, to the extent the Partnership seeks to retain an investment bank for (i) an initial public offering of the Partnership or (ii) any other sale, merger or financing transaction relating to the Partnership involving an amount in excess of $100 million, the Partnership shall offer to Goldman, Sachs & Co. or one or more of its Affiliates the opportunity to act as (A) lead investment banker with respect to an initial public offering or (B) co-lead investment banker with respect to a transaction described in clause (ii) above; PROVIDED, HOWEVER, that in the event of a sale, merger or financing other than an initial public offering, the Partnership may, at the election of BGP or Blackstone GP engage a second investment banker of its choice to act as co- lead financial advisor. In the event that the Partnership engages Goldman, Sachs & Co. and/or one of its Affiliates in connection with such an initial public offering or to arrange a purchase, sale, financing, refinancing, securitization or similar transaction in respect of the Partnership, or all or any portion of the Properties, Goldman, Sachs & Co. and/or such Affiliate shall be entitled to receive from the Partnership its customary fees, commissions and indemnification for such services charged to independent third parties. In addition, in the event of any sale, merger or other disposition relating to the Partnership and involving an amount in excess of $100 million, the Partnership shall pay to an Affiliate of Blackstone LP an advisory fee, equal to 33% of the total fees paid to Goldman, Sachs & Co. in connection with such engagement. Notwithstanding the foregoing, the aggregate amount of fees so paid to Goldman, Sachs & Co. or its Affiliates and to such Affiliate of Blackstone LP shall not exceed in the aggregate customary amounts that would be payable to one investment banker in a transaction of that type. (c) Each of BGP and Berkshire, on behalf of itself and each member of the Berkshire Group and their respective Affiliates, hereby agrees that for so long as any member of the Berkshire Group or any Affiliate thereof shall control the owner of the properties listed on Schedule 4.4(c) hereto (the "Managed Properties") and until the latter to occur of (i) the end of the Restricted Period or (ii) the third anniversary of the Closing Date, subject to its fiduciary duties as general partner of such owners, Berkshire shall cause the owner of such Managed Properties not to terminate or reduce the management fees payable under, or seek to terminate or reduce the management fees payable under, any of the management or similar contracts relating to such Managed Properties to which BRI, the Partnership or any of their respective Affiliates is a party without the prior written consent of Blackstone GP and WHGP; provided that the owner of such Managed Properties may, after the third anniversary of the Closing Date, reduce the management fee paid under such agreements to four percent (4%) of the gross revenues of the properties subject to such management agreements. In addition, each of BGP and Berkshire, on behalf of itself and each member of the Berkshire Group and their respective Affiliates, hereby agrees that it will use its best efforts, prior to the Closing Date (and following the Closing Date if the amendments or waivers referred to in this Section 4.4(c) are not made or obtained prior to the Closing Date) to cause The Berkshire Companies Limited Partnership to amend the Administrative Services Agreement, dated as of February 28, 1997, as amended (as so amended, the "Administrative Services Agreement"), between a subsidiary of BRI and The Berkshire Companies Limited Partnership to provide that (i) the transactions contemplated by this Agreement and the merger agreement between BRI and the Partnership shall not constitute a "Change in Control" for purposes of the Administrative Services Agreement, (ii) no termination or similar fee shall be payable by BRI, the Partnership or their respective successors, assigns or Affiliates in connection with any termination of such Administrative Services Agreement, (iii) The Berkshire Companies Limited -36- Partnership will not terminate or reduce the fees payable under, or seek to terminate or reduce the fees payable under, the Administrative Services Agreement without the prior written consent of Blackstone GP and WHGP. By its execution below solely for the purpose of this paragraph, The Berkshire Companies Limited Partnership hereby agrees, and Berkshire hereby agrees, on behalf of its Affiliates, including The Berkshire Companies Limited Partnership, that, upon and after consummation of the transactions contemplated by the BRI Merger Agreement and the BRI OP Merger Agreement, no further BRI OP Units or other consideration shall be issuable to The Berkshire Companies Limited Partnership or any other person under the terms of the Advisory Contribution Agreement, dated as of February 26, 1996, by and among BRI, BRI OP and The Berkshire Companies Limited Partnership. (d) The Partnership will enter into an employment agreement with Douglas Krupp in substantially the form set forth on Exhibit 1 hereto (the "DK Employment Agreement") effective as of the Closing Date. 4.5 Dealing with Partners. (a) Subject to paragraph (b) below, the fact that a Partner, an Affiliate of a Partner, or any officer, director, employee, partner, consultant or agent of a Partner, is directly or indirectly interested in or connected with any Person employed by the Partnership to render or perform a service, or from or to whom the Partnership may buy or sell any property or have other business dealings, shall not prohibit a General Partner from employing such Person or from dealing with such Person on customary terms and at competitive rates of compensation, and neither the Partnership nor any of the other Partners shall have any right in or to any income or profits derived therefrom by reason of this Agreement. The foregoing is not intended to modify the restrictions on the authority of the Administering General Partner under Sections 3.3 and 3.4. (b) Except as provided in Section 4.4, the Partnership shall not employ to render or perform a service, buy or sell any property from or to, or have any other business dealings with, any Person who is a Partner in the Whitehall Group, the Blackstone Group or the Berkshire Group or any Affiliate of any Partner in the Whitehall Group, the Blackstone Group or the Berkshire Group without the prior approval of both of the disinterested General Partners. 4.6 Use of Partnership Property. No Partner shall make use of the funds or property of the Partnership, or assign its rights to specific Partnership property, other than for the business or benefit of the Partnership. 4.7 Designation of Tax Matters Partner. WHGP shall act as the "tax matters partner" of the Partnership, as provided in the regulations pursuant to Section 6231 of the Code. Each Partner 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. The Partnership and each General Partner further agrees to indemnify WHGP for any claims made against it in its capacity as tax matters partner in accordance -37- with Section 4.3. To the extent and in the manner provided by applicable Code sections and regulations thereunder, the Tax Matters Partner (a) shall furnish the name, address, profits interest and taxpayer identification number of each Partner to the IRS and (b) shall inform each Partner of administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes. The Tax Matters Partner shall not enter into an agreement with the IRS or any other taxing authority to extend the limitation period for assessment of any federal, state or local income, franchise or unincorporated business tax of any Partner or owner thereof nor settle with the IRS or any other taxing authority to disallow deductions or increase income from the Partnership with respect to any Partner, unless all of the General Partners shall have agreed thereto. Each Partner hereby reserves all rights under applicable law, including the right to retain independent counsel of its choice at its expense (which counsel shall receive the full cooperation of the Tax Matters Partner and shall be entitled to prior review of submissions by the Partnership in respect of any dispute with relevant taxing authorities). 4.8 Guarantees. (a) The General Partners acknowledge that certain of the Partners (individually, an "Indemnitor Partner," and collectively, the "Indemnitor Partners") would, absent a guarantee of Partnership indebtedness, be required to recognize income or gain under the Code in respect of their interests in the Partnership. For purposes of this Section 4.8, the amount of Partnership liabilities that an Indemnitor Partner would need to guarantee, at any time, so as to enable such Indemnitor Partner to defer the recognition of income or gain that would otherwise result by virtue of the liability allocation rules under Code Section 752 and Section 465 and the Treasury Regulations thereunder is referred to herein as the "Minimum Debt Amount" and the aggregate of the Minimum Debt Amounts of all the Indemnitor Partners on the date first written above is referred to herein as the "Aggregate Minimum Debt Amount." (b) On the Closing Date and otherwise upon written request from an Indemnitor Partner, the General Partners on behalf of the Partnership shall permit such Partner to guarantee (a "Guarantee") an amount of the "least risky portion" of Partnership indebtedness then available (it being understood and agreed that, subject to the following sentence, this Section 4.8 shall not impose any obligations on the Partnership with respect to the incurrence or maintenance of any amount of indebtedness) equal to such Indemnitor Partner's then Minimum Debt Amount, pursuant to a guarantee substantially in the form attached hereto as Exhibit 2 to the extent not prohibited by the applicable lenders. The General Partners agree that until the earliest of (i) the date that is sixty-six months after the Closing Date, or (ii) the sale of all or substantially all of the Partnership's assets (other than any transaction described in Section 9.13(a)) or (iii) the sale of the Partnership's assets pursuant to a plan of liquidation of the Partnership the Partnership shall maintain at least $110,000,000 of Partnership indebtedness (including by reason of any guarantees made by the Partnership of indebtedness of partnerships in which the Partnership is a partner directly or indirectly, the form of such guarantees to be provided to BRI OP prior to the closing of the BRI OP Merger Agreement and subject to the reasonable approval of BRI OP). In the event that the minimum debt provision of the previous sentence ceases to apply, the Partnership shall use reasonable efforts to continue to maintain such minimum debt; provided that such reasonable efforts are consistent with the Partnership's Approved -38- Business Plan and that no Indemnitor Partner shall have any rights to assert that the Partnership has not used such reasonable efforts to so maintain such indebtedness. In the event that the sum of the Minimum Debt Amounts of the Indemnitor Partners other than Berkshire and BGP who request a Guarantee of indebtedness exceeds the Aggregate Minimum Debt Amount of such Partners or the amount of available debt, each such Indemnitor Partner shall be entitled to a Guarantee of indebtedness PRO RATA based upon the respective Minimum Debt Amounts of such Indemnitor Partners then requesting Guarantees as of the date first written above. The General Partners on behalf of the Partnership shall use commercially reasonable efforts to cause any lender of Partnership indebtedness that is the subject of the Guarantee to acknowledge and accept such Guarantee, and such Indemnitor Partner's obligation thereunder and to cause the Partnership to acknowledge and accept the indemnification obligation of such Indemnitor Partner contained in any such Guarantee. (c) Nothing in this Section 4.8 shall prohibit or preclude the General Partners, at any time and in their sole discretion (but subject to any other provision of this Agreement), from refinancing, paying down or paying off any Partnership indebtedness or permitting new Partners to guarantee excess amounts of debt, or indemnify the General Partners for, any portion of the Partnership indebtedness; PROVIDED, HOWEVER, with respect to any Partnership indebtedness that is subject to a Guarantee and which is to be refinanced, paid down or paid off, the Administering General Partner shall notify, in writing (the "Notice"), each such Indemnitor Partner of such refinancing, paydown or payoff, and such Indemnitor Partner shall have fifteen (15) days from the date of receipt of the Notice to execute a substitute Guarantee (a "Substitute Guarantee") for an amount of the "least risky portion" of Partnership indebtedness then in existence determined in the manner described in subsection (b) above pursuant to a guarantee having substantially similar terms as the Guarantee that is being substituted. If, within fifteen (15) days of the Indemnitor Partner's receipt of the Notice, the Indemnitor Partner notifies the Administering General Partner, in writing, of the Indemnitor Partner's desire to execute a Substitute Guarantee as described in the Notice, then the Administering General Partner shall, subject to the limitations set forth herein: (i) permit such Indemnitor Partner to execute such Substitute Guarantee; (ii) use commercially reasonable efforts to cause the lender of the Partnership indebtedness that is guaranteed by the Substitute Guarantee to acknowledge and accept such Substitute Guarantee, and such Indemnitor Partner's obligations thereunder, and (iii) cause the Partnership to acknowledge and accept the indemnification obligation of such Indemnitor Partner contained in such Guarantee. (d) Notwithstanding anything herein to the contrary, provided that the General Partners and the Partnership satisfy their obligations under this Section 4.8, at no time and under no circumstances shall an Indemnitor Partner have any recourse against the Partnership, the General Partners or any other Person, and none of the Partnership, the General Partners nor any other Person shall have any liability under this Section 4.8 or otherwise in the event that a Guarantee or Substitute Guarantee (i) is not acknowledged or accepted by any lender and/or (ii) does not result in the deferral of taxes. -39- ARTICLE 5. BOOKS AND RECORDS; ANNUAL REPORTS 5.1 Books of Account. At all times during the continuance of the Partnership, the Administering General Partner shall keep or cause to be kept true and complete books of account in which shall be entered fully and accurately each transaction of the Partnership. Such annual books shall be kept on the basis of the Fiscal Year in accordance with the accrual method of accounting, and shall reflect all Partnership transactions in accordance with generally accepted accounting principles. Any Investor Group Partner shall have the right to inspect, copy and audit the books and records of the Partnership at reasonable times and upon reasonable notice. 5.2 Availability of Books of Account. All of the books of account referred to in Section 5.1, together with an executed copy of this Agreement and the Certificate, and any amendments thereto, shall at all times be maintained at the principal office of the Partnership or such other location as the Administering General Partner may propose and WHGP and Blackstone GP shall approve (which other location, upon such approval, shall be communicated to all of the Partners), and upon reasonable notice to the Administering General Partner, shall be open to the inspection and examination of the General Partners or their representatives during reasonable business hours. 5.3 Annual Reports and Statements; Annual Budgets and Business Plans. (a) For each Fiscal Year, the Administering General Partner shall send to each Person who was a Partner at any time during such Fiscal Year, by no later than February 15 of the next Fiscal Year, an annual report of the Partnership including an annual balance sheet, profit and loss statement and a statement of changes in financial position, and a statement showing distributions to the Partners all as prepared in accordance with generally accepted accounting principles consistently applied and audited by the Partnership's independent public accountants, which initially shall be PricewaterhouseCoopers, and a statement showing allocations to the Partners of taxable income, gains, losses, deductions and credits, as prepared by such accountants (it being acknowledged that the Administering General Partner's obligations hereunder are not to guaranty timely delivery of audits, tax returns or similar third-party work product, and the failure of the auditor or another third party to make such delivery shall not itself constitute a default hereunder on the part of the Administering General Partner). For each quarter, the Administering General Partner shall send to each Person who was a Partner at any time during such quarter, within forty-five (45) days after the end of such quarter, quarterly financial statements of the Partnership including a quarterly balance sheet, profit and loss statement and a statement of changes in financial position, and a statement showing distributions to the Partners all as prepared in accordance with generally accepted accounting principles consistently applied. In addition, the Administering General Partner shall send (i) to each General Partner within twenty-five (25) days after the end of each month of each Fiscal Year a monthly report setting forth the financial and operating information on an accrual basis and in form and substance approved by the General Partners (acting reasonably) after the date hereof, (ii) to each Partner by no later than February 15 of each year, completed IRS Schedules K-1 prepared by the Partnership's accountants in accordance with Section 3.3(ii), and (iii) to each Partner such other information concerning the -40- Partnership and reasonably requested by any Partner as is necessary for the preparation of each Partner's federal, state and local income or other tax returns. Each General Partner agrees that the Partnership will use and comply with the requirements and deadlines of the Whitehall REPSYS management reporting system (to the extent that compliance with such reporting system does not cause the Partnership to incur additional material costs). The Administering General Partner shall prepare and deliver to the lender under any loan documents to which the Partnership is a party all reports and statements required by such lender. (b) The Administering General Partner shall prepare or cause to be prepared a proposed Annual Budget and related Business Plan for the Partnership as a whole. The initial Annual Budget and Business Plan, which have been approved by all of the General Partners, are attached hereto as Schedule 5.3(b). Not later than November 15 of the prior Budget Year with respect to each subsequent Budget Year, the Administering General Partner shall prepare for the Partnership for the Budget Year in question, a proposed Annual Budget and a proposed Business Plan for the Partnership as a whole. Not later than thirty (30) days after receipt by WHGP and Blackstone GP of a proposed Annual Budget or Business Plan (or such longer period as WHGP or Blackstone GP may reasonably request on notice to the Administering General Partner), WHGP or Blackstone GP may deliver a notice (an "Objection Notice") to the Administering General Partner stating that WHGP or Blackstone GP objects to any information contained in or omitted from such proposed Annual Budget or Business Plan and setting forth the nature of such objections. With respect to all or any portion of such proposed Annual Budget or Business Plan as to which no Objection Notice is delivered prior to such thirtieth (30th) day (or such longer period as WHGP or Blackstone GP may have reasonably requested), the proposed Annual Budget or Business Plan or such portion thereof will be deemed to have been accepted and consented to by WHGP and Blackstone GP. If the Objection Notice is timely delivered, the Administering General Partner shall modify the proposed Annual Budget or Business Plan, taking into account WHGP's and/or Blackstone GP's, as applicable, objections, shall resubmit the same to WHGP and Blackstone GP for WHGP's and Blackstone GP's approval within 15 days thereafter, and WHGP and Blackstone GP may deliver further Objection Notices (if any) within 15 days thereafter (in which event, the re-submission and review process described above in this sentence shall continue until the Annual Budget or Business Plan in question is accepted and consented to by WHGP and/or Blackstone GP or deemed to be so accepted and consented to). As to any portion of a proposed Annual Budget or Business Plan that is the subject of an Objection Notice, the Annual Budget or Business Plan (as the case may be) for the immediately preceding year shall be deemed to control pending resolution by WHGP and/or Blackstone GP of the disputed items (as adjusted in accordance with Section 3.3(2) above). Notwithstanding the foregoing, approval of the Annual Budget and the Business Plan shall at all times be a Majority Decision and no General Partner shall have the right to submit an Objection Notice after the approval of an Annual Budget or Business Plan by the General Partners in accordance with Section 3.3. 5.4 Accounting and Other Expenses. All out-of-pocket expenses payable to Persons, including Affiliates of the Administering General Partner that are retained in accordance with the terms of this Agreement, in connection with the keeping of the books and records of the Partnership 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 -41- authority with jurisdiction over the Partnership or otherwise required to be paid in connection with the management or operation of the Partnership shall be borne by the Partnership as an ordinary expense of its business. The Partnership shall reimburse the Administering General Partner's consultants for the preparation of K-1's, and federal and local tax and information returns. 5.5 Bank Account. The Administering General Partner shall, as soon as reasonably practicable, establish and maintain segregated bank accounts in the Partnership's name and for the Partnership's business, which accounts shall, to the extent reasonably practicable, be interest-bearing. Withdrawals or checks, other than withdrawals or checks made or issued in respect of required mortgage payments, in excess of $500,000 (or, upon notice to the Administering General Partner, such lesser or greater amount as WHGP and Blackstone GP may from time to time determine) shall require the signature of an authorized representative of WHGP or Blackstone GP. Withdrawals or checks not in excess of $500,000 (or upon notice to the Administering General Partner, such lesser or greater amount as WHGP and Blackstone GP may from time to time determine) and withdrawals and checks made or issued in respect of required mortgage payments may be made by an authorized representative of the Administering General Partner to the extent that the Administering General Partner is permitted hereunder to incur the expense or other liability paid or discharged without the prior consent or approval of the other General Partners. ARTICLE 6. CAPITAL CONTRIBUTIONS, LOANS AND LIABILITIES 6.1 Initial Capital Contributions of the Partners. (a) Each Class C Partner shall, on or prior to the Closing Date, make initial cash Capital Contributions, to the Partnership in the aggregate amounts set forth opposite such Class C Partner's name on Schedule 6.1(a) hereto and the Partnership shall, in consideration of such Capital Contribution, issue to each such Class C Partner the number of Class C Preferred Units set forth opposite such Class C Partner's name on Schedule 6.1 hereto. Each Class C Partner shall be deemed to have made a Capital Contribution to the Partnership in an amount equal to the amount of cash so contributed to the Partnership. (b) As contemplated by Section 2.7(c), each Class D Partner shall, on or prior to the Closing Date, make an initial Capital Contribution to the Partnership of 512,203 shares of common stock of BRI and 4,904,066 BRI OP Units held by Berkshire, BGP and their respective Affiliates on such date free and clear of any and all liens and encumbrances, such Capital Contributions having an agreed value equal to the product of (i) the number of shares plus the number of such BRI Units so contributed to the Partnership and (ii) $12.25. In consideration for such Capital Contributions, the Partnership shall issue to Berkshire and BGP a number of Class D Units equal to the sum of the number of shares of common stock of BRI plus the number of BRI OP Units so contributed to the Partnership. -42- (c) Each holder of BRI OP Units electing to receive Class A Preferred Units in the merger of BRI OP and a subsidiary partnership of the Partnership (the "Partnership Merger") shall be considered to have made, as a result of the Partnership Merger, an initial Capital Contribution to the Partnership on the Closing Date of all BRI OP Units held by such holder on such date (it being understood and agreed that all such BRI OP Units shall, immediately prior to the consummation of such Partnership Merger, be free and clear of any and all liens and encumbrances). In consideration for such Capital Contributions, the Partnership shall issue to such holder of BRI OP Units a number of Class A Preferred Units equal to the number of BRI OP Units so contributed to the Partnership. Each such holder shall be deemed to have made a Capital Contribution to the Partnership in an amount equal to the product of (i) the number of BRI OP Units so contributed to the Partnership by such holder of BRI OP Units and (ii) $12.25. (d) Each holder of BRI OP Units electing to receive Class B Units in the Partnership Merger shall be considered to have made, as a result of the Partnership Merger, an initial Capital Contribution to the Partnership on the Closing Date of all BRI OP Units held by such holder on such date (it being understood and agreed that all such BRI OP Units shall, immediately prior to the consummation of such Partnership Merger, be free and clear of any and all liens and encumbrances). In consideration for such Capital Contributions, the Partnership shall issue to such holder of BRI OP Units a number of Class B Units equal to the number of BRI OP Units so contributed to the Partnership. Each such holder shall be deemed to have made a Capital Contribution to the Partnership in an amount equal to the product of (i) the number of BRI OP Units so contributed to the Partnership by such holder of BRI OP Units and (ii) $12.25. (e) Schedule 6.1 hereto, as such schedule may be amended from time to time, sets forth the respective number and type of Units held by, and the Class A Preferred Percentage Interest, Class B Percentage Interest, Class C Percentage Interest, Class D Percentage Interest and Class E Percentage Interest of, each of the Partners. (f) Intentionally omitted. (g) The General Partners may, acting by unanimous decision pursuant to Section 3.4, cause the Partnership to admit officers, employees or consultants of the Partnership as Class E Limited Partners and in connection therewith, in their sole discretion, apportion Class E Percentage Interests to such Class E Limited Partners. Each such officer, employee or consultant shall become a Class E Limited Partner only when (i) such person executes a written acceptance of all of the terms and conditions of this Agreement and (ii) the Administering General Partner has entered such person as a Partner on the books and records of the Partnership. The General Partners may, acting as if such decision were a Unanimous Decision, remove any Class E Limited Partner for Cause or Company Cause (as determined by the General Partners), and in the event of such removal such Class E Limited Partner shall forfeit his Class E Limited Partnership Interest. In addition, the Partnership may, upon the approval of all of the General Partners as if such decision were a Unanimous Decision, enter into agreements with one or more Class E Limited Partners providing for, among other things, the repurchase or forfeiture of Class E Limited Partnership Interests in accordance with the terms of such agreements. -43- (h) On the date hereof and prior to the Closing Date, the Class C Partners may make Capital Contributions to fund the Partnership's obligations (or make payments in respect of obligations) that arise prior to the Closing Date, including, without limitation, the Partnership's obligations to provide an escrowed amount under the terms of the BRI Merger Agreement or to purchase interest rate hedge agreements). All such Capital Contributions or payments made by such Class C Partners shall be deemed to be made pursuant to Section 6.1(a). Any amounts paid by Berkshire or BGP to fund such obligations shall be treated as an advance to the Partnership and shall be repaid by the Partnership contemporaneously with the closing under the BRI Merger Agreement (together with a 12% return thereon). This clause (h) shall not apply with respect to the payment of fees and expenses that are to be reimbursed pursuant to Section 2.9(a). 6.2 Additional Contributions. (a) If two of the General Partners, acting together as if such decision were a Majority Decision, determine that funds are necessary with respect to required debt service payments, the payment of taxes required to be paid in respect of the Properties or the operations of the Partnership, operating deficits, insurance premiums and similar matters, or by an emergency that threatens injury to persons or damage to property, (a "Necessary Expenditure"), such General Partners shall have the right to make a capital call (a "Mandatory Capital Call") with respect to the Investor Group Partners in an amount as reasonably determined by such General Partners making such Mandatory Capital Call in order to remedy such matter and shall as promptly as reasonably possible deliver a notice to each of the other Investor Group Partners (by telephone, telecopier or such other means as is necessary in order to remedy such emergency potential injury or damage) describing the amount and nature of such Necessary Expenditure and making a Mandatory Capital Call for such amount. Notwithstanding anything contained herein to the contrary, in no event may the General Partners make Mandatory Capital Calls in excess of an aggregate amount equal to the amount obtained by dividing (a) $10,000,000 by (b) the aggregate Partnership Percentage Interests of Berkshire and BGP on the date hereof (the "Mandatory Capital Call Limit") (it being understood and agreed that any Additional Capital Call or portion thereof in respect of Necessary Expenditures in an amount which when aggregated with the amounts of all previous Mandatory Capital Calls exceeds the Mandatory Capital Call Limit shall be subject to Section 6.2(c)). Each Investor Group Partner shall be required to contribute to the capital of the Partnership an amount of cash equal to such Investor Group Partner's PRO RATA portion (based on such Investor Group Partner's Partnership Percentage Interest as compared to the Partnership Percentage Interests of all of the other Investor Group Partners) which contribution shall be made as promptly as reasonably determined by the General Partners making such Mandatory Capital Call (but in no event sooner than twenty (20) business days following the delivery of the notice of a Mandatory Capital Call) in order to remedy such matter requirement, emergency, potential injury or damage. The Partnership shall use reasonable efforts to minimize the costs and expenditures to the Partnership in connection with such requirement, emergency, potential injury or matter. (b) Two of the General Partners, acting together as if such decision were a Majority Decision, may, during the period ending on the date that is the later of (i) the first anniversary following the Closing Date and (ii) three months after the maturity of the Bridge Loan, require the -44- funding of one or more Additional Capital Calls in an aggregate amount not to exceed $30,000,000 (a "Financing Capital Call"). In the event such General Partners determine to make such a Financing Capital Call, such General Partners shall as promptly as reasonably possible deliver a notice to each of the other Investor Group Partners (in the manner provided in Section 12.2) describing the amount and nature of such Financing Capital Call. Each of Berkshire, Whitehall and Blackstone LP shall be required to contribute to the capital of the Partnership an amount in cash equal to one-third (1/3) of the amount of such Financing Capital Call, which contribution shall be made as promptly as possible, but in no event later than twenty (20) business days following the delivery of notice of such Financing Capital Call. (c) Any Additional Capital Calls not described in clause (a) or clause (b) of this Section 6.2 (including, without limitation, an Additional Capital Call on account of a Necessary Expenditure in excess of the Mandatory Capital Call Limit) shall be Unanimous Decisions subject to the approval requirements of Section 3.4. In the event that such an Additional Capital Call is so approved, each of the Investor Group Partners shall be required to contribute to the capital of the Partnership an amount in cash equal to such Partner's PRO RATA portion (based on such Investor Group Partner's Partnership Percentage Interest as compared to the Partnership Percentage Interests of all of the other Investor Group Partners) which contribution shall be made as promptly as possible, but in no event later than thirty (30) days, after such approval. (d) Unless otherwise determined by the unanimous vote of the General Partners, the Partnership shall issue Class C Preferred Units as consideration for Additional Contributions and such Class C Preferred Units shall be issued by the Partnership at a price of $12.25 per Class C Preferred Unit. (e) The amount of any U.S. federal and state tax liability of the direct or indirect owners of the Berkshire Group (after giving effect to any losses allocated to the Berkshire Group under Section 7.2 hereof) arising from gain recognized by the Partnership in connection with the merger of BRI with the Partnership (or a Subsidiary thereof) (as a result of the shares of common stock in Berkshire Realty Company, Inc. contributed to the Partnership by the Berkshire Group) will be deemed to constitute an Additional Contribution made PRO RATA by the Berkshire Group on the date such tax liability is paid, up to a maximum of $1.5 million, and the Berkshire Group shall receive Class D Units in exchange for such deemed Additional Contributions valued at $12.25 per class D Unit. 6.3 Dilution for Failure to Fund Capital Calls. (a) If any Partner shall fail to make a capital contribution required pursuant to an Additional Capital Call in the amount and within the time periods specified therein (such Partner is hereinafter referred to as a "Non-Contributing Partner"), the Administering General Partner (or, if the Administering General Partner is the Non-Contributing Partner, WHGP or Blackstone GP) shall give notice of such failure to all other Investor Group Partners and the amount of the capital contribution not funded by the Non-Contributing Partner (such amount is hereinafter referred to as the "Failed Contribution") and, within twenty (20) business days after receiving notice of such failure, any Investor Group Partner or Investor Group Partners that is or are not in default with respect to the -45- Failed Contribution or any contribution required to be made in connection with such Additional Capital Call may fund all or part of such Failed Contribution (each such funding Partner is hereinafter referred to as a "Contributing Partner"). If more than one Partner desires to be a Contributing Partner, each such Partner shall have the right to fund a portion of such Failed Contribution (the "Funded Portion") PRO RATA in proportion to the relative Partnership Percentage Interests of such Contributing Partners. At any time after funding all or part of a Failed Contribution, the Partnership Percentage Interest of each such Contributing Partner(s) shall be increased to the percentage (rounded up to the nearest one hundredth of one percent) equal to the sum of (i) such Contributing Partner's Partnership Percentage Interest immediately prior to giving effect to the Capital Contributions pursuant to such Additional Capital Call plus (ii) the percentage equal to the quotient of (x) the sum of (A) the amount funded by such Contributing Partner pursuant to such Additional Capital Call (other than the Funded Portion ) plus (B) the product of 2.0 (200%) times the Funded Portion funded by such Contributing Partner divided by (y) the sum of all Partners' (other than the Class A Preferred Limited Partners) Capital Contributions after giving effect to the Capital Contributions funded pursuant to such Additional Capital Call (including the Funded Portions). The Partnership Percentage Interest of the NonContributing Partner shall be decreased by the aggregate amount of the increase in the Partnership Percentage Interests of all Contributing Partners as a result of the failure of the Non-Contributing Partner to fund the capital calls in question. Notwithstanding the foregoing, the words "1.0 (100%)" shall replace the words "2.0 (200%)" for determining the applicable dilution for a Non-Contributing Partner in respect of any Additional Capital Call made pursuant to clause (a) of Section 6.2, to the extent, but only to the extent, that Berkshire's share of such Additional Capital Contribution is in excess of $10,000,000. (b) In the event that the Partnership Percentage Interest of a Non-Contributing Partner or of a Contributing Partner is adjusted pursuant to the foregoing provisions of this Section 6.3, the Class C Percentage Interest or other Percentage Interest relating to a class of Partnership Units of such Contributing Partner or Non-Contributing Partner and the number of Partnership Units of each class held by such Non-Contributing Partner shall likewise be adjusted, using the same dilution factors as are used in determining the adjustment to the Partnership Percentage Interests (it being understood and agreed that such adjustments will result in an adjustment to the Partnership Percentage Interest of the Non-Contributing and Contributing Partner and to the Class C Percentage Interest (or such other applicable Percentage Interest) and to the number of Partnership Units of each class held by the Contributing Partner and the Non-Contributing Partner). (c) In the event one or more of the Investor Group Partners fund an Additional Capital Call, the Limited Partners other than the Investor Group Partners shall not be required or entitled to fund any portion of such Additional Capital Call and the Partnership Percentage Interest of such Limited Partners (and of the Investor Group Partners) shall be adjusted as provided in clause (a) of this Section 6.3; PROVIDED, HOWEVER, that the words "1.0 (100%)" shall replace the words "2.0 (200%)" for purposes of all such calculations. (d) Notwithstanding anything contained herein to the contrary, the Class A Preferred Limited Partners, Class B Limited Partners and Class E Limited Partners shall have no obligation to -46- contribute any additional capital to the Partnership and the Partnership Percentage Interest of the Class A Preferred Limited Partners , Class B Limited Partners and Class E Limited Partners (which shall at all times be zero (0%)), shall not be diluted by operation of this Section 6.3. 6.4 Capital of the Partnership. Except as otherwise expressly provided herein, no Partner 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 Partnership property (other than cash) in return for its Capital Contribution. No Partner shall be entitled to make a Capital Contribution to the Partnership except as expressly authorized by this Agreement or to make any loans to the Partnership except with the unanimous consent of the General Partners. 6.5 Liability of General Partners. All debts and obligations of the Partnership shall be paid or discharged first with the assets of the Partnership before the General Partners shall be obligated to pay or discharge such debts or obligations (and then such obligation shall be only to the extent required by applicable law). The General Partners shall not be liable for the return of the Capital Contribution of any Limited Partner. 6.6 Limited Liability of Limited Partners. Except as provided in Section 4.8, no Limited Partner shall be bound by, or be personally liable for, the expenses, liabilities, indebtedness or obligations of the Partnership or of the General Partners. The liability of each Limited Partner shall be limited solely to the amount of its Capital Contribution; PROVIDED, HOWEVER, that after a Limited Partner has received a distribution from the Partnership, such Limited Partner may be liable to the Partnership for the amount of the distribution but only to the extent required by the Act. Without affecting the rights and remedies provided under Sections 6.2 through 6.5 hereof, the Limited Partners shall not be required to contribute any amounts to the Partnership other than their Initial Capital Contributions. Nothing contained in this Agreement shall be deemed to confer on any Limited Partner the right to control the business of the Partnership for purposes of the Act. ARTICLE 7. CAPITAL ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS 7.1 Capital Accounts. (a) The Partnership shall maintain a Capital Account for each Partner in accordance with federal income tax accounting principles. Each Partner's Capital Account as of the Effective Date will be equal to its original Capital Contribution pursuant to Section 6.1. In the event any General Partner or any controlling person of such General Partner files a bankruptcy or similar proceeding with respect to the Partnership without first obtaining the prior written approval of at least one other General Partner, the Capital Account, the Partnership Percentage Interest, Class C Percentage Interest and/or Class D Percentage Interest of such General Partner and of whichever of the Berkshire Group, the Whitehall Group or The Blackstone Group of which it is a member shall be reduced to zero (0). -47- (b) The Capital Account of each Partner shall be increased by (i) the amount of any cash and the agreed Book Value of any property (net of liabilities encumbering such property) as of the date of contribution subsequently contributed as a Capital Contribution to the capital of the Partnership by such Partner and (ii) the amount of any Profits allocated to such Partner. The Capital Account of each Partner shall be decreased by (i) the amount of any Losses allocated to such Partner and (ii) the amount of distributions (including the fair market value of any property distributions (net of liabilities encumbering such Properties)) to such Partner. In all respects, the Partner'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 Partnership ("Profits" and "Losses") shall be the net income or net loss (including capital gains and losses), respectively, of the Partnership determined for each Fiscal Year in accordance with the accounting method followed for federal income tax purposes except that (i) in computing Profits and Losses, all depreciation and cost recovery deductions shall be deemed equal to Depreciation, (ii) in computing Profits and Losses, gains or losses shall be determined by reference to Book Value rather than tax basis, (iii) any tax-exempt income received by the Partnership shall be included as an item of gross income; (iv) the amount of any adjustments to the Book Values of any assets of the Partnership pursuant to Code Section 743 shall not be taken into account except to the extent provided in the penultimate sentence of Treasury Regulation Section 1.704-1(b)(2)(iv)(M)(2), (v) any expenditure of the Partnership described in Code Section 705(a)(2)(B) (including any expenditures treated as being described in Section 705(a)(2)(B) pursuant to Treasury Regulations under Code Section 704(b)) shall be treated as a deductible expense, (vi) the amount of items of income, gain, loss or deduction specially allocated to any Partners pursuant to Section 7.2(f) shall not be included in the computation and (vii) the amount of any increases or decreases in the Book Value of any asset upon an adjustment to the Book Values of the assets pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(F) shall be included in the computation as items of gain and loss respectively. (b) Whenever a proportionate part of the Profits or Losses is allocated to a Partner, 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 Partner in the same proportion; PROVIDED, HOWEVER, that "recapture income", if any, shall be allocated to the Partners who were allocated the corresponding depreciation deductions. (c) If any Partner 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 Partners, as the case -48- 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 each year among all the Partners as follows: (i) First, PRO RATA among all the Partners in proportion to the amounts allocated and previously allocated pursuant to Section 7.2(e)(viii) hereof until the amount allocated and previously allocated pursuant to this Section 7.2(d)(i) equals the amount allocated and previously allocated pursuant to Section 7.2(e)(viii) hereof; (ii) Second, to the Partners so that the cumulative amounts allocated to each of them pursuant to this Section 7.2(d)(ii) equals the cumulative amount distributed to each of them for the current period and all prior periods pursuant to Section 8.1(b)(1) hereof (including amounts distributed on a sale or other disposition of all or substantially all of the Partnership Assets pursuant to the accrued and unpaid distribution clause of Section 10.3(5)); (iii) Third, to the Partners in proportion to the amounts distributable and previously distributed pursuant to Section 8.1(b)(2) hereof (excluding amounts attributable to Capital Contributions but including amounts (x) that would be distributable pursuant to Section 8.1(b)(2) hereof as a result of the application of Section 10.3(6) upon a sale or other disposition of all or substantially all of the Partnership Assets, or (y) that would have been distributable if the Partnership had received and distributed the full amount of cash attributable to the income being allocated) until the amount allocated and previously allocated pursuant to this Section 7.2(d)(iii) (and not reversed by Section 7.2(e) (vii) hereof) equals such distributed or distributable amounts; (iv) Fourth, to the Partners in proportion to the amounts distributable and previously distributed pursuant to Section 8.1(b)(3) hereof (excluding amounts attributable to Capital Contributions but including amounts (x) that would be distributable pursuant to Section 8.1(b)(3) as a result of the application of Section 10.3(6) upon a sale or other disposition of all or substantially all of the Partnership Assets, or (y) that would have been distributable if the Partnership had received and distributed the full amount of cash attributable to the income being allocated) until the amount allocated and previously allocated pursuant to this Section 7.2(d)(iv) (and not reversed by Section 7.2(e)(vi) hereof) equals such distributed or distributable amounts; (v) Fifth, to the Partners in proportion to the amounts distributable and previously distributed pursuant to Section 8.1(b)(4) hereof (excluding amounts attributable to Capital Contributions but including amounts (x) that would have been distributable pursuant to Section 8.1(b)(4) as a result of the application of Section 10.3(6) upon a sale or other disposition of all or substantially all of the Partnership Assets, or (y) that would have been distributable if the Partnership had received and distributed the full amount of cash attributable to the income being allocated) until the amount allocated and previously allocated -49- pursuant to this Section 7.2(d)(v) (and not reversed by Section 7.2(e)(v) hereof) equals such distributed or distributable amounts; (vi) Sixth, to the Partners in proportion to the amounts distributable and previously distributed pursuant to Section 8.1(b)(5) hereof (excluding amounts attributable to Capital Contributions but including amounts (x) that would be distributable pursuant to Section 8.1(b)(5) as a result of the application of Section 10.3(6) upon a sale or other disposition of all or substantially all of the Partnership Assets, or (y) that would have been distributable if the Partnership had received and distributed the full amount of cash attributable to the income being allocated) until the amount allocated and previously allocated pursuant to this Section 7.2(d)(vi) (and not reversed by Section 7.2(e)(iv) hereof) equals such distributed or distributable amounts; (vii) Seventh, to the Partners in proportion to the amounts distributable and previously distributed pursuant to Section 8.1(b)(6) hereof (including amounts (x) that would be distributable pursuant to Section 8.1(b)(6) as a result of the application of Section 10.3(6) upon a sale or other disposition of all or substantially all of the Partnership Assets, or (y) that would have been distributable if the Partnership had received and distributed the full amount of cash attributable to the income being allocated) until the amount allocated and previously allocated pursuant to this Section 7.2(d)(vii) (and not reversed by Section 7.2(e)(iii) hereof) equals such distributed or distributable amounts; and (viii) Thereafter, (A) with respect to periods during which BGP is the Administering General Partner, (I) seventeen and one-half percent (17 1/2%) PRO RATA to the Class D Partners, (II) seven and one-half percent (7 1/2%) to the Class E Limited Partners (in proportion to their respective Class E Percentage Interests) and (iii) seventy-five percent (75%) to the Partners other than the Class A Preferred Limited Partners and Class E Limited Partners (PRO RATA in proportion to their Partnership Percentage Interests, or (B) with respect to periods during which BGP is not the Administering General Partner, (I) seventeen and one-half percent (17 1/2%) to the Class E Limited Partners and (II) the remainder to the Partners other than the Class A Preferred Limited Partners and Class E Limited Partners (PRO RATA in proportion to their Partnership Percentage Interests). (e) For all purposes, including federal, state and local income tax purposes, Losses shall be allocated each year among all the Partners as follows: (i) First, PRO RATA to the Class D Partners in proportion to and to the extent of their positive Capital Account balances; (ii) Second, to the Partners in proportion to and to the extent of the excess of (A) the respective aggregate amount allocated to them pursuant to Section 7.2(d)(viii) hereof over (B) the respective amounts previously allocated to them pursuant to this Section 7.2(e)(ii); -50- (iii) Third, to the Partners in proportion to and to the extent of the excess of (A) the respective aggregate amount allocated to them pursuant to Section 7.2(d)(vii) hereof over (B) the respective amounts previously allocated to them pursuant to this Section 7.2(e)(iii); (iv) Fourth, to the Partners in proportion to and to the extent of the excess of (A) the respective aggregate amount allocated to them pursuant to Section 7.2(d)(vi) hereof over (B) the respective amounts previously allocated to them pursuant to this Section 7.2(e)(iv); (v) Fifth, to the Partners in proportion and to the extent of the excess of (A) the respective aggregate amount allocated to them pursuant to Section 7.2(d)(v) hereof over (B) the respective amounts previously allocated to them pursuant to this Section 7.2(e)(v); (vi) Sixth, to the Partners in proportion to and to the extent of the excess of (A) the respective aggregate amount allocated to them pursuant to Section 7.2(d)(iv) hereof over (B) the respective amounts previously allocated to them pursuant to this Section 7.2(e)(vi); (vii) Seventh, to the Partners in proportion to and to the extent of the excess of (a) the respective aggregate amount allocated to them pursuant to Section 7.2(d)(iii) hereof over (B) the respective amounts previously allocated pursuant to this Section 7.2(e)(vii); and (viii) Thereafter, PRO RATA among all the Partners in proportion to their Partnership 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 Partnership with respect to any property that was contributed to the Partnership (including any dividend or other income realized by the Partnership with respect to Berkshire's contribution to the Partnership of the BRI common stock and operating partnership units) or that was held by the Partnership at a time when the Book Value of the Partnership 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 Regulation Sections 1.704-1(b)(2)(iv)(d) and (f) and 1.704- 3(b), be allocated among the Partners in a manner which takes into account the differences between the adjusted basis for federal income tax purposes to the Partnership 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 Partnership during a taxable year (including any Minimum Gain attributable to Partner-Funded Debt), each Partner at the end of such year shall be allocated, prior to any other allocations required under this Article 7, items of gross income for such year (and, if necessary, for subsequent years) in the -51- amount and proportions described in Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(4). (iii) Notwithstanding the allocations provided for in Sections 7.2(d), (e) and (f) no allocation of an item of loss or deduction shall be made to a Partner to the extent such allocation would cause or increase a deficit balance in such Partner's Capital Account as of the end of the taxable year to which such allocation relates. If any Partner receives an adjustment, allocation or distribution that causes or increases such a deficit balance, taking into account the rules of Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), such Partner shall be allocated (after taking into account any allocations made pursuant to Section 7.2(g)(ii)) items of income and gain in an amount and manner to eliminate the Partner's Capital Account deficit attributable to such adjustment, allocation or distribution as quickly as possible. For purposes of this Section 7.2(g)(iii), there shall be excluded from a Partner's deficit Capital Account balance at the end of a taxable year of the Partnership (a) such Partner's share, determined in accordance with Section 704(b) of the Code and Treasury Regulation Section 1.704-2(g) of Minimum Gain (provided that in the case of Minimum Gain attributable to Partner-Funded Debt, such Minimum Gain shall be allocated to the Partner or Partners to whom such debt is attributable pursuant to Treasury Regulation Section 1.704- 2(i)) and (b) the amount, if any, that such Partner is obligated to restore to the Partnership under Treasury Regulation Section 1.704-1(b)(2)(ii)(c). (iv) Notwithstanding the allocations provided for in subsection (i) of this Section 7.2(g) and Sections 7.2(d), (e) and (f), if there is a net increase in Minimum Gain of the Partnership during a taxable year of the Partnership that is attributable to Partner-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 Partner (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 Partner-Funded Debt in such year. (v) Subject to the provisions of Section 7.2(f)(iv), above, all Non-recourse Deductions of the Partnership for any year shall be allocated to the Class A, Class B and Class D Partners in the same manner and proportion as their relative shares of Profits and Losses for such year, and the Partnership shall allocate "excess non-recourse liabilities" (as determined under Treasury Regulation Section 1.752-3(a)(3)) in the same ratio. (vi) Any special allocation under Sections 7.2(f)(ii) through (v) shall be taken into account (to the extent appropriate) 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 Partner pursuant to this Article 7 shall, to the extent permissible under Sections 704(b) of the Code and the Treasury Regulations promulgated thereunder, be equal to the net amount that would have been allocated to each Partner pursuant to this Article 7 if such special allocation had not occurred. -52- ARTICLE 8. APPLICATIONS AND DISTRIBUTIONS OF AVAILABLE CASH 8.1 Applications and Distributions. (a) Distributions of Available Cash (subject to all restrictions contained in the definition of such term) for each quarter shall be made to the Partners by the Administering General Partner on behalf of the Partnership in accordance with Section 8.1(b) within 60 days after the end of such quarter of each Fiscal Year. (b) Available Cash shall be distributed to the Partners in the following order of priority (and the calculations described in the following clauses shall be made as of the date of each distribution, on a cumulative basis), subject to the other terms of this Article 8 and the terms of Section 6.3: (1) First, to the Class A Preferred Limited Partners, PRO RATA in accordance with their respective Class A Preferred Percentage Interests, until each of the Class A Preferred Limited Partners has received a cumulative, compounded quarterly to the extent not paid on a quarterly basis, return of 7.5% per annum on the amount of such Class A Preferred Limited Partner's Capital Contribution taking into account the amount and timing of all prior distributions under this Section 8.1(b)(1) (any shortfall in the full payment of such return, from time to time, being referred to in this Agreement as an unpaid and accrued distribution in respect of the Class A Preferred Units). (2) Second, to holders of Class C Preferred Units (PRO RATA in proportion to the amount of any accrued and unpaid return owing with respect to the Class C Preferred Units held by each such Partner) until each of such Partners has received, taking into account the amount and timing of all prior distributions under this Section 8.1(b)(2) and of all prior Capital Contributions made pursuant to Sections 6.1 and 6.2 (to the extent made in respect of Class C Preferred Units) by such Partner, a Rate of Return on the aggregate Capital Contributions made by it in respect of the Class C Preferred Units equal to twelve percent (12%). (3) Third, to the holders of Class B Units and Class D Units on a pari passu basis (PRO RATA in proportion to the amount of any accrued and unpaid return owing with respect to the Class B Units and Class D Units held by each such Partner) until each such Partner has received, taking into account the amount and timing of all prior distributions under this Section 8.1(b)(3) and of all prior Capital Contributions made in respect of such Class B Units or Class D Units, as applicable, pursuant to Section 6.1 by such Partner, a Rate of Return on the aggregate Capital Contributions made in respect of the Class B Units and Class D Units equal to twelve percent (12%). -53- (4) Fourth, to all of the Partners other than the Class A Preferred Limited Partners and the Class E Limited Partners (PRO RATA in proportion to their relative Capital Contributions) until each Partner other than the Class A Preferred Limited Partners and the Class E Limited Partners has received, taking into account the amount and timing of all prior distributions under this Section 8.1(b)(4) and under Sections 8.1(b)(2) and 8.1(b)(3) and of all prior Capital Contributions made by such Partner, a Rate of Return on the aggregate Capital Contributions made in respect of the Partnership Units held by such Partner equal to fifteen percent (15%). (5) Fifth, (i) 80% to all of the Partners other than the Class A Preferred Limited Partners and the Class E Limited Partners (PRO RATA in proportion to their relative Capital Contributions) and (ii) with respect to periods during which BGP is the Administering General Partner, fourteen percent (14%) to the Class D Partners (PRO RATA in proportion to their relative Class D Percentage Interests), and (iii) 6% to the Class E Limited Partners as IMP (PRO RATA in proportion to their respective Class E Percentage Interests) until each Partner other than the Class A Preferred Limited Partners and the Class E Limited Partners has received, taking into account the amount and timing of all prior distributions under this Sections 8.1(b)(5) and under Sections 8.1(b)(2), 8.1(b)(3) and 8.1(b)(4) and the amount and timing of all prior Capital Contributions, a Rate of Return on the aggregate Capital Contributions made in respect of the Partnership Units held by such Partner equal to twenty percent (20%). (6) Sixth, (i) with respect to periods during which BGP is the Administering General Partner, seventy percent (70%) to the Class D Partners (PRO RATA in proportion to their relative Class D Percentage Interests) and (ii) thirty percent (30%) to the Class E Limited Partners as IMP (in proportion to their respective Class E Percentage Interests) until the Class D Partners, if applicable, and the Class E Limited Partners have received under this Section 8.1(b)(6) together with the amounts previously received under Section 8.1(b)(5)(ii) or 8.1(b)(5)(iii), (but only to the extent amounts previously received under Section 8.1(b)(5)(ii) or 8.1(b)(5)(iii) are received after each Partner other than the Class A Preferred Limited Partners and the Class E Limited Partners has received a Rate of Return on the aggregate Capital Contributions made by such Partner in respect of the Partnership Units held by such Partner equal to seventeen and one half percent (17 1/2%)) as applicable, an amount equal to twenty-five percent (25%) of the Second Tier Differential. (7) Seventh, (i) with respect to periods during which BGP is the Administering General Partner, seventeen and one-half percent (17 1/2%) of the remainder to the Class D Partners (PRO RATA in proportion to their relative Class D Percentage Interests), (ii) seven and one-half percent (7 1/2%) of the remainder to the Class E Limited Partners as IMP (PRO RATA in proportion to their respective Class E Percentage Interests) and (iii) seventy-five percent (75%) of the remainder to the Partners other than the Class A Preferred Limited Partners and the Class E Limited Partners (PRO RATA in proportion to their relative Capital Contributions). -54- With respect to periods during which BGP is not the Administering General Partner, amounts otherwise distributable to the holders of the Class D Units pursuant to Sections 8.1(b)(5)(ii), (6)(i) and (7)(i) shall be distributable under Sections 8.1(b)(5)(i), (6)(ii) and (7)(iii), respectively, unless the General Partners (other than BGP) desire to admit a new Administering General Partner, in which case the General Partners may jointly determine to distribute part or all of such amounts instead to such new Administering General Partner or otherwise as such other General Partners shall determine. (c) The Partnership shall endeavor to distribute in each Fiscal Year (and, to the extent required, the immediately following Fiscal Year) Available Cash (strictly in accordance with the priorities set forth in Section 8.1(b)) in an amount at least sufficient (taking into account all other distributions) for the Investor Group Partners' (and if such Investor Group Partner is a pass-through entity for tax purposes, the shareholders, members or partners comprising such Investor Group Partner) payment of federal, state and local income taxes arising in respect of each Investor Group Partner's share (or the share of the shareholders, members or partners comprising such Investor Group Partner) of the income of the Partnership for such Fiscal Year, assuming the highest combined effective tax rate applicable to an individual resident in Massachusetts (but the foregoing shall not be grounds for an Additional Capital Call), PROVIDED, HOWEVER, that in the case of phantom income for any member of the Berkshire Group, such distribution shall be made in proportion to the Partnership Percentage Interests of the Investor Group Partners PROVIDED, HOWEVER, that no distributions may be made pursuant to this clause (c) at any time when distributions to be paid under Section 8.1(b)(1) are accrued and unpaid and PROVIDED FURTHER that such distributions shall offset amounts otherwise distributable to partners currently or in the future. 8.2 Liquidation. In the event of the sale or other disposition of all or substantially all of the Partnership Assets, the Partnership shall be dissolved and the proceeds of such sale or other disposition shall be distributed to the Partners in liquidation as provided in Article 10, except that to the extent that the Partnership receives a purchase money note or notes in exchange for all or a portion of such assets, the Partnership shall continue until such purchase money notes or notes have been paid in full. ARTICLE 9. TRANSFER OF COMPANY INTERESTS 9.1 Limitations on Assignments of Interests by Partners. (a) Except as provided in this Article 9, no Partner shall Transfer (as hereinafter defined) all or any portion of its Interest or permit such a Transfer or contract to do so, without the consent of each of the General Partners (which consent may be withheld in such General Partner's sole discretion for any reason or no reason) and in strict compliance with the provisions of this Article 9. Notwithstanding the foregoing, but subject to Section 9.9, (i) each member of the Whitehall Group, the Blackstone Group or the Berkshire Group may, at any time, and without the prior consent of the -55- General Partners, Transfer all or any portion of its Interest to a Person qualifying as an Affiliate under clause (i) of its definition hereof of such transferring Partner and (ii) each member of the Berkshire Group and each Class A Preferred Limited Partner and Class B Limited Partner may at any time, and without the prior consent of the General Partners, and solely for estate planning purposes, Transfer all or any portion of its Interest to one or more family members of the Berkshire Principals, or to trusts established for such family members or, as applicable, to family members of or trusts established for the families of such Class A Preferred Limited Partners or Class B Limited Partners. In addition each Class A Preferred Limited Partner and Class B Limited Partner may transfer its Class A Preferred Units or Class B Units to one or more Affiliates of such Class A Preferred Limited Partner or Class B Limited Partner satisfying the requirements of clause (i) of the definition of "Affiliate". As used herein "Transfer" of an Interest means, with respect to any Partner, any transfer, sale, pledge, hypothecation, encumbrance, assignment or other disposition of any portion of the Interest of such Partner or the proceeds thereof (whether voluntarily, involuntarily, by operation of law or otherwise, other than a pledge permitted under Section 9.1 (b)). Any purported Transfer in violation of this Article 9 shall be void ab initio, and shall not bind the Partnership, and the Partners making such purported transfer, sale or assignment shall indemnify and hold the Partnership and the other Partners harmless from and against any federal, state or local income taxes, or transfer taxes, including without limitation, transfer gains taxes, arising as a result of, or caused directly or indirectly by, such purpor ted Transfer. The giving of any consent to a Transfer in any one or more instances shall not limit or waive the need for such consent in any other or subsequent instances. Notwithstanding the foregoing, a Class A Preferred Limited Partner or a Class B Limited Partner may (after giving the Partnership and the Class C Partners and Class D Partners the right to purchase such Partnership Unit described in this Section 9.1(a)) Transfer all, but not less than all, of its Class A Preferred Units or Class B Units, respectively, to an "accredited investor" (as such term is defined in Regulation D under the Securities Act) as long as (i) prior to such Transfer, such Class A Preferred Limited Partner or Class B Limited Partner offers to the Partnership and the Class C Partners and the Class D Partners the right to purchase such Partnership Units in accordance with the procedures described below in this Section 9.1, (ii) such transferee agrees to be bound by all of the provisions of this Agreement, (iii) prior to such Transfer outside legal counsel to the Partnership delivers (at the sole expense of the transferring Partner except as provided below) an opinion to the Partnership to the effect that such transfer does not require registration under the Securities Act and does not cause the Partnership to be a "publicly traded partnership" within the meaning of Section 7704 of the Code (it being understood and agreed that (a) the Partnership shall spend up to $50,000 in legal fees and expenses in any fiscal year in respect of any such transfers, but that any legal fees or expenses in excess of such amount shall be for the account of the transferring Partner or Partners; (b) that the Partnership shall not be obligated to pay (and the transferring Partner shall be obligated to pay) any and all fees and expenses incurred by such transferring Partner including, without limitation, transfer and similar taxes, and fees and expenses of legal counsel engaged by such transferring Partners or the transferee and (c) the Partnership shall not charge the transferring Partner with other fees and expenses incurred by the Partnership in connection with such transfer), and (iv) such Transfer otherwise complies with the provisions of Sections 9.5, 9.7, 9.8, 9.9, and this Section 9.1. Prior to any Transfer of Class A Preferred Units or Class B Units pursuant to this Section 9.1(a), a Partner desiring to transfer such Partnership Units (a "Transferring Partner") shall first give written notice (a "Notice of Sale") to the Partnership and the General Partners, which Notice of Sale shall state the Transferring Partner's desire -56- to make such Transfer, the number and Class of Units held by such Transferring Partner (the "Offered Interest") and the price and such other terms on which the Transferring Partner proposes to Transfer its Interest (collectively, the "Offer Terms"). Each Notice of Sale shall constitute an irrevocable offer by the Transferring Partner to sell to the Partnership and the General Partners the Offered Interest on the Offer Terms. No Offer Terms in respect of an Offered Interest may include any form of consideration other than cash (which may be paid at closing, in installments or after any period of time (as set forth in the Offer Terms) or indebtedness (secured, unsecured, guaranteed, supported by a letter of credit or otherwise) (as set forth in the Offer Terms) of the Purchaser (as defined below) of such Offered Interest. The Partnership may elect to purchase (or cause an Affiliate designated by the Partnership to purchase) the Offered Interest on the Offer Terms by delivering to the Transferring Partner, with a copy to the Partnership and the General Partners, within twenty-five (25) days following the date the Notice of Sale is received by the Partnership and all of the General Partners, notice of such election (a "Notice of Purchase"). The decision of the Partnership to purchase an Offered Interest shall be a Unanimous Decision. In addition, if the Partnership does not elect to purchase the Offered Interest on the Offer Terms the General Partners may, by delivering a Notice of Purchase not more than five (5) days after the expiration of the 25-day period specified above, elect to purchase (or cause an Affiliate designed by them to purchase) stating (x) the maximum share of the Offered Interest that such General Partner (or such designated Affiliate) elects to purchase (the "Maximum Share") (which Maximum Share may be greater than such General Partners's proportionate share of the Offered Interest calculated in accordance with its Partnership Percentage Interest), (y) that the election made by such Notice of Purchase is irrevocable and (z) that such General Partner irrevocably commits to purchase any share of the Offered Interest up to and including the Maximum Share specified in preceding clause (x) on the Offer Terms. Each of the General Partners that delivers a Notice of Purchase (each, a "Purchaser") shall be allocated the Maximum Share of the Offered Interest set forth in such Purchaser's Notice of Purchase, unless such allocation, together with the shares of the Offered Interest allocated to the other Purchasers, exceeds one hundred percent (100%) of the Offered Interest, in which case each Purchaser whose Maximum Share is less than such Purchaser's proportionate share of the Offered Interest calculated in accordance with its Percentage Interest shall receive its Maximum Share, and the remaining share of the Offered Interest shall be allocated among the remaining Purchasers ratably in accordance with their respective Percentage Interests. A Notice of Purchase shall be deemed to be an irrevocable commitment by the Purchaser to purchase from the Transferring Partner on the Offer Terms the Maximum Share of the Offered Interest that such Purchaser has elected to purchase pursuant to its Notice of Purchase. If in the aggregate the Purchasers do not commit to purchase the entire Offered Interest within the time periods specified in Section 9.2(b), the Transferring Partner (i) shall be under no obligation to sell any portion of the Offered Interest to any Purchaser, unless the Transferring Partner so elects, and (ii) may, within a period of 6 months from and after the later of (x) the date of the last Notice of Purchase delivered to the Transferring Partner in accordance with Section 9.2(b) hereof and (y) the date which is twenty five (25) days from the date of the Notice of Sale, Transfer the -57- entire Offered Interest to one or more Persons at a price equal to or higher than the price included in the Offer Terms. If the Transferring Partner shall not have consummated the Transfer of the Offered Interest to any Person or Persons prior to the expiration of such six month period then the provisions of this Section 9.2 shall again apply. (b) Subject to compliance with the remaining provisions of this Article 9 and notwithstanding anything to the contrary set forth in Section 9.1(a) above, each of the Investor Group Partners, Class A Preferred Limited Partners and Class B Limited Partners may, from time to time and without any consent or approval, pledge or otherwise grant a security interest in all or part of such Partner's Interest to an Institutional Lender to secure a loan made to such Partner or its Affiliates (a "Pledgor") by such Institutional Lender (a "Pledgee"); PROVIDED, HOWEVER, that with regard to any such pledges made by a member of the Berkshire Group, any Class A Preferred Limited Partner or any Class B Limited Partner, (i) such pledged Interest may not be transferred to the Pledgee by foreclosure, assignment in lieu thereof or other enforcement of such pledge, (ii) such Partner may pledge only its economic interests in the Partnership and no other rights hereunder, (iii) such pledges shall be securing a loan which is fully recourse to such Partner and, in the case of a pledge by a member of the Berkshire Group, The Berkshire Companies Limited Partnership (or its successor) or one or more of the Berkshire Principals and (iv) Blackstone GP and WHGP shall have the right to review and reasonably approve, the documents relating to such loan to confirm the non-foreclosable nature of the pledge and the recourse nature of the loan. Any right of the Pledgee in the Interest shall be expressly subordinated to the rights (then existing or thereafter arising) of any Partner in the Interest as a result of any claims for indemnification pursuant to Section 4.3. (c) Any direct or indirect transfer of interests in Berkshire or BGP shall require the consent of all of the GPs to the extent such transfer results in Berkshire or BGP no longer being controlled (directly or indirectly) by a Berkshire Principal. Any direct or indirect transfer of interests in Whitehall or WHGP shall require the consent of all of the GPs to the extent such transfer results in Whitehall or WHGP no longer being controlled (directly or indirectly) by or under common control with a member of the Whitehall Group or GS Group. Any direct or indirect transfer of interests in Blackstone GP or Blackstone LP shall require the consent of all of the GPs to the extent such transfer results in Blackstone GP or Blackstone LP no longer being controlled (directly or indirectly) by or under common control with Blackstone Real Estate Acquisitions III L.L.C. 9.2 Sale of All of the Properties Before the Fifth Anniversary of the Closing Date at the Option of Berkshire. (a) Notwithstanding any other provisions herein, at any time during the period beginning on the date that is the second anniversary of the Closing Date and ending on the day that is the date immediately before the date that is the fifth anniversary of the Closing Date, the Berkshire Group, may, by delivering written notice (a "Sales Notice") to WHGP and Blackstone GP (the Berkshire Group, or such member thereof as shall deliver such Sales Notice, being referred to as a "Triggering Party" and the recipients of such Sales Notice each being referred to as a "Non-Triggering Party", and collectively as the "Non-Triggering Parties"), require the Partnership (and act on behalf of the Partnership with full right, power and authority) to sell all or substantially all of the Properties in one -58- or more transactions to a Person not Affiliated with any member of the Berkshire Group (including by merger of the Partnership), subject to the provisions of this Section 9.2. Any such Sales Notice shall state the cash price (the "Total Price") at which the Triggering Party desires to sell the Properties, free and clear of any liens. Any sale of the Properties pursuant to this Section 9.2 may be accomplished by a sale of the Partnership itself (including by merger of the Partnership) or of all of the Partnership Assets, provided that such a proposed transaction may provide for the members of the Berkshire Group to receive consideration other than cash and for the other Partners to receive at their election, either cash or such other consideration. (b) Concurrently with the delivery of the Sales Notice referred to in Section 9.2(a), the Triggering Party shall submit to the Non-Triggering Parties an offer (the "Offer"), to sell (or cause the Partnership to sell) the Properties to the Non-Triggering Parties (or their designees) for cash in exchange for the Non-Triggering Parties (or their designees) paying to the Partnership the Total Price, failing which the Triggering Party shall be entitled to market the Properties, as more particularly set forth below in this Section 9.2. The Offer shall also set forth any other material economic terms of the purchase; PROVIDED that, any Offer may include a holdback for breaches of representations or warranties (which may survive for claims made within no more than one year from the transfer of the Properties) by the Partnership (which in each case shall be as outlined by the Triggering Party in the Offer) not to exceed 5% of the purchase price, which holdback amount may be available for no more than the survival period of the representations and warranties; provided, further, that the terms of the transaction shall not, in any event, provide for the personal liability of any Partner in the event of the breach of such representations and warranties. (c) Within thirty (30) days after receiving the Offer, each Non-Triggering Party shall deliver a notice (a "Sales Response Notice") to the Triggering Party, stating the election by such Non- Triggering Party of one of the two following options: (1) to purchase (or have its Affiliate purchase) for the Total Price the Properties on or before the date (the "Applicable Closing Date") specified in such Sales Response Notice (which date shall be no later than sixty (60) days after the Sales Response Notice is delivered) and in accordance with the terms set forth in the Offer; concurrently with the delivery of a Sales Response Notice, and as a condition to its effectiveness under this Section 9.2(c), such Non-Triggering Party shall also deliver to the Partnership (for the account of the Triggering Party) a down payment equal to the product of (i) 5% of the Total Price and (ii) the aggregate Partnership Percentage Interest of the Triggering Party and each Non-Triggering Party that does not elect to purchase the Properties pursuant to this clause (c)), (provided that if more than one Non-Triggering party makes such an election, each such non-Triggering Partner shall pay a pro rata portion of such deposit based on its respective Partnership Percentage Interest) which shall not be refundable except if the Partnership defaults as a seller of the Properties; or (2) to agree to the sale of the Properties in accordance with the terms of the Offer, subject to such changes therein as are contemplated by the terms of this Section 9.2 -59- provided below, in which event, such Non-Triggering Party shall have no further rights to purchase the Properties, except as may be expressly provided for below in this Section 9.2. If any Non-Triggering Party fails to elect, by written notice, one of the above two options within said thirty (30)-day period, or fails to deliver the down payment required as a condition of such election, then it shall be conclusively presumed that such Non-Triggering Party elected option (2) above (and such Non-Triggering Party hereby consents to such sale in such case). In the event that both the Whitehall Group and the Blackstone Group, as Non-Triggering Parties, make an election pursuant to Section 9.2(c)(1), they shall each acquire 50% of each Property. (d) Promptly after an election by a Non-Triggering Party pursuant to Section 9.2(c)(1), the Partnership and such electing Non-Triggering Party (or its Affiliate(s)) shall proceed with such purchase and sale, the closing for which shall be held on or before the Applicable Closing Date, during normal business hours at the offices of counsel to the Non-Triggering Party. The Non-Triggering Party shall be entitled to one five (5) Business Day adjournment, whereupon time shall be of the essence with respect to the Non-Triggering Party's obligation to close on the purchase of the Properties in accordance with the terms of this Section 9.2(d) on or before the Applicable Closing Date, and if the Non-Triggering Party does not close in accordance with this paragraph, the Triggering Party shall be entitled, as the sole and exclusive remedies of the Triggering Party, to market and sell the Properties on behalf of the Partnership in accordance with this Section 9.2 as if the Non-Triggering Party made the election described in Section 9.2(c)(2) and the Triggering Party and each Non-Triggering Party that did not elect to purchase the Properties or that is not in default shall be entitled, as its sole and exclusive remedy, to keep a portion of the downpayment described in Section 9.2(c)(1) above (pro rata based on its respective Partnership Interests) (unless the failure to close is due to the default of the Partnership, in which case the Triggering Party shall not be entitled to the foregoing remedies). No defaulting Non-Triggering Party shall have any rights of first offer under this Section 9.2 after such default in respect of any subsequent offers. (e) Upon an election (or deemed election) by each Non-Triggering Party pursuant to Section 9.2(c)(2), the Triggering Party shall have the right to cause the Partnership to market the Properties for a period (the "Marketing Period") of one hundred and eighty (180) days commencing with the earlier to occur of (i) the thirtieth (30th) day after the delivery of the Offer to the Non- Triggering Parties or (ii) the notice by each Non-Triggering Party to the Triggering Party of each Non- Triggering Party's election to proceed under Section 9.2(c)(2). The Partners shall cooperate fully with the efforts of the Triggering Party to market the Properties and shall use their good faith efforts to cause the sale of the Properties on the terms set forth in the Offer or on terms more favorable to the Partnership. (f) Subject to the provisions of Section 9.2(l), if (i) during the Marketing Period, the Partnership receives a third-party offer to purchase the Properties for all cash (a "Third Party Offer") that the Triggering Party desires to accept, (ii) the sale price provided for therein (the "Third Party Offer Price") is equal to 100% or more of the Total Price, (iii) the terms are otherwise no less favorable to the Partnership than those set forth in the Offer and shall not provide for any additional or separate consideration to the Triggering Party (or its Affiliates), or to Berkshire, BGP, or any -60- member of the Berkshire Group or any of their respective Affiliates (whether through the payment of fees, salaries, consideration or otherwise) then the Partnership shall sell the Properties in accordance with the terms of such Third Party Offer (the Triggering Party being fully authorized and empowered to execute and deliver all necessary documents, agreements and instruments on the Partnership's or the Non-Triggering Parties' behalf and to make the representations and warranties on the Partnership's (but not the Non-Triggering Parties') behalf that were outlined in the Offer) and no Non-Triggering Party shall have any right to purchase the Properties or to object to or otherwise interfere with such sale, PROVIDED that the closing of such sale shall occur not later than the one hundred eightieth (180th) day after the commencement of the Marketing Period. In the event that the closing shall not occur within such one hundred eighty (180)-day period, or the Partnership does not receive a Third Party Offer that satisfies the conditions of this Section 9.2(f) during the Marketing Period, then the Triggering Party shall have the right at any time thereafter to further attempt to sell the Properties, subject to the rights of the Non-Triggering Parties under Section 9.2(a), which shall be reinstated with respect to any such further decision on the part of Triggering Party to sell the Properties. Any purchase and sale or other agreement documenting such Third Party Offer shall provide that the Non- Triggering Parties may exercise their rights and the Partnership its obligations to the Non-Triggering Parties set forth in the immediately previous sentence without penalty to the Partnership. (g) If a Non-Triggering Party, having elected to proceed under Section 9.2(c)(1), defaults on its obligation to purchase the Properties as required thereunder, then as set forth in clause (d) above the Triggering Party and each Non-Triggering Party that does not elect to purchase the Properties or that is not in default shall be entitled to retain, as liquidated damages, its portion of the down payment received in contemplation of such sale (as determined above), it being agreed that the amount represents a fair and equitable estimate of the damages to be suffered by the Triggering Party or the Partnership if a Non-Triggering Party were to so default and that actual damages would be highly impracticable to determine. If the Partnership defaults on its obligation to sell the Properties to a Non- Triggering Party pursuant to such Non-Triggering Party's election to purchase the Properties under Section 9.2(c)(1), then such Non-Triggering Party shall be entitled to specific performance by the Partnership. (h) Notwithstanding anything to the contrary, the Triggering Party shall, subject to and in accordance with this Section 9.2, have full right, power and authority (acting alone) to execute, deliver and perform, for and in the name of the Partnership and, in the case of a sale of the Partnership, of the Partners, and each Partner hereby agrees to execute, deliver and perform, any and all documents, agreements and instruments, and to take any other actions as may be required or desirable for the purpose of transferring the Properties, to the maker of the Third Party Offer or a Non-Triggering Party, as the case may be. (i) The following provisions shall apply to a purchase by a Non-Triggering Party pursuant to the election in Section 9.2(c)(1): (i) If such Non-Triggering Party is any of the Whitehall Group, the Blackstone Group or both of such Groups, such Non-Triggering Party may elect either (a) to purchase the Properties, in which case, the price payable to the Partnership shall be the Total Price (in -61- the case of a purchase by such Non-Triggering Party pursuant to Section 9.2(c)(1)) less the principal and accrued interest on account of any third party debt that will be assumed by such Non-Triggering Party or be paid at closing by such Non-Triggering Party (or its designee) from its own funds or (b) to purchase all of the Interests (other than the Class A Preferred Units and Class B Units) not already owned by such Non-Triggering Party, which Interests shall be sold free and clear of any liens or encumbrances. Subject to subparagraph (iii) of this Section 9.2(i), if such Non-Triggering Party elects to purchase the Interests (other than the Class A Preferred Units and Class B Units) not already owned by such Non-Triggering Party, such Non-Triggering Party shall pay to the other Partners an amount in cash that the other Partners would have received had the Properties been sold to a third party for the Total Price (in the case of a purchase by a Non-Triggering Party pursuant to Section 9.2(c)(1)) and the net proceeds (after deducting all fees, costs and expenses incurred in connection with such transaction) of such sale were distributed pursuant to Section 10.3 and any required deposits shall be calculated in respect of such amount. In the event more than one Non-Triggering Party makes an election under this clause (k), such Non-Triggering Partners shall purchase, on a PRO RATA basis (based on their respective Partnership Percentage Interests), the Interests not owned by them and to be purchased pursuant to this Section 9.2(i)(i). In the event that two Non-Triggering Partners elect to purchase the Partnership's assets pursuant to this Section 9.2, such Non-Triggering Partners shall use commercially reasonable efforts to permit the Class A Limited Partners and the Class B Limited Partners to invest in such entity in similar proportions, and subject to substantially the same terms and conditions, as the investment of the Class A Limited Partners and the Class B Limited Partners in the Partnership and in a manner that permits such Partners to defer the recognition of any gain attributable to their Interests. (ii) All transfer costs (including transfer taxes) shall be paid in accordance with customary practices in the relevant jurisdiction (unless the Offer provided otherwise) and there shall be an adjustment of the purchase price at closing to reflect a proration of any accrued income and expenses, excluding non-cash items, provided that each of the Triggering Party and such Non-Triggering Party shall bear its own attorneys' fees. Within forty-five (45) days after the closing, such Non-Triggering Party shall direct the independent accountants for the Partnership to complete an audit of the Partners' proration and such independent accountants shall deliver their audit report to the partners. If such audit report shall adjust such proration, the party in whose favor such adjustment is made shall promptly be paid by the other party the amount of such adjustment. (iii) On payment of the purchase price, such Non-Triggering Party shall, with respect to each Partnership debt, obligation and claim against the Partnership for which the Partnership or any Partner (or any guarantor affiliated therewith or which delivered the guaranty on behalf of such Person) is or may be personally liable with respect to the Properties at the option of such Non-Triggering Party either (i) obtain a release of the Partnership and each such Partner (and any guarantor affiliated therewith or which delivered the guaranty on behalf of such Person) from all liability, direct or contingent, from holders of such debt, obligation or claim or (ii) deliver to the Partnership and each such Partner, an -62- agreement in form and substance reasonably satisfactory to the Partnership and each such Partner, which satisfaction may require a creditworthy guarantor, to defend, indemnify and hold the Partnership and each such Partner (and any guarantor affiliated therewith or which delivered the guaranty on behalf of such Person) harmless from any actions, including attorneys' fees and costs of litigation, claims or loss arising from such debt, obligation or claim. In no event shall such indemnity apply to liabilities resulting from the breach by any Partner of its obligations under this Agreement. This subparagraph (iii) shall not apply to any debt, obligation or claim which is fully insured by public liability insurer(s) reasonably acceptable to the Partnership and each Partner. (j) Notwithstanding anything contained herein to the contrary, the Berkshire Group may not, without the consent of each General Partner other than BGP, sell all of the Properties of the Partnership in one or more transactions pursuant to this Section 9.2 (i) to any member of the Berkshire Group or any Affiliate thereof or (ii) unless the net proceeds from all sales that are, at the time of the calculation pursuant to this clause (ii), subject to binding agreements would result in a 12% per annum annually compounded Rate of Return (taking into account the timing of the receipt of the proceeds of such sale and the amount thereof and the timing and amount of prior distributions from the Partnership pursuant to Section 8.1(b)) to each of the Whitehall Group and the Blackstone Group in respect of all their Capital Contributions prior to the date of the receipt of such sale proceeds (it being understood and agreed that the Berkshire Group may, at its election, make payments to the Whitehall Group and the Blackstone Group in amounts necessary to achieve such Rate of Return for all of the members of the Whitehall Group and the Blackstone Group in respect of all such Capital Contributions and, provided that as a result of any such payments and the sale of the Properties contemplated hereby all of the members of the Whitehall Group and the Blackstone Group achieve such Rate of Return in respect of all of their Capital Contributions prior to such date, may consummate such sales although the net proceeds of such sales alone would not be sufficient to result in the achievement of such Rate of Return thresholds). 9.3 Sale of All of the Properties Before the Fifth Anniversary of the Closing Date at the Option of Two General Partners. (a) Notwithstanding any other provisions herein, at any time during the period beginning on the date that is forty-two (42) months after the Closing Date and ending on the day that is immediately before the date that is the fifth anniversary of the Closing Date, WHGP and Blackstone GP, acting together, (acting as if such decision were a Majority Decision) may, by delivering written notice (a "Majority Sales Notice") to any General Partner that did not join in such decision, require the Partnership (and act on behalf of the Partnership with full right, power and authority) to sell all or substantially all the Properties in one or more bona fide transactions to parties that are not Affiliates of any Majority Triggering Party and in which no Majority Triggering Party has a continuing interest. (b) Subject to the provisions of Section 9.3(c), if following the delivery of a Majority Sales Notice, the Partnership receives a third-party offer to purchase the Properties for all cash (a "Majority Third Party Offer") that the General Partners delivering the Majority Sales Notice (the "Majority Triggering Parties") desire to accept, then the Partnership shall sell the Properties in -63- accordance with the terms of such Majority Third Party Offer (the Majority Triggering Parties being fully authorized and empowered to execute and deliver all necessary documents, agreements and instruments on the Partnership's behalf or on behalf of the Partners other than the Majority Triggering Parties and to make the representations and warranties on the Partnership's (but not such other Partners') behalf that were outlined in the Majority Third Party Offer). (c) Notwithstanding anything contained herein to the contrary, if a sale of the Properties pursuant to this Section 9.3 closes during the period beginning on the date that is forty-two (42) months after the Closing Date and ending on the date that is fifty-four (54) months after the Closing Date, then the Majority Triggering Parties shall ensure that in connection with such sale, the members of the Berkshire Group and the Class B Limited Partners receive, in accordance with Section 10.3, an amount at least equal to the excess of the aggregate amount of Capital Contributions made by the members of the Berkshire Group or the Class B Limited Partners, as applicable through the date of such sale over the amount of any distributions from the Partnership previously received by such member of the Berkshire Group (or its Affiliates or predecessors). Any sale of the Properties pursuant to this Section 9.3 may be accomplished by a sale of the Partnership itself (including by merger of the Partnership) or of all of the Partnership Assets. Notwithstanding anything to the contrary, the Majority Triggering Parties shall, subject to and in accordance with this Section 9.3, have full right, power and authority to execute, deliver and perform, for and in the name of the Partnership and, in the case of a sale of the Partnership, of the Partners, and each Partner hereby agrees to execute, deliver and perform, any and all documents, agreements and instruments, and to take any other actions, as may be required or desirable for the purpose of transferring the Properties to the purchaser of the Partnership's assets or the Partnership under this Section 9.3. Any sale of the Properties pursuant to this Section 9.3 (x) shall not contain any representations by any Partner without the consent of such Partner (but may contain representations by the Partnership), and (y) may include a holdback for breaches of representations or warranties (which may survive for claims made within no more than one year from the transfer of the Properties) by the Partnership not to exceed 5% of the purchase price, which holdback amount may be available for no more than the survival period of the representations and warranties; provided, further, that the terms of the transaction shall not, in any event, provide for the personal liability of any Partner in the event of the breach of such representations and warranties. 9.4 Sale of the Properties After the Fifth Anniversary. Notwithstanding any other provisions herein, at any time after the date that is the fifth anniversary of the Closing Date, each of the General Partners shall be authorized unilaterally to cause a sale in which each General Partner will have the option to receive consideration consisting of all cash of (i) all or substantially all of the Properties or (ii) the Partnership in one or more bona fide transactions to a Person in which none of the Whitehall Group, the Blackstone Group or the Berkshire Group and no Affiliate of any of the Whitehall Group, the Blackstone Group or the Berkshire Group has an interest; PROVIDED, HOWEVER, that BGP may not exercise such right until the date that is three months following the fifth anniversary of the Closing Date, unless during such three month period (i) the DK Employment Agreement is -64- terminated for reasons other than Cause or Company Cause and (ii) neither WHGP nor Blackstone GP has already exercised its rights under this Section 9.4. In the event that one or more General Partners elect to cause the sale of the Properties pursuant to this Section 9.4 by giving written notice of such election to any General Partner not joining in such election, no other General Partner may subsequently make an election pursuant to this Section 9.4 until the date that is 180 days after the date such electing General Partner or General Partners deliver such notice of election. Any sale of the Properties pursuant to this Section 9.4 may be accomplished by a sale of the Partnership itself (including by merger of the Partnership) or of all of the Partnership Assets. Notwithstanding anything to the contrary, the General Partners shall, subject to and in accordance with this Section 9.4, have full right, power and authority to execute, deliver and perform, for and in the name of the Partnership and, in the case of a sale of the Partnership, of the Partners, and each Partner hereby agrees to execute, deliver and perform, any and all documents, agreements and instruments, and to take any other actions as may be required or desirable for the purpose of transferring the Properties, to the purchaser of the Partnership's assets or the Partnership under this Section 9.4. Any sale of the Properties pursuant to this Section 9.4 (x) shall not contain any representations by any Partner without the consent of such Partner (but may contain representations by the Partnership) and (y) may include a holdback for breaches of representations or warranties (which may survive for claims made within no more than one year from the transfer of the Properties) by the Partnership not to exceed 5% of the purchase price, which holdback amount may be available for no more than the survival period of the representations and warranties; provided, further, that the terms of the transaction shall not, in any event, provide for the personal liability of any Partner in the event of the breach of such representations and warranties. 9.5 Assignment Binding on Partnership. No Transfer of all or any part of the Interest of a Partner permitted to be made under this Agreement shall be binding upon the Partnership unless and until a duplicate original of such assignment or instrument of transfer, duly executed and acknowledged by the assignor or transferor, has been delivered to the Partnership, and such instrument evidences (i) the written acceptance by the assignee of all of the terms and provisions of this Agreement, (ii) the assignee's representation that such assignment was made in accordance with all applicable laws and regulations and (iii) the consent to the Transfer of the Interest required pursuant to Section 9.1, if any. In addition, a Person to whom a Transfer may be made pursuant to this Article 9, other than pursuant to Section 9.1(a), may also be required, in the reasonable discretion of any of the General Partners, and as a condition precedent to its becoming a transferee to make certain representations, warranties and covenants to evidence compliance with U.S. federal and state securities laws including, but not limited to, representations as to its net worth, sophistication and investment intent. 9.6 Bankruptcy of a Limited Partner. The Partnership shall not be dissolved or terminated by reason of the Bankruptcy, removal, withdrawal, dissolution or admission of any Limited Partner. -65- 9.7 Substituted Partners. (a) Partners who assign all their Interests pursuant to an assignment or assignments permitted under this Agreement shall cease to be Partners of the Partnership except that unless and until a Substituted Partner is admitted in its stead, the assigning Partner shall not cease to be a Partner of the Partnership under the Act and shall retain the rights and powers of a member under the Act and hereunder, PROVIDED that such assigning Partner may, prior to the admission of a Substituted Partner, assign its economic interest in its Interest, to the extent otherwise permitted under Article 9. Any Person who is an assignee of any portion of the Interest of a Partner and who has satisfied the requirements of Article 9 shall become a Substituted Partner only when (i) the Administering General Partner has entered such assignee as a Partner on the books and records of the Partnership, which the Administering General Partner is hereby directed to do upon satisfaction of such requirements, and (ii) such assignee shall have paid all reasonable legal fees and filing costs in connection with the substitution as a Partner except as otherwise provided in Section 9.1(a). (b) Any Person who is an assignee of any of the Interest of a Partner but who does not become a Substituted Partner and desires to make a further assignment of any such Interest, shall be subject to all the provisions of this Article 9 to the same extent and in the same manner as any Partner desiring to make an assignment of its Interest. 9.8 Acceptance of Prior Acts. Any person who becomes a Partner, by becoming a Partner, accepts, ratifies and agrees to be bound by all actions duly taken pursuant to the terms and provisions of this Agreement by the Partnership prior to the date it became a Partner 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 Partnership prior to said date and which are in force and effect on said date. 9.9 Additional Limitations. Notwithstanding anything contained in this Agreement, no Transfer of an Interest shall be made, and any General Partner 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) except as otherwise provided in Section 9.2, 9.3 or 9.4 such Transfer will not be subject to, or such Transfer, when aggregated with prior Transfers in accordance with applicable law will not result in the imposition of, any state, city or local transfer taxes, including, without limitation, any transfer gains taxes, unless such assignor pays such taxes; and (iv) such Transfer will not cause the Partnership to be treated as a "publicly-traded partnership" within the meaning of Section 7704 of the Code. Any General Partner may elect prior to any Transfer to require an opinion of counsel with respect to any of the foregoing matters. -66- 9.10 Purchase of the Berkshire Group's Interest upon the Termination of Douglas Krupp's Employment Under the DK Employment Agreement. (a) In the event that Douglas Krupp is terminated as chief executive officer of the Partnership as a result of a Performance Termination, the Berkshire Group shall have the right (but not the obligation), exercisable at any time within 60 days after such termination, to require the Partnership to acquire its Interest (including the DK IMP) for a price equal to the Fair Market Value (as such term is defined below) of its Interest (including the DK IMP) on the date such right is exercised. (b) In the event that Douglas Krupp (i) is terminated as chief executive officer of the Partnership for Company Cause, or for Cause at any time, or (ii) resigns or otherwise terminates the DK Employment Agreement on or prior to the fifth anniversary of the Closing Date, the Partnership shall have the right (but not the obligation), exercisable at any time within 60 days after such termination or resignation, to purchase the Interest of the Berkshire Group for a price equal to the greater of (x) the Fair Market Value of the Berkshire Group's Interest (excluding the DK IMP which shall be forfeited upon the occurrence of any of the events described in clause (i) and (ii) above) on the date such right is exercised or (y) the amount equal to the aggregate amount of Capital Contributions made by the Berkshire Group prior to the date of such termination or resignation less any prior distributions made to the Berkshire Group. (c) In the event Douglas Krupp is terminated as chief executive officer of the Partnership prior to the fifth anniversary of the Closing Date for any reason other than for Company Cause, Cause, a Performance Termination or Douglas Krupp's death or disability, the Partnership shall purchase the Interest of the Berkshire Group for a cash price equal to the greater of (i) the Fair Market Value of the Berkshire Group's Interest (including the DK IMP) at the date of such termination or (ii) the sum of (x) an amount equal to a 12% Rate of Return on the amount of the Berkshire Group's Capital Contributions made prior to the date of such termination, for the five year period ending with fifth anniversary of the Closing Date (taking into account the amount and timing of prior distributions to the Berkshire Group and discounting back such amount to the date of payment utilizing as the discount rate the then current Treasury rate for Treasury obligations with a maturity equal to or approximating the term between the date of such termination and the fifth anniversary of the Closing Date) plus (y) an amount in cash equal to $10 million (in full payment of the DK IMP). (d) For purposes of this Section 9.10, "Fair Market Value" of the Berkshire Group's Interest (either including or excluding the DK IMP as specified above) will be the amount the Berkshire Group would have received upon the full liquidation of the tangible assets then owned by the Partnership at the fair market value of such assets (with all intangible assets being valued at zero) and the distribution of the proceeds pursuant to Section 10.3. "Fair Market Value" will be determined based upon what a willing buyer, under no compulsion to buy, would pay a willing seller, under no compulsion to sell. If all three General Partners cannot agree on a fair market value after a 30-day resolution period, each of BGP, on the one hand, and WHGP and Blackstone GP, on the other hand, shall select an independent, disinterested appraiser who is a certified member of the Appraisal Institute with at least ten (10) years' established experience in appraising properties and interests of the same -67- type and in the same geographic areas as the Properties ("Appraiser") and have an appraisal prepared (the "Initial Appraisals") within sixty (60) days after the expiration of the thirty (30) day period described above. If the lower of the Initial Appraisals is not more than ten percent (10%) less than the higher of the Initial Appraisals, then the Initial Appraisals shall be averaged and such average shall be the Fair Market Value for the Properties. If the lower of the Initial Appraisals is more than ten percent (10%) less than the higher of the Initial Appraisals, then within ten (10) days after the date on which the last Initial Appraisal is delivered to the other party the two Appraisers shall select a third Appraiser or, if the two Appraisers are unable to agree on a third Appraiser within such time period, the third Appraiser shall be designated by the American Arbitration Association's New York, New York, office at the request of either party. The third Appraiser shall conduct a third, independent appraisal (the "Third Appraisal") within twenty (20) days. If the Third Appraisal is required, the Fair Market Value shall be the appraised value of whichever Initial Appraisal is closest to the appraised value of the Third Appraisal. Each such Initial Appraisal and Third Appraisal shall be made as of the date of the termination of the DK Employment Agreement. Each side will bear its own costs and expenses in the arbitration. If the requisite General Partners (other than BGP) elect, at any time before the arbitration panel is selected, to cause a sale of the Properties, rather than having the fair market value determined by the arbitration panel, the Berkshire Group will receive its share of the sale proceeds (either including or excluding its share of any IMP as specified above) that instead of the amount it would have received based on the arbitrated value. 9.11 Transfers by the Blackstone Group and the Whitehall Group. Each of the Partners acknowledges and agrees that the Blackstone LP intends to Transfer its Interests to one or more persons satisfying the condition of clause (i) of the definition of Affiliate after the date hereof, and that no consent of any Partner shall be required in connection therewith. Upon such transfer such Affiliate(s) shall automatically become Substituted Partner(s) without any further action and, upon Transfer by the Blackstone LP of all its entire Interest, shall be deemed to have assumed all of Blackstone LP's obligations hereunder with respect to such Interest so transferred and Blackstone LP shall be released from any liabilities under or relating to this agreement with respect to such Interests so transferred. (b) Each of the Partners acknowledges and agrees that Whitehall may Transfer its Interests to one or more persons satisfying the condition of clause (i) of the definition of Affiliate after the date hereof, and that no consent of any Partner shall be required in connection therewith. Upon such Transfer such Affiliate(s) shall automatically become Substituted Partner(s) without any further action and, upon Transfer by Whitehall of such Interest, shall be deemed to have assumed all of Whitehall's obligations hereunder with respect to such Interest so transferred and Whitehall shall be released from any liabilities under or relating to this agreement with respect to such Interests so transferred. 9.12 Purchase of the Class A Preferred Units and Class B Units. (a) Each holder of Class A Preferred Units shall, from and after the date that is the five years after the Closing Date, have the right, by delivering written notice to the Partnership, to require the Partnership to purchase all, but not less than all of its Class A Preferred Units for an amount in -68- cash equal to $12.25 per Class A Preferred Unit, plus an amount equal to the accrued and unpaid distributions on such Class A Preferred Units for all fiscal quarters ending on or prior to the Holder Purchase Date. Any notice of redemption delivered pursuant to this Section 9.12(a), will be mailed to the Partnership, by certified mail, postage prepaid, not less than 180 days prior to the date upon which the holder designates such purchase is to occur (the "Holder Purchase Date"). The Partnership shall pay the holders of the Class A Preferred Units as to which such an election has duly been made hereunder the full amount due under this Section 9.12(a) on the Holder Purchase Date. (b) The Partnership shall have the right, from and after the earlier to occur of (i) the sixth anniversary of the Closing Date, (ii) the consummation by the Partnership (or its successor) of an underwritten public offering of its equity securities, (iii) the time immediately prior to the consummation of a merger, consolidation or other business combination (other than (x) a merger, consolidation or other business combination with a General Partner or an Affiliate of a General Partner or (y) a merger in which the holders of Partnership Units prior to such merger, consolidation or other business combination hold 51% or more of the partnership interests in the surviving entity after the consummation of such merger, consolidation or other business combination) involving, the Partnership or (iv) the sale of all or substantially all of the assets of the Partnership (other than such a sale to a General Partner or an Affiliate of a General Partner), to (1) redeem all the Class A Preferred Units for a cash price equal to $12.25 per Class A Preferred Unit, plus an amount equal to the accrued and unpaid distributions on such Class A Preferred Units for all fiscal quarters ending on or prior to the date of such redemption (it being understood and agreed that no payment shall be made in respect of any other quarterly distribution period), and (2) redeem all of the Class B Units held by any Partner for a cash price equal to the fair market value of such Class B Units, as such fair market value shall be reasonably determined by the General Partners (taking into account appraisals that have been performed at the request of the Partnership prior to the date of such determination, without imposing any obligation on the Partnership to obtain any such appraisals). Any notice of redemption delivered pursuant to this Section 9.12(b) will be mailed by the Partnership, by certified mail, postage prepaid, not less than 10 nor more than 60 days prior to the date upon which such redemption is to occur (the "Partnership Redemption Date"), addressed to each holder of record of the Partnership Units to be redeemed at such holder's address as it appears on the records of the Partnership. No failure to give or defect in such notice shall affect the validity of the proceedings for the redemption of any Partnership Units. In addition to any information required by law, each such notice shall state: (a) the Partnership Redemption Date, (b) the redemption price, (c) the aggregate number of each class of Partnership Units to be redeemed, and (d) the place or places where such Partnership Units to be redeemed are to be surrendered for payment of the amount payable upon redemption. Notwithstanding the foregoing, in the event of a public offering of equity securities of the Partnership prior to the date that is five and one half years after the Closing Date, the Partnership shall use its commercially reasonable efforts to structure such offering in a manner that would permit the holders of the Class A Preferred Units and Class B Units to remain Partners in the Partnership; PROVIDED, HOWEVER, if the lead underwriters of such public offering advise the Partnership that such structure would adversely affect the price to be obtained in such offering or otherwise materially adversely affect the offering, the provisions of this sentence shall not apply and instead the Partnership shall have the right to redeem the Class A Preferred Units or Class B Units pursuant to this Section 9.12(b). -69- (c) Except as provided above in clause (a) or clause (b), the Partnership shall make no payment or allowance for unpaid distributions, whether or not in arrears, on any Partnership Units purchased or called for redemption or purchase pursuant to clause (a) or (b) of this Section 9.12. On and after a Holder Purchase Date or a Partnership Redemption Date, distributions will cease to accumulate on the Partnership Units for which the holder purchase option has been exercised or Partnership Units called for redemption, as applicable, unless the Partnership defaults in payment of the full redemption price therefor. If any date fixed for redemption or purchase of Partnership Units is not a Business Day, then payment of the redemption price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the originally scheduled redemption date. If payment of the redemption or purchase price is improperly withheld or refused and not paid by the Partnership, distributions on such Partnership Units will continue to accumulate from the originally scheduled redemption date to the date of payment. (d) In the event the Partnership defaults in its obligations to purchase Class A Preferred Units under Section 9.12(a) for a period of more than fifteen (15) days, the coupon rate on such Class A Preferred Units shall increase to a rate per annum, compounded quarterly, to the extent not paid on quarterly basis, equal to 12% during such period of default and the Partnership shall reimburse the holder of any such Class A Preferred Units as to which such a default has occurred for all reasonable out of pocket expenses incurred by such holder in enforcing the collection of such defaulted amounts. (e) In the event that prior to the date that is five and one half years after the Closing Date the Partnership proposes to make a distribution which, after giving effect to such distribution, will result in the Investor Group Partners having received cumulative distributions from the Partnership pursuant to Section 8.1(b) or 8.1(c) equal to more than 50% of their aggregate Capital Contributions, then (i) the Partnership shall, not fewer than thirty (30) days prior to such scheduled distribution, provide notice of such proposed distribution to the Class A Preferred Limited Partners and provide to the Class A Preferred Limited Partners the opportunity to accelerate their rights under this Section 9.12(a) to the date of such proposed distribution (and each such Class A Preferred Limited Partner shall have the right to exercise such right by delivering to the Partnership, by hand delivery or nationally recognized overnight courier, such election not less than five (5) business days prior to such proposed distribution and (ii) the Partnership shall, on or prior to the date of such proposed distribution purchase all such the Class A Preferred Units as to which such an election has been made at a price equal to the purchase price specified in Section 9.12(a) 9.13 Subsequent Transactions. (a) As a result of the closing of the Mergers under the BRI Merger Agreement and the BRI OP Merger Agreement, immediately after the Closing Date the Partnership shall be the sole owner (directly and/or indirectly) of all of the ownership interests of BRI OP, and BRI OP shall be the sole owner (directly and/or indirectly) of all of the Properties. The Administering General Partner hereby acknowledges and agrees that, unless there has been a change in law that would make the structure -70- below not effective in achieving its intended purpose, it shall cause the Partnership to undertake the following actions to occur promptly following the closing of the loan contemplated by the Freddie Mac Parameters (but in no event later than January 15, 2000) in a manner consistent with its obligations under Section 4.8 hereof, (collectively, the "Section 9.13 Structure"): (1) with respect to the 17 properties listed on Schedule 9.13(a)(1) attached: (i) the Partnership shall form a limited liability company under the laws of the State of Delaware (the "Property LLC") with the Partnership as the sole member in the Property LLC; and the Partnership shall elect that the Property LLC be taxed as a partnership or a "disregarded entity" under any applicable federal and state taxation laws; (ii) each Property listed on Schedule 9.13(a)(1) attached hereto shall be transferred to the Property LLC either (A) through an asset transfer with the entity which directly owns such Property (each such entity, a "Property Owning Entity") as the transferor, (B) by transfer of all of the ownership interests in the Property Owning Entity for such Property, or (C) by other means that minimize expenses or taxes (including transfer taxes) without impairing the tax benefits afforded by the Section 9.13 Structure; (2) with respect to the 22 Properties listed on Schedule 9.13(a)(2): (i) the Partnership shall acquire 100% of the outstanding common shares of capital stock of one or more newly formed REITs, and 100 individuals or entities to be selected jointly by the Blackstone GP and WHGP shall acquire preferred shares of the stock of each REIT; (ii) the REITs described in clause (i) shall elect to be treated as real estate investment trusts (as defined in Parts II and III of Subchapter M of Chapter 1 of Subtitle A of the Code) and shall comply with any and all requirements, restrictions and limitations imposed on real estate investment trusts under the Code or any other applicable laws or governmental rules or regulations; (iii) the Partnership shall form one or more Delaware limited partnerships whose partners shall consist of the Partnership with a 1% general partnership interest and one of the REITs described in clause (i) with a 99% limited partnership interest; (iv) each Property listed on Schedule 9.13(a)(2) shall be transferred to a limited partnership described in clause (iii) either (A) through an asset transfer with the Property Owning Entity of such Property, as the transferor, (B) by transfer of all of the ownership interests in the Property Owning Entity of such Property or (C) by other means that minimize expenses or taxes (including transfer taxes), without impairing the tax benefits afforded by the Section 9.13 structure; -71- (3) with respect to the 33 Properties listed on Schedule 9.13(a)(3): (i) the Partnership shall acquire 100% of the outstanding common shares of capital stock of a newly formed REIT ("REIT 33"), and 100 individuals or entities to be selected jointly by the Blackstone GP and the Whitehall GP shall purchase 100 preferred shares of the stock of REIT 33; (ii) REIT 33 shall elect to be treated as a real estate investment trust (as defined in Parts II and III of Subchapter M of Chapter 1 of Subtitle A of the Code) and shall comply with any and all requirements, restrictions and limitations imposed on real estate investment trusts under the Code or any other applicable laws or governmental rules or regulations; and (iii) the Partnership shall transfer to REIT 39 a 99% interest in BRI OP, and the REIT 33 shall become a 99% limited partner in BRI OP. (b) In the event that the Administering General Partner does not cause the Partnership to undertake the actions set forth in Section 9.13(a) to occur (unless there has been a change in law that would make the Section 9.13 Structure not effective in achieving its intended purpose) by January 15, 2000, the Blackstone GP and the Whitehall GP shall each be entitled, without the consent of any other Partner, to cause such actions to occur at any time after such date, and each of the Blackstone GP and the Whitehall GP shall have the full right, power and authority (acting alone) to execute, deliver and perform, for and in the name of the Partnership, any and all documents, agreements and instruments, and to take any other actions, as may be required or desirable in order to cause the actions set forth in Section 9.13(a) to occur. (c) If in lieu of (i) implementing the structure set forth in Section 9.13(a) (the "Section 9.13 Structure") or (ii) maintaining the ownership structure of the Properties and BRI OP in effect immediately after the closings under the BRI Merger Agreement and BRI OP Merger Agreement, any General Partner proposes a change in the structure (a "Revised Section 9.13 Structure") of the ownership of any of the Properties or entities then supporting one or more Guarantees contemplated by Section 4.8 or BRI OP (other than in connection with a third party transaction otherwise authorized under this Agreement), and such Revised Section 9.13 Structure, in the opinion of each General Partner (in its sole discretion) does not (i) generate increased Unrelated Business Taxable Income for the Partnership, (ii) diminish or impair the economic and tax benefits received by the Investor Group Partners under this Agreement and the Section 9.13 Structure, or (iii) otherwise adversely affect the rights (including the governance rights under Article 3 and the sale rights under Article 9) and remedies of the Investor Group Partners under this Agreement and the Section 9.13 Structure, then the General Partners, subject to the other provisions of this Agreement, including, without limitation, Section 4.8, shall cause the Partnership to implement the Revised Section 9.13 Structure, in lieu of the Section 9.13 Structure but otherwise in accordance with this Section 9.13. The Blackstone GP and the Whitehall GP each agrees to use commercially reasonable efforts to cooperate with BGP in developing a Revised Section 9.13 Structure which meets the requirements set forth in this Section 9.13(c) and eliminates the necessity of (or reduces the amount of) the guarantees from BGP or its Affiliates. Notwithstanding -72- the foregoing provisions of this Section 9.13(c), the Partnership shall not undertake, and no Partner shall cause the Partnership to undertake, any restructuring involving any Revised Section 9.13 Structure hereof unless either (i) an opinion of counsel reasonably satisfactory to BGP is obtained to the effect that such restructuring would not increase the risk that any Limited Partner or BGP would be required to recognize taxable income or (ii) the Partnership agrees to fully indemnify BGP and any Limited Partner that is required to recognize taxable income as a result of the consummation of such Revised Section 9.13 Structure. (d) Any expenses incurred by the Partnership or the General Partners in implementing the Section 9.13 Structure (or Revised Section 9.13 Structure, as applicable), including, without limitation attorneys and accountants fees and disbursements, transfer taxes, recording costs, and the formation costs of the REIT and the Property LLC, shall constitute expenses of the Partnership. ARTICLE 10. DISSOLUTION OF THE PARTNERSHIP; WINDING UP AND DISTRIBUTION OF ASSETS 10.1 Dissolution. (a) The Partnership shall be dissolved and its affairs shall be wound up upon the first to occur of the following: (1) the dissolution or Bankruptcy of any General Partner or the occurrence of any other event that terminates the continued membership of a General Partner in the Partnership, unless the business of the Partnership is continued by the consent of the majority of the outstanding Partnership Interests ninety (90) days following the occurrence of any such event; (2) the sale or other disposition of all of the Partnership Assets and receipt of the final payment of any installment obligation received as a result of any such sale or disposition; (3) the written consent of all of the General Partners; (4) any event which makes it unlawful for the Partnership's business to be continued; (5) the issuance of a decree by any court of competent jurisdiction that the Partnership be dissolved and liquidated; (6) December 31, 2049. (b) No Partner shall have the right to (i) withdraw or resign as a Partner of the Partnership, (ii) redeem, or request redemption of, its Interest or any part thereof, other than pursuant to Section 9.10(a), or (iii) dissolve itself voluntarily. -73- 10.2 Winding Up. (a) In the event of the dissolution of the Partnership pursuant to Section 10.1(a), the Majority-in-Interest may wind up the Partnership's affairs. (b) Upon dissolution of the Partnership and until the filing of a certificate of cancellation as provided in the Act, two General Partners (acting as if such action were a Majority Decision) or a liquidating trustee, as the case may be, may, in the name of, and for and on behalf of, the Partnership, prosecute and defend suits, whether civil, criminal or administrative, gradually settle and close the Partnership's business, dispose of and convey the Partnership's property, discharge or make reasonable provision for the Partnership's liabilities, and distribute to the Partners in accordance with Section 10.3 any remaining assets of the Partnership, all without affecting the liability of Partners and without imposing liability on any liquidating trustee. (c) Upon the completion of winding up of the Partnership, two General Partners (acting as if such action were a Majority Decision) or liquidating trustee, as the case may be, shall file a certificate of cancellation in the Office of the Secretary of State of Delaware as provided in the Act. 10.3 Distribution of Assets. Upon the winding up of the Partnership, the assets shall be distributed as follows: (1) to the payment of expenses of the liquidation; (2) to the payment of debts and liabilities of the Partnership, in order of priority as provided by law, other than debts and liabilities owed to Partners; (3) to the setting up of any reserves that the two General Partners or the liquidating trustee, as the case may be, shall determine are reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership or the Partners; (4) to the payment of debts and liabilities of the Partnership owed to Partners; (5) to the Partners who are holders of Class A Preferred Units, in proportion to the respective number of Class A Preferred Units, in an amount not to exceed an amount per Class A Preferred Unit equal to $12.25, plus an amount equal to the accrued and unpaid distributions for each quarterly period ended prior to the date of such redemption (it being understood and agreed that no payment shall be made in respect of any other distribution period); and (6) to the Partners other than holders of Class A Preferred Units in accordance with Section 8.1(b). 10.4 Special Allocation. It is intended that, to the extent possible, at the liquidation of the Partnership each Partner's Capital Account balance will be equal to such Partner's Targeted Capital -74- Account Balance. Notwithstanding anything in Article 7, if the ending Capital Account balance of any partner immediately prior to the distributions to be made pursuant to Section 10.3 is more or less than such Partner's Targeted Capital Account Balance, then Partnership Profit and Loss, including items of income, gain, loss and deduction, shall be specially allocated among the Partners for the year in which liquidating distributions are made pursuant to Section 10.3 until each Partner's actual Capital Account balance, to the extent possible, is equal to such Partner's Targeted Capital Account Balance. The special allocation provision provided by this Section 10.4 shall be applied in such a manner so as to cause the difference between each Partner's Targeted Capital Account Balance and the actual balance in its Capital Account (determined after this allocation, but immediately prior to the distributions pursuant to this Article 10) to be the smallest dollar amount possible. ARTICLE 11. AMENDMENTS 11.1 Amendments. Subject to Sections 3.7(b) and 3.7(c), amendments may be made to this Agreement from time to time by the Administering General Partner with the consent of each of the General Partners and without the consent of any Limited Partner; PROVIDED, HOWEVER, that no such amendment shall without such Partner's consent reduce the amounts distributable to any Partner (in a manner that is not PRO RATA with respect to all Interests of a class of Interests), increase the obligations or liabilities of any Partner hereunder, or otherwise impair the rights of any Partner under this Agreement, other than an impairment of rights that is PRO RATA with other Partners holding the same class of Interests. Without the consent of the holders of a majority of the outstanding Class A Preferred Units and Class B Units (excluding holders that are General Partners or Affiliates of General Partners), voting together as a single class, this Agreement may not be amended to change materially the nature of the business of the Partnership or to change this sentence. No amendment, modification, supplement, discharge or waiver hereof or hereunder shall require the consent of any Person not a party to this Agreement. Notwithstanding the foregoing, (a) no consent of any Partner other than WHGP and Blackstone GP shall be required for an amendment entered into to reflect any assignment made pursuant to Section 9.10, (b) no amendment of the proviso clause of the first sentence of this Section 11.1 shall be made without the consent of all Partners, (c) no amendment of Section 3.7(b) or this clause (c) shall be made without the consent of the holders of a majority of the outstanding Class A Preferred Units (excluding holders that are General Partners or Affiliates of General Partners), and (d) no amendment of Section 3.7(c) or this clause (d) shall be made without the consent of the holders of a majority of the outstanding Class B Units (excluding holders that are General Partners or Affiliates of General Partners). 11.2 Additional Partners. If this Agreement shall be amended as a result of adding or substituting a Partner, the amendment to this Agreement shall be signed by the General Partners, by the Person to be added or substituted and by the assigning Partner, if any. In making any amendments, the Administering General Partner shall prepare and file for recordation such documents and certificates as shall be required to be prepared and filed. -75- 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 any General Partner, may be necessary or advisable to carry out the intent and purpose of this Agreement. 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 2.5 and 2.6, as applicable, or at such other address as may be designated by the addressee thereof (which in the case of the Partnership, shall be designated by the Administering General Partner) upon written notice to all of the Partners. 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). 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 Consent to Jurisdiction. Each party hereto hereby irrevocably consents and agrees, for the benefit of each party, 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 correction of an award rendered in an arbitration proceeding may be brought in any state or federal court located in the Borough of Manhattan, The City of New York (a "New York Court"), and hereby irrevocably accepts and submits -76- to the non-exclusive jurisdiction of each New York Court, as the case may be, with respect to any such action, suit or proceeding. Each party hereto also hereby irrevocably consents and agrees, for the benefit of each other party, that any legal action, suit or proceeding against it shall be brought in any New York Court, and hereby irrevocably accepts and submits to the exclusive jurisdiction of each such New York Court with respect to any such action, suit or proceeding. Each party 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. 12.8 Arbitration. (a) Arbitration shall be the exclusive method for resolution of any claims or disputes arising in connection with this Agreement, and the determination of the arbitrators shall be final and binding (except to the extent there exist grounds for vacation or an award under applicable arbitration statutes) on the Partners. The parties agree that they will give conclusive effect to the arbitrators' determination and award and that judgment thereon may be entered in any court having jurisdiction. Each party shall bear its own costs, in any arbitration. (b) The number of arbitrators shall be three, each of whom shall be disinterested in the dispute or controversy and shall be impartial with respect to all parties hereto. The Whitehall Group, the Blackstone Group, and the Berkshire Group shall each appoint one arbitrator within ten (10) business days of notice from a party that arbitration is requested. Notwithstanding the foregoing, in the event one or more Class A Limited Partners or Class B Limited Partners are claimants in such arbitration proceedings, such Class A Limited Partners and/or Class B Limited Partners shall collectively have the right to designate one arbitrator to such arbitration panel, the Partnership (as if such decision were a Majority Decision) or the General Partners involved in such proceeding, as applicable, collectively shall appoint one arbitrator, and such two appointed arbitrators shall appoint the third arbitrator. In the event the parties fail to agree upon the arbitrators, the arbitrators (or such number thereof as shall not have been agreed upon) shall be appointed under the commercial arbitration rules of the American Arbitration Association. (c) The place of arbitration shall be the Borough of Manhattan, The City of New York. The arbitration shall be conducted in the English language. The arbitrators shall give effect insofar as possible to the desire of the parties hereto that the dispute or controversy be resolved in accordance with good commercial practice. The arbitrators shall decide such dispute in accordance with the law of the State of Delaware. The arbitrators shall decide such dispute within thirty (30) days of selection of the arbitrators. The arbitration shall be conducted in accordance with the commercial arbitration rules of the American Arbitration Association. 12.9 Partition. The Partners hereby agree that no Partner nor any successor-in-interest to any Partner shall have the right to have the property of the Partnership partitioned, or to file a complaint or institute any proceeding at law or in equity to have the property of the Partnership parti tioned, and each Partner, on behalf of himself, his successors, representatives, heirs and assigns, hereby waives any such right. 12.10 Invalidity. Every provision of this Agreement is intended to be severable. The invalidity and unenforceability of any particular provision of this Agreement in any jurisdiction shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. 12.11 Successors and Assigns. This Agreement shall be binding upon the parties hereto and their respective successors, executors, administrators, legal representatives, heirs and legal assigns and shall inure to the benefit of the parties hereto and, except as otherwise provided herein, their respective successors, executors, administrators, legal representatives, heirs and legal assigns. No Person other than the parties hereto and their respective successors, executors, administrators, legal representatives, heirs and permitted assigns shall have any rights or claims under this Agreement. 12.12 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. 12.13 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. 12.14 No Brokers. Each of the Partners hereto warrants to each other that, except as set forth in Section 2.9(b) (it being understood, however, that BRI and BRIOP, in connection with the Merger, hired Lazard Freres & Co LLC, Lehman Brothers Inc. and Prudential Securities Incorporated as their financial advisors and paid fees to such parties), there are no brokerage commissions or finders' fees (or any basis therefor) resulting from any action taken by such Partner or any Person acting or purporting to act on their behalf upon entering into this Agreement. Each Partner agrees to indemnify and hold harmless each other Partner for all costs, damages or other expenses arising out of any misrepresentation made in this Section 12.14. 12.15 Maintenance as a Separate Entity. The Partnership shall maintain books and records and bank accounts separate from those of its Affiliates; shall at all times hold itself out to the public as a legal entity separate and distinct from any of its Affiliates (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 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; shall not guarantee any obligation of any of its Affiliates; shall cause its business to be carried on by the General Partners and shall keep minutes of all meetings of the Partners. 12.16 Confidentiality. Each Partner agrees 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 this Agreement (collectively, "Confidential Information"), provided that such disclosure -77- may be made (a) to any Person who is a member, partner, officer, director or employee of such Partner or counsel to or accountants of such Partner solely for their use and on a need-to-know basis, provided that such Persons are notified of the Partners' confidentiality obligations hereunder, (b) with the prior consent of the other Partners, (c) subject to the next paragraph, pursuant to a subpoena or order issued by a court, arbitrator or governmental body, agency or official, (d) to any lender providing financing to the Partnership, (e) in connection with a purchase agreement under Section 9.2, to the sellers thereunder (f) to a bona fide potential transferee of an Interest who agrees in writing with the Partnership to be bound by the provisions of this Section 12.16 or (g) as required by law or regulation. In the event that a Partner shall receive a request to disclose any Confidential Information under a subpoena or order, such Partner shall (i) promptly notify the other General Partners thereof, (ii) consult with the other General Partners on the advisability of taking steps to resist or narrow such request and (iii) if disclosure is required or deemed advisable, cooperate with any of the other General Partners 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. No Partner shall issue any press release or other public communication about the formation or existence of the Partnership without the express written consent of BGP, WHGP and Blackstone GP. 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 Partnership, or of any Partner shall have any right whatsoever to require any Partner to contribute capital to the Partnership. 12.18 Power of Attorney. (a) Each of the Limited Partners (other than the Investor Group Partners) does hereby irrevocably constitute and appoint each of WHGP, Blackstone GP and, for so long as it is the Administering General Partner, BGP 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 required or permitted by law or the provisions of this Agreement, (ii) all certificates and other instruments requiring execution by the Partners or any of them and deemed necessary or advisable by WHGP, Blackstone GP or BGP to qualify or continue the Partnership as a Partnership wherein the Partners have limited liability in the jurisdictions where the Partnership may be conducting its operations, (iii) all instruments requiring execution by the Partners or any of them and that WHGP, Blackstone GP or BGP deems appropriate to reflect a change or modification of this Agreement or the Partnership in accordance with this Agreement, including, without limitation, the substitution of assignees as Substituted Partners pursuant to Section 9.6 (PROVIDED, HOWEVER, that any such modification is otherwise in accordance with this Agreement), and (iv) all conveyances and other instruments deemed necessary or advisable by WHGP, Blackstone GP or BGP to effect the dissolution and termination of the Partnership in accordance with this Agreement. Nothing contained in this Section 12.18 shall -78- empower any General Partner to take any action requiring the consent of any other General Partner hereunder unless such consent is first obtained. (b) The powers of attorney granted pursuant to this Section 12.18 are coupled with an interest and shall be irrevocable and survive and not be affected by the subsequent death, incapacity, disability, Bankruptcy or dissolution of the grantor; may be exercised by any of the General Partners either by signing separately as attorney-in-fact for each Partner or by the General Partners acting as attorneys-in-fact for all of them; and shall survive the delivery of an assignment by a Partner of the whole or any fraction of its Interest, except that, where the whole of such Partner's Interest has been assigned or diluted in accordance with this Agreement, the power of attorney of the assignor shall survive the delivery of such assignment for the sole purpose of enabling the General Partners to execute, acknowledge, swear to, deliver, record and file any instrument necessary or appropriate to effect such substitution. In the event of any conflict between this Agreement and any document, instrument, conveyance or certificate executed or filed by any General Partner pursuant to such power of attorney, this Agreement shall control. (c) Each Partner shall execute and deliver to any General Partner, within five days after the receipt of such General Partner's request therefor, such further designations, powers of attorney and other instruments as such General Partner deems necessary or appropriate to carry out the provisions of this Agreement. (d) Notwithstanding the foregoing provisions of this Section 12.18, in the event that BGP has been removed as the Administering General Partner or any General Partner has been removed or has resigned as a General Partner pursuant to the terms of this Agreement or has voluntarily ceased to manage or administer the day-to-day business of the Partnership as contemplated by Section 3.2, then, in either case, the power of attorney granted to BGP or such General Partner, as applicable, pursuant to this Section 12.18 shall immediately be revoked and terminated. 12.19 Construction of Documents. The parties hereto acknowledge that they were represented by counsel in connection with the review, negotiation and drafting of this Agreement and that this Agreement shall not be subject to the principle of construing their meaning against the party that drafted same. 12.20 Time of Essence. Time is of the essence in the performance of each and every term of this Agreement. 12.21 Default by Partnership. In the event that on or prior to the Closing Date, one or more of the Investor Group Partners defaults in its obligations to make Capital Contributions hereunder, then (i) in the event such default results in the Partnership defaulting in its obligations under the BRI Merger Agreement and the Partnership's deposit thereunder being retained by BRI, such defaulting Partner or Partners shall immediately pay in cash to the non-defaulting Partners, as sole and liquidated damages under this Agreement, the amount of any Capital Contributions previously made to the Partnership by such non-defaulting Partners and (ii) the defaulting Partner or Partners shall forfeit their respective Interests in the Partnership and immediately be deemed to have withdrawn from the -79- Partnership. To the extent there is more than one defaulting Partner under this Section, amounts to be paid by the defaulting Partners hereunder shall be paid by each such defaulting Partner in relative proportion to their relative Partnership Percentage Interests. Amounts due to any Partner under this Section and not paid shall accrue interest and compound annually at a rate per annum (until paid in full) equal to the lesser of (i) 20% or (ii) the maximum rate permitted by law. 12.22 Subsidiary Joint Ventures. The Partnership agrees that it will not, without the consent of the holders of a majority of the Class A Preferred Units (excluding any Class A Preferred Units held by a General Partner or an Affiliate of a General Partner), voting as a separate class, transfer Properties of the Partnership having a total value of more than one-third of the total value of all of the Properties of the Partnership to one or more joint venture companies, partnerships or similar entities, if such joint venture companies, partnerships, or similar entities issue equity securities to a party other than the Partnership that rank prior to the Class A Preferred Units with respect to distributions or receipt of proceeds upon liquidation. -80- IN WITNESS WHEREOF, the parties hereto have executed this Agreement of Limited Partnership as of the day and year first above written. GENERAL PARTNERS: WXI/BRH Gen-Par LLC By: /s/ Steven Feldman ------------------ Name: Title: BRE/Berkshire GP L.L.C. By: /s/ Kenneth C. Whitney ---------------------- Name: Title: Aptco Gen-Par, L.L.C. By: /s/ Douglas Krupp ----------------- Name: Title: LIMITED PARTNERS: Whitehall Street Real Estate Limited Partnership XI By: WH Advisors, L.L.C. XI By: /s/ Steven Feldman ------------------ Name: Title: -81- BRE/Berkshire L.P. L.L.C. By: /s/ Kenneth C. Whitney ---------------------- Name: Title: Aptco Holdings, L.L.C. By: /s/ Douglas Krupp ----------------- Name: Title: Stone Street Real Estate Fund 1998 L.P. By: Stone Street Advantage Realty Corp., its General Partner By: /s/ Alan Kava ------------- Name: Title: Bridge Street Real Estate Fund 1998 L.P. By: Stone Street Advantage Realty Corp., its General Partner By: /s/ Alan Kava ------------- Name: Title: Stone Street WXI/BRH Corp. By: /s/ Alan Kava ------------- Name: Title: -82- For the purposes of Section 4.4(c): The Berkshire Companies Limited Partnership By: /s/ Douglas Krupp ----------------- Name: Title: -83- EX-9 3 EXHIBIT 9 April 13, 1999 CONFIDENTIAL Berkshire Realty Holdings, L.P. c/o The Berkshire Group One Beacon Street Boston, Massachusetts 02108 Attn: Douglas S. Krupp, CEO Re: Commitment Letter Ladies and Gentlemen: Affiliates of Douglas S. Krupp ("Krupp"), Blackstone Real Estate Acquisitions III L.L.C. ("Blackstone") and Whitehall Street Real Estate Limited Partnership XI ("Whitehall" and, collectively with Krupp and Blackstone and/or their affiliates, the "Investors") have formed and intend to capitalize Berkshire Realty Holdings, L.P., a Delaware limited partnership ("Holdings"), which will propose a transaction to the Board of Directors of a publicly held Delaware corporation ("Bruin"), pursuant to which (i) Bruin would merge with Holdings and all the outstanding Bruin capital stock (and rights to acquire Bruin capital stock) being converted in the merger into the right to receive cash equal to a price per share (and total purchase price) not to exceed $12.25 per share (the "Bruin Merger") and (ii) immediately prior to such merger, a subsidiary of Holdings would be merged into BRI OP Limited Partnership, a Delaware limited partnership ("OP"), in a transaction pursuant to which OP and OP's current general partner ("OP GP") would become wholly owned by Holdings (the "OP Merger" and together with the Bruin Merger, the "Transaction"). Currently, 79.16% of the partnership interests of OP are directly or indirectly owned by Bruin. This letter is referred to herein as the Commitment Letter. Financing of $755 million, but in no event in excess of 75.5% of the Transaction Value (as defined below) is being sought by you in connection with the Transaction (the "Facility"). A portion of the proceeds of the Facility would be made available to Holdings to finance a portion of the consideration to be paid to Bruin stockholders and option/warrantholders in the Bruin Merger and the cash option in the OP Merger. Additional information regarding the Transaction is set forth in the partnership agreement of Holdings among the Investors and the draft agreements for the Bruin Merger and the OP Merger which you have furnished to us (the "Partnership Agreement"). Based on our understanding of the Transaction as set forth above and in other documents referred to above, and the other information which you have provided to us, each of Whitehall and Blackstone commits to provide, on a several and not joint basis, 50% of the Facility on the terms and subject to the conditions set forth herein (provided that Whitehall shall not be obligated to fund its portion of the Facility unless Blackstone funds its portion of the Facility, and Blackstone shall not be obligated to fund its portion of the Facility unless Whitehall funds its portion of the Facility). LENDERS: Whitehall and Blackstone, together with their respective - ------- permitted participants and co-lenders (each, a "Lender" and, collectively the "Lenders"). TRANSFERABILITY: Prior to closing, Borrower and Lenders will agree upon - --------------- the terms pursuant to which Lenders may transfer their interest in the loan (it being understood and agreed that Lenders may sell participation interests in the loan, provided that Whitehall retains the agent role). BORROWER: OP and/or, at Lenders' election, certain other property- - -------- owning OP subsidiaries. GUARANTORS: Holdings and those OP subsidiaries owning the 58 - ---------- properties identified on Schedule I hereto which are not borrowers. In addition, Guarantors shall include all other subsidiaries of OP for which no third party consent for such guarantee is required or as to which all required third party consents have been obtained (as to special purpose entities, OP shall arrange for charter amendments, as necessary to permit granting of guarantees). Borrower and Guarantors to use all commercially reasonable efforts to obtain such consents. The Investors (or special purpose entities holding the Investors' interest in Holdings) shall be non-recourse guarantors of the Loan, to be secured by an assignment or pledge of their interests in Holdings (see "Security" below). AMOUNT: $755 million in the aggregate, but in no event in excess - ------ of 75.5% of the Transaction Value, defined as the aggregate of (i) the cash required to consummate the Transaction, (ii) assumed debt of at least $233,000,000, (iii) equity contributed or deemed contributed by Investors and (iv) all fees and expenses of Holdings and its subsidiaries relating thereto. The amount borrowed under the Facility is referred to as the Loan. Borrower may borrow less than the entire Loan at closing. In such event, the collateral to secure the Loan will be reduced in accordance with loan allocation amounts among the properties (such allocated loan amounts 2 shall be agreed upon by the Lenders and Borrower before the merger agreement is signed). TERM: Twelve (12) months from initial funding. - ---- USE OF PROCEEDS: Proceeds will be used to finance a portion of the - --------------- aggregate consideration to be paid by Holdings in the Bruin Merger, as needed to fund the cash option in the OP Merger, to refinance specified existing indebtedness of OP and its subsidiaries, to repay intercompany indebtedness owed to Bruin to enable Bruin to finance the redemption of its outstanding Series A Preferred Stock, and to fund certain fees and expenses associated with the Transaction. INTEREST: - -------- Rate: Absent a default, the Loan will bear interest at the rate of 3.75% above the reserve adjusted London Interbank Offered Rate ("LIBOR Rate") for one month interest periods; provided, however, that notwithstanding the foregoing, the minimum interest rate shall at all times be 8.65%. Payment Dates: Interest will be payable monthly. Other Terms: All interest will be calculated based on a 360-day year and actual days elapsed. The financing documentation will contain (a) customary LIBOR breakage provisions and LIBOR borrowing mechanics, (b) LIBOR Rate definitions and (c) customary provisions for determination of interest in the event that LIBOR is not available for any period. Default Rate: From and after the occurrence of a default, the interest rates applicable to the Loan will be increased by 2% per annum over the interest rate otherwise applicable and such interest and fees will be payable on demand. COMMITMENT FEE: 1.0% of the maximum amount of the Facility, payable at - -------------- the drawing of the Facility upon the closing of the Transaction. STRUCTURING FEE: 0.25% of the maximum amount of the Facility, payable at - --------------- the same time as the commitment fee. 3 TAKEDOWN FEE: 0.50% of the amount borrowed, payable upon borrowing. - ------------ REPAYMENT FEE: A repayment fee of 0.50% of the then outstanding amount - ------------- of the Facility, if any, shall be due on June 15, 2000. PREPAYMENTS: Borrowers may voluntarily prepay all or any portion of - ----------- the Loan in minimum amounts of $1 million at any time, upon at least 5 days' prior written notice. All voluntary prepayments will be accompanied by LIBOR breakage costs, if any. SECURITY: First mortgage liens (recorded) and title insurance on - -------- 58 properties identified on Schedule I hereto. Pledge by Holdings of entire equity of OP GP. In addition, the Investors (or special purpose entities holding the Investors' interest in Holdings) will guarantee the Loan (on a non- recourse basis) and assign or pledge their interest in Holdings as security for such guaranty. At Lenders' election, a first priority perfected lien on and security interest in all assets of Holdings, OP and the subsidiaries of OP not covered by the preceding sentences to the extent available without the requirement to obtain any third party consent or as to which all required third party consents are obtained. Borrower and Guarantors to use all commercially reasonable efforts to obtain such consents. Lenders will have dominion over all cash if requested by Whitehall and Blackstone, which arrangement shall permit the release of cash to Borrower and Guarantors absent a default; provided, however, that to the extent that the holders of debt in respect of the 24 properties identified on Schedule II hereto shall have the right to and shall prohibit such an arrangement, Lenders shall not be entitled to same. The Loan will be cross-collateralized and cross-defaulted in a manner satisfactory to Lenders. The Parties will use reasonable good faith efforts to minimize or avoid mortgage recording taxes and title insurance premiums on the 58 properties on Schedule I; it being understood that there will be no mortgages or title insurance obtained with respect to the 24 properties on Schedule II. 4 PARTIAL RELEASES FROM Permitted in connection with third party sales and MORTGAGE OR NEGATIVE certain partial refinancings provided that Lenders COVENANT: receive at least minimum release prices based on - --------------------- allocated loan amounts to be agreed upon by the parties. Minimum release price is to be equal to greater of the property's allocated loan amount or 100% of sale or refinancing proceeds capped at 110% of the property's allocated loan amount. Borrower and Lenders to agree on allocated loan amounts prior to the execution of the merger agreement. DOCUMENTATION: The documentation for the Financing will contain - ------------- representations and warranties, conditions precedent described below, closing document deliveries and similar customary conditions precedent, affirmative and negative covenants (but no financial ratios, maintenance or other similar financial condition tests), indemnities, events of default and remedies, in each case customarily found in documentation for similar transactions. The OP and/or Holdings will provide customary environmental indemnity to the Lenders. This Commitment Letter does not contain all the terms that will be included in the documentation for the Financing. CONDITIONS: The commitment of Lenders for the Facility is - ---------- conditioned upon satisfaction of all the following (all to Lenders' satisfaction): o Relevant documents, such as all transaction documents for the Bruin Merger and the OP Merger and other material agreements to which Borrower is a party, must be acceptable to Lenders in all material respects. o The Bruin Merger and the OP Merger each shall have been consummated in compliance with all applicable law and regulations. o The material terms of the Bruin Merger and the OP Merger, including, without limitation, the consideration offered and the conditions precedent, shall not have been modified, amended or supplemented in any respect and no provision 5 contained therein shall have been waived, without Lenders' prior written consent. o All necessary governmental and material third party waivers and consents shall have been received. o Receipt of opinions of counsel from Borrower's counsel (including local counsel as requested) reasonably acceptable to Lenders. o Receipt of customary mortgage title insurance policies, existing land surveys, evidence of insurance and addition of Lenders as loss payees, and the like. o Absence of a default under the Financing. o Holdings shall have received the equity from Blackstone and Whitehall contemplated by the Summary of Terms (i.e., a minimum of $125 million from each), and not less than 5,416,000 shares of Bruin stock and/or OP Units currently owned by Krupp and his affiliates. o The Transaction shall have closed, and the Loan shall have been drawn, no later than December 31, 1999 (the "Commitment Termination Date"). o Definitive agreements for the Bruin Merger and the OP Merger shall have been executed by April 14, 1999, provided, however, that if definitive agreements are not executed by April 14, 1999 and Lenders do not extend this Commitment Letter, this Commitment Letter will terminate and neither Borrower nor Lenders will be liable hereunder. OTHER TERMS: The documentation for the Facility will require, among - ----------- other things, compliance with covenants pertaining to the following (all in form and substance satisfactory to Lenders): 6 o Financial reporting on a monthly basis. All financial statements shall be prepared on a consolidated and consolidating basis. o Compliance with all applicable law, decrees and material agreements, or obtaining of applicable consents and waivers. o Limitations on commercial transactions, management agreements, service agreements and borrowing transactions with officers, directors, employees and affiliates. o Prohibition on new indebtedness, other than the Facility, and other than refinancings of existing indebtedness (i) in respect of the 24 properties listed on Schedule II, provided the same are on terms not materially more onerous to the Borrower than the existing indebtedness being refinanced and (ii) in respect of the 58 properties identified on Schedule I, provided that payment of the appropriate release price is made. o Prohibitions on liens, mortgages and security interests except those in existence and identified, those incurred in connection with permitted refinancings, and liens on indebtedness permitted to be incurred for the financing of permitted purchases of properties which liens are limited to the properties purchased, and which obligations are solely those of the property owning subsidiary. o Limitations on, or prohibitions of, cash dividends, other distributions to equity holders, payments in respect of subordinated debt and redemption of common or preferred stock. Such limitations and/or prohibitions shall not preclude, in the absence of a default under the Loan, distributions to certain OP Unit Holders who convert their interests to Class A (Preferred) Interests or tax distributions, as contemplated by the Holdings partnership agreement. 7 o Limitations on mergers, acquisitions, or sale of a material portion of assets (other than sales accompanied by payment of specified release prices). o Prohibitions of a direct or indirect change in control of Borrower or Holdings (other than changes which increase the control of Whitehall and Blackstone). The foregoing shall not prohibit any change in ownership within Whitehall or Blackstone. o Customary provisions regarding responsibility for misappropriation of funds. o Limitations on capital expenditures. o Agent's and Lenders' rights of inspection and access to facilities, management and auditors. o Payment of Lenders' costs and expenses in documenting, closing and servicing the Loan (including reasonable attorneys' fees and costs, title insurance premiums and mortgage recording taxes). o Escrow for real estate taxes. o Governing law: New York. The commitment of Lenders hereunder is subject to the execution and delivery of final legal documentation acceptable to Lenders and their counsel incorporating, without limitation, the terms set forth in this Commitment Letter and other terms satisfactory to the Lenders. By signing this Commitment Letter, you acknowledge that this Commitment Letter supersedes any and all discussions and understandings, written or oral, between or among Lenders and any other person as to the Facility, including any prior commitment letters for debt financing for the Transaction. No amendments, waivers or modifications of this Commitment Letter or any of its contents shall be effective unless expressly set forth in writing and executed by you and Lenders. This letter and the agreements contained herein are solely for the benefit of Holdings and do not confer upon any other person or entity (including, without limitation, any partner in Holdings) any rights or remedies and may not be enforced by any person or entity other than Holdings. As described above, the commitments of Whitehall and Blackstone hereunder are several and not 8 joint and are subject to all of the terms of this Commitment Letter, including, without limitation, the conditions to the obligations of the Lenders hereunder. This Commitment Letter is being provided to you on the condition that, except as required by law or SEC Regs (as defined below), neither it nor its contents will be disclosed publicly or privately except to those individuals who are your advisors who have a need to know of them as a result of their being specifically involved in the Bruin Merger and the OP Merger and the Facility and then only on the condition that such matters may not, except as required by law or regulations of the Securities and Exchange Commission ("SEC Regs"), be further disclosed and except that, following your acceptance hereof, you may disclose this Commitment Letter to Bruin and its advisors. No person, other than the parties signatory hereto, is entitled to rely upon this Commitment Letter or any of its contents. No person shall, except as required by law or SEC Regs, use the name of, or refer to Lenders or any of their respective affiliates, in any correspondence, discussions, press release, advertisement or disclosure made in connection with the Transaction without the prior written consent of Lenders. You agree to indemnify and hold harmless each Lender, and its affiliates, and the directors, officers, employees, agents, attorneys and representatives of any of them (each, an "Indemnified Person"), from and against all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including, but not limited to, reasonable attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal), which may be instituted or asserted against or incurred by any such Indemnified Person in connection with, or arising out of, this Commitment Letter, the Financing, the documentation related thereto, any actions or failures to act in connection therewith, and any and all environmental liabilities and legal costs and expenses arising out of or incurred in connection with any disputes between or among any parties to any of the foregoing, and any investigation, litigation, or proceeding related to any such matters. Your obligation for such reimbursement may be assumed by Borrower at closing. Notwithstanding the foregoing, no indemnitor shall be liable for any indemnification to any Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results solely from that Indemnified Person's gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction. Under no circumstances shall any Lender, or any of its affiliates be liable to you or any other person for any punitive, exemplary, consequential or indirect damages in connection with this Commitment Letter, the Facility or the documentation related thereto, regardless of whether the commitment herein is terminated or the Transaction or the Facility closes. For purposes of this paragraph, the term "affiliate" shall not include any affiliated entity which is an Investor. You and Lenders expressly waive any right to trial by jury of any claim, demand, action or cause of action arising in connection with this Commitment Letter, any transaction relating hereto, or any other instrument, document or agreement executed or delivered in connection herewith, whether sounding in contact, tort or otherwise. You and Lenders consent and agree that the state or federal courts located in New York County, City of New York, New York, shall have exclusive jurisdiction to hear and determine any claims or disputes between or among any of the 9 parties hereto pertaining to this Commitment Letter or the Facility under consideration and any investigation, litigation, or proceeding related to or arising out of any such matters, provided, however, that you and Lenders acknowledge that any appeals from those courts may have to be heard by a court located outside of such jurisdiction. You and Lenders expressly submit and consent in advance to such jurisdiction in any action or suit commenced in any such court, and hereby waive any objection which either of them may have based upon lack of personal jurisdiction, improper venue or inconvenient forum. The definitive documentation for the Facility shall contain Borrower's and Guarantors' agreement to the foregoing. This Commitment Letter is governed by and shall be construed in accordance with the law of the State of New York applicable to contracts made and performed in that State. Lenders shall have access to all relevant facilities, personnel and accountants, and copies of all documents which Lenders may reasonably request, including business plans, financial statements (historical and pro forma), books, records, and other documents. Lenders agree to treat any confidential information so received as they would their own confidential information. This Commitment Letter shall be of no force and effect unless and until this Commitment Letter is executed and delivered to Lenders on or before 5:00 p.m. New York City time on April 14, 1999, at both (i) 85 Broad Street, New York, New York 10004 and (ii) 345 Park Avenue, 31st Floor, New York, New York 10154. Once effective, the commitment of Lenders to provide financing in accordance with the terms of this Commitment Letter shall terminate if the Bruin Board of Directors rejects Holdings's proposal relating to the Transaction or if definitive agreements have not been executed by April 14, 1999 (in which case, none of the Holdings, the Investors or their respective affiliates shall have any liability hereunder whether on account of fees, reimbursement obligations or otherwise) or if the Loan does not close by the Commitment Termination Date. 10 We look forward to continuing to work with you toward completing this transaction. Sincerely, WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP XI By: WH ADVISORS, L.L.C., XI, its General Partner By: /s/ Steven Feldman ------------------ Name: Title: BLACKSTONE REAL ESTATE ACQUISITIONS III By: /s/ Kenneth C. Whitney ---------------------- Name: Title: AGREED AND ACCEPTED THIS 13th DAY OF APRIL, 1999. BERKSHIRE REALTY HOLDINGS, L.P. By: /s/ Douglas Krupp - --------------------- 11 EX-10 4 EXHIBIT 10 AGREEMENT AND PLAN OF MERGER BY AND AMONG BERKSHIRE REALTY HOLDINGS, L.P., BRI ACQUISITION, LLC AND BERKSHIRE REALTY COMPANY, INC. DATED AS OF APRIL 13, 1999 TABLE OF CONTENTS Page ---- ARTICLE 1 THE MERGER.............................................................1 1.1 The Merger......................................................1 1.2 Closing.........................................................2 1.3 Effective Time..................................................3 1.4 Effect of Merger on Certificate of Incorporation and By-laws....3 1.5 Directors and Officers..........................................3 1.6 Effect on Shares................................................3 1.7 Merger Consideration............................................4 1.8 Transactions Relating to Seller Partnership.....................5 1.9 Exchange of Certificates; Pre-Closing Dividends: Fractional Shares..........................................................5 1.10 Dissenting Shares...............................................7 1.11 Alternative Structure of Merger.................................7 1.12 Further Assurances..............................................8 ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER...............................8 2.1 Organization, Standing and Power of Seller......................9 2.2 Seller Subsidiaries.............................................9 2.3 Capital Structure..............................................10 2.4 Other Interests................................................11 2.5 Authority; Noncontravention; Consents..........................12 2.6 SEC Documents; Financial Statements; Undisclosed Liabilities...13 2.7 Absence of Certain Changes or Events...........................14 2.8 Litigation.....................................................15 2.9 Properties.....................................................16 2.10 Environmental Matters..........................................18 2.11 Related Party Transactions.....................................20 2.12 Employee Benefits..............................................20 2.13 Employee Matters...............................................22 2.14 Taxes..........................................................23 2.15 No Payments to Employees, Officers or Directors................25 2.16 Brokers........................................................25 2.17 Compliance With Laws...........................................25 2.18 Contracts; Debt Instruments....................................26 2.19 Opinions of Financial Advisors.................................28 2.20 State Takeover Statutes........................................28 2.21 Proxy Statement and Consent Solicitation Statement.............29 -i- Page ---- 2.22 Investment Company Act of 1940.................................29 2.23 Definition of Knowledge of Seller..............................29 2.24 Insurance......................................................29 2.25 Board Recommendation...........................................30 2.26 Representations in Partnership Merger Agreement................30 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER....................30 3.1 Organization, Standing and Power of Parent and Buyer...........30 3.2 [Intentionally Omitted]........................................31 3.3 Ownership of Parent and Buyer..................................31 3.4 Authority; Noncontravention; Consents..........................31 3.5 Litigation.....................................................32 3.6 Undisclosed Liability..........................................33 3.7 Brokers........................................................33 3.8 Compliance With Laws...........................................33 3.9 Contracts; Debt Instruments....................................33 3.10 Solvency.......................................................33 3.11 [Intentionally Omitted]........................................34 3.12 Proxy Statement and Consent Solicitation Statement.............34 3.13 Investment Company Act of 1940.................................34 3.14 Parent and Buyer Not Interested Stockholders...................34 3.15 Definition of Knowledge........................................34 3.16 [Intentionally Omitted]........................................34 3.17 Sufficient Funds...............................................34 3.18 Pro Forma Capitalization Table.................................35 3.19 Representations in Partnership Merger Agreement................35 ARTICLE 4 COVENANTS.............................................................35 4.1 Acquisition Proposals..........................................35 4.2 Conduct of Seller's Business Pending Merger....................37 4.3 Conduct of Parent's and Buyer's Business Pending Merger........40 4.4 Other Actions..................................................42 4.5 Partnership Merger Agreement...................................42 4.6 Private Placement..............................................42 4.7 Irrevocable Letter of Credit...................................42 ARTICLE 5 ADDITIONAL COVENANTS..................................................43 5.1 Preparation of the Proxy Statement; Seller Stockholders Meeting........................................................43 -ii- Page ---- 5.2 Access to Information: Confidentiality........................45 5.3 Reasonable Best Efforts; Notification..........................46 5.4 Tax Treatment..................................................46 5.5 Public Announcements...........................................46 5.6 Transfer Taxes.................................................47 5.7 Benefit Plans..................................................47 5.8 Indemnification................................................47 5.9 Declaration of Dividends and Distributions.....................49 5.10 Resignations...................................................50 5.11 Outside Property Management Agreements.........................50 5.12 Stockholder Claims.............................................50 ARTICLE 6 CONDITIONS............................................................51 6.1 Conditions to Each Party's Obligation to Effect the Merger.....51 6.2 Conditions to Obligations of Parent and Buyer..................51 6.3 Conditions to Obligations of Seller............................53 ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER.....................................55 7.1 Termination....................................................55 7.2 Certain Fees and Expenses......................................56 7.3 Effect of Termination..........................................59 7.4 Amendment......................................................59 7.5 Extension: Waiver..............................................59 ARTICLE 8 GENERAL PROVISIONS....................................................59 8.1 Nonsurvival of Representations and Warranties..................59 8.2 Notices........................................................59 8.3 Interpretation.................................................61 8.4 Counterparts...................................................61 8.5 Entire Agreement; No Third-Party Beneficiaries.................61 8.6 Governing Law..................................................62 8.7 Assignment.....................................................62 8.8 Enforcement....................................................62 8.9 Severability...................................................62 -iii- Page ---- EXHIBITS Exhibit A Financing Commitments Exhibit B Pro Forma Capitalization Table of Parent and its Subsidiaries Exhibit C Form of Letter of Credit Exhibit D Form of Tax Opinions -iv- INDEX OF DEFINED TERMS DEFINED TERM SECTION - ------------ ------- Accrued Dividends........................................................1.7(a) Acquisition Proposal.....................................................4.1(a) Additional Filings.......................................................5.1(a) Affiliate..................................................................2.11 Agreement..............................................................Preamble AICPA Statement..........................................................5.1(b) Alternative Merger.........................................................1.11 Break-Up Expenses........................................................7.2(a) Break-Up Fee.............................................................7.2(a) Buyer..................................................................Preamble Buyer Disclosure Letter...............................................Article 3 Buyer Material Adverse Effect............................................3.1(b) Buyer Operating Partnership...........................................Recital E Cash Collateral..........................................................4.7(a) Certificates.............................................................1.9(c) Certificate of Merger.......................................................1.3 Change of Control Preference.............................................1.7(a) Claims...................................................................5.8(b) Class A Preferred Units.....................................................1.8 Class B Units...............................................................1.8 Closing..................................................................1.2(a) Closing Date.....................................................1.2(a), 1.2(b) Code....................................................................2.12(a) Commitment...............................................................4.2(r) Common Merger Consideration..............................................1.7(a) Consent Solicitation Statement...........................................5.1(a) Controlled Group Member....................................................2.12 Development..............................................................2.9(g) Development Agreements...................................................4.2(i) DGCL........................................................................1.1 DLLCA.......................................................................1.1 Dissenting Shares..........................................................1.10 Effective Time......................................................1.2(b), 1.3 Election Notice............................................................1.11 Employee Plan..............................................................2.12 Encumbrances.............................................................2.9(a) Environmental Law..........................................................2.10 Environmental Liabilities and Costs........................................2.10 Equity Commitments.........................................................3.17 ERISA......................................................................2.12 Escrow Agent.............................................................4.7(a) Escrow Agreement.........................................................4.7(a) Financing Commitment.......................................................3.17 -v- DEFINED TERM SECTION - ------------ ------- Fee Plan.................................................................1.7(c) Flow-Through Entity.....................................................2.14(b) GAAP........................................................................2.6 Governmental Entity......................................................2.5(b) HSR Act..................................................................2.5(b) Hazardous Materials.....................................................2.10(a) Indebtedness............................................................2.18(b) Indemnified Parties......................................................5.8(a) Indemnifying Parties.....................................................5.8(b) Injunction...............................................................7.1(d) Knowledge of Buyer.........................................................3.15 Knowledge of Parent........................................................3.15 Knowledge of Seller........................................................2.23 Laws.....................................................................2.5(b) Lazard.....................................................................2.16 Lehman.....................................................................2.16 Letter of Credit.........................................................4.7(a) Liens....................................................................2.2(b) Liquidation Vote............................................................4.2 Material Contract.......................................................2.18(a) Merger..........................................................Recital A, 1.11 Merger Consideration.....................................................1.7(a) 1940 Act...................................................................2.22 Option Consideration.....................................................1.7(b) Ordinary Course Liabilities..............................................4.2(q) Outside Property Management Agreements..................................2.18(e) Parent.................................................................Preamble Parent Material Adverse Effect...........................................3.1(a) Parent's Closing Notice..................................................1.2(d) Partial Period..............................................................5.9 Partial Period Dividend.....................................................5.9 Partnership Merger .........................................................1.8 Partnership Merger Agreement..........................................Recital E Paying Agent.............................................................1.9(a) Pension Plan...............................................................2.12 Person...................................................................2.2(a) Preferred Merger Consideration...........................................1.7(a) Property Restrictions....................................................2.9(a) Proxy Statement..........................................................5.1(a) Prudential.................................................................2.16 REIT....................................................................2.14(b) SEC......................................................................2.5(b) Securities Act..............................................................2.6 Seller.................................................................Preamble -vi- DEFINED TERM SECTION - ------------ ------- Seller Common Shares.....................................................2.3(a) Seller Contribution Agreements..........................................2.18(a) Seller Disclosure Letter..............................................Article 2 Seller Financial Statement Date.............................................2.7 Seller General Partner.....................................................2.25 Seller Material Adverse Change..............................................2.7 Seller Material Adverse Effect..............................................2.1 Seller OP Units.............................................................1.8 Seller Options...........................................................2.3(b) Seller Partner Approval..................................................2.5(a) Seller Partnership....................................................Recital E Seller Partnership Agreement.............................................2.3(e) Seller Permits.............................................................2.17 Seller Plan..............................................................2.3(a) Seller Preferred Shares..................................................2.3(a) Seller Properties..................................................2.9(a), 2.10 Seller SEC Documents........................................................2.6 Seller Shareholder Approval..............................................2.5(a) Seller Shareholders Meeting..............................................5.1(c) Seller Subsidiaries......................................................2.2(a) Seller Unit Holder..........................................................1.8 Seller's Closing Notice..................................................1.2(c) Seller's Environmental Reports.............................................2.10 Share Unit Account.......................................................1.7(c) Share Units..............................................................1.7(c) Subsidiary...............................................................2.2(a) Superior Acquisition Proposal............................................4.1(d) Surviving Company.....................................................1.1, 1.11 Surviving Operating Partnership.......................................Recital E Takeover Statute...........................................................2.20 Tax(es).................................................................2.14(a) Tax Authority...........................................................2.14(a) Tax Return(s)...........................................................2.14(a) Tax Protection Agreements...............................................2.18(i) Third Party Provisions......................................................8.5 Transactions...............................................................2.25 Transfer Taxes..............................................................5.6 Welfare Plan...............................................................2.12 -vii- AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of April 13, 1999, is by and among Berkshire Realty Holdings, L.P., a Delaware limited partnership ("Parent"), BRI Acquisition, LLC, a Delaware limited liability company and subsidiary of Parent ("Buyer"), and Berkshire Realty Company, Inc., a Delaware corporation ("Seller"). RECITALS: A. The sole member of Buyer and the Board of Directors of Seller deem it advisable and in the best interests of their respective members and stockholders, subject to the conditions and other provisions contained herein, that Buyer shall merge with and into Seller (the "Merger"). B. Seller has received fairness opinions relating to the transactions contemplated hereby as more fully described herein. C. Buyer and Seller desire to make certain representations, warranties and agreements in connection with the transactions contemplated hereby. D. Contemporaneously with the execution of this Agreement, BRI Acquisition Sub, LP, a Delaware limited partnership ("Buyer Operating Partnership"), and BRI OP Limited Partnership, a Delaware limited partnership (the "Seller Partnership"), and Parent will enter into a Merger Agreement (the "Partnership Merger Agreement") pursuant to which, immediately prior to the Merger, Buyer Operating Partnership will be merged with and into Seller Partnership with Seller Partnership as the surviving entity ("Surviving Operating Partnership"). E. Immediately following the Merger, Parent may liquidate Seller and, as a result of such liquidation, Parent would acquire all of the assets, and assume all of the liabilities, of Seller. NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE 1 THE MERGER 1.1 The Merger. Upon the terms and subject to the terms and conditions of this Agreement (including, without limitation, Section 1.11), and in accordance with Section 264 of the Delaware General Corporation Law ("DGCL") and Section 18-209 of the Delaware Limited Liability Company Act ("DLLCA"), Buyer shall be merged with and into Seller, with Seller as the surviving entity (the entity surviving the Merger, the "Surviving Company"). 1.2 Closing. (a) Subject to Section 1.2(b), Seller's compliance with Section 1.2(c) and the satisfaction (or waiver by the parties entitled to the benefit thereof) of the conditions set forth in Article 6, the closing of the Merger (the "Closing") will take place at 10:00 a.m., local time in Boston, Massachusetts on the date (the "Satisfaction Date") which is the first business day to occur on or after the day which is the later of (i) the 10th calendar day following satisfaction (or waiver by the parties entitled to the benefit thereof) of the conditions set forth in Article 6 (other than Sections 6.2(d), 6.2(g), 6.2(i), 6.3(d) and 6.3(g)) and (ii) October 15, 1999, at the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, unless another date or place is agreed to in writing by the parties. The date on which the Closing occurs shall be referred to herein as the "Closing Date." (b) Notwithstanding the provisions of Section 1.2(a) and subject to Parent's compliance with Section 4.7(b) hereof, Parent may elect to extend the Closing Date to any business day on or prior to December 29, 1999 by delivering written notice of such election to Seller as contemplated under Section 1.2(d). (c) On the first business day after the satisfaction (or waiver by Parent and Buyer) of the conditions set forth in Sections 6.1 and 6.2 (other than Sections 6.2(d), 6.2(g) and 6.2(i)), Seller shall deliver a written notice ("Seller's Closing Notice") to Parent and Buyer which (i) sets forth the date that is the Satisfaction Date and (ii) certifies, as of the date of such notice, the satisfaction (or waiver by Parent and Buyer) of the conditions set forth in Sections 6.1 and 6.2 (other than Sections 6.2(d), 6.2(g) and 6.2(i)). (d) At least three business days prior to the Satisfaction Date (as indicated in Seller's Closing Notice), Parent shall deliver a written notice to Seller ("Parent's Closing Notice") indicating one of the following: (i) Parent's determination to exercise the election contemplated by Section 1.2(b) and to extend the Closing Date to such business day on or prior to December 29, 1999 as is set forth in such notice, or (ii) Parent's determination not to exercise the election contemplated by Section 1.2(b), in which case the Closing Date shall be the Satisfaction Date. (e) If the Closing Date is extended as contemplated by Section 1.2(b), then for purposes of the conditions set forth in Section 6.2 (other than Sections 6.2(g) and 6.2(i)), all references in the lettered subsections thereof to the terms "Closing Date" and "Effective Time" shall be deemed to mean the Satisfaction Date, and the certificates and other documents to be delivered by the parties pursuant to such Sections shall be delivered on and as of the Satisfaction Date. The parties hereto agree that other than with respect to the conditions set forth in Section 6.2(g) and 6.2(i) (which conditions shall be satisfied or waived by the parties entitled to the -2- benefit thereof as of the Closing Date), none of the conditions set forth in Section 6.2 shall be required to be satisfied at any time after the Satisfaction Date. Notwithstanding the foregoing, for purposes of determining whether Parent or Buyer has the right to terminate this Agreement pursuant to Section 7.1(b), the conditions set forth in Section 6.2(b) shall, in all circumstances, be evaluated as of the Closing Date. (f) If the conditions set forth in Sections 6.1 and 6.2 are not satisfied (or waived by Parent and Buyer), or if the certificates and other documents required to be delivered pursuant to Section 6.2 are not delivered, in each case on and as of the Satisfaction Date (as indicated in Seller's Closing Notice), then (i) the Satisfaction Date shall be deemed not to have occurred, (ii) Seller's Closing Notice and Parent's Closing Notice shall be void and of no further effect, (iii) the Closing shall remain subject to Seller's further compliance with Section 1.2(c) hereof and the Closing shall occur as provided in Section 1.2(a) and (iv) Parent shall have retained its right, subject to its compliance with Section 1.2(b), to extend the Closing Date as contemplated thereunder. (g) If the Satisfaction Date occurs on or before October 29, 1999 and the Closing Date is extended as contemplated by Section 1.2(b) to a date that is after October 29, 1999, then notwithstanding anything to the contrary contained in the first paragraph of Section 5.9, Seller may declare a dividend not to exceed $.25 per Seller Common Share for the dividend for the fourth quarter of 1999 (i.e., with a record date of November 1, 1999). 1.3 Effective Time. On the Closing Date, the Surviving Company shall execute and file a certificate of merger (the "Certificate of Merger"), executed in accordance with Delaware law, and shall make all other filings and recordings required under Delaware law. The Merger shall become effective at the time ("Effective Time") the Certificate of Merger is filed with the Secretary of State of the State of Delaware, or at such time as Buyer and Seller shall agree should be specified in the Certificate of Merger (not to exceed thirty (30) days after the Certificate of Merger is filed with the Secretary of State of the State of Delaware). Unless otherwise agreed, the parties shall cause the Effective Time to occur on the Closing Date. 1.4 Effect of Merger on Certificate of Incorporation and By-laws. Subject to Section 1.11, the Restated Certificate of Incorporation, as amended, of Seller and the By-laws of Seller, as in effect immediately prior to the Effective Time, shall constitute the Restated Certificate of Incorporation and By-laws, respectively, of the Surviving Company, from and after the Effective Time, until further amended in accordance with applicable Delaware law. 1.5 Directors and Officers. Subject to Section 1.11, the directors and officers of the Surviving Company shall be the Persons who were the directors and officers, respectively, of Seller immediately prior to the Effective Time. Such -3- directors and officers shall continue to serve for the balance of their unexpired terms or their earlier death, resignation or removal. 1.6 Effect on Shares. The effect of the Merger on the shares of Seller shall be as provided in this Article 1. Each membership interest of Buyer outstanding immediately prior to the Merger shall be converted, without any action on the part of the holder thereof, into one share of the common stock of the Surviving Company. 1.7 Merger Consideration. (a) Subject to Section 1.10 and Section 5.9 below, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Buyer, Seller or the holders of the following securities, each Seller Common Share (as defined in Section 2.3(a)) issued and outstanding immediately prior to the Effective Time (other than Seller Common Shares held by Parent, Buyer, any wholly-owned subsidiary of Parent or Buyer, or in the treasury of Seller, which shares, by virtue of the Merger and without any action on the part of the holder thereof, shall be canceled and shall cease to exist with no payment being made with respect thereto, and other than Dissenting Shares (as defined in Section 1.10)) shall be converted into the right to receive $12.25 in cash (the "Common Merger Consideration"), without interest thereon, upon surrender of the certificate formerly representing such share. In addition, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Buyer, Seller or the holders of the following securities, each Seller Preferred Share (as defined in Section 2.3(a)) issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares) shall be converted into the right to receive the "Change of Control Preference" in the amount of $28.75 per Seller Preferred Share together with 115% of any Accrued Dividends per Seller Preferred Share ("Change of Control Preference" and "Accrued Dividends" each being defined in the Certificate of Designation of the Seller Preferred Shares) (the "Preferred Merger Consideration"), without interest thereon, upon surrender of the certificate formerly representing such share. The Surviving Company 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 stockholders of Seller in connection with the payment of the Merger Consideration. The Preferred Merger Consideration, together with the Common Merger Consideration, is hereinafter referred to as the "Merger Consideration". (b) Each outstanding Seller Option (as defined in Section 2.3(b)) shall be subject to the terms of this Agreement. As of the Effective Time, each outstanding Seller Option, whether or not then vested or exercisable, shall have the expiration date thereof accelerated to the Closing Date and shall be converted into the right to receive from the Surviving Company an amount of cash equal to the product of (i) the number of Seller Common Shares subject to the Seller Option and (ii) the excess, if any, of the Common Merger Consideration over the exercise price per Seller Common Share of such option (the "Option Consideration"). Prior to the Effective Time, Seller shall take all steps necessary to give written notice to each -4- holder of a Seller Option that all Seller Options shall expire effective as of the Effective Time and be converted into the right to receive the Option Consideration. The Surviving Company shall cause the Paying Agent (as defined in Section 1.9(a)) to pay each holder of Seller Options, promptly following the Effective Time, the Option Consideration for all Seller Options held by such holder. The Board of Directors of Seller or any committee thereof responsible for the administration of Seller's stock option plans shall take any and all action necessary to effectuate the matters described in this Section 1.7(b) on or before the Effective Time. Any amounts payable pursuant to this Section 1.7(b) shall be subject to any required withholding of taxes and shall be paid without interest. Parent agrees to provide the Surviving Company with sufficient funds to permit the Surviving Company to satisfy its obligations under this Section 1.7(b). (c) The Seller has adopted a Directors Retainer Fee Plan (the "Fee Plan") pursuant to which eligible directors may elect to receive certain fees in cash or in Seller Common Shares or to defer payment of such fees and credit such fees to an account (the "Share Unit Account") consisting of units that are equivalent in value to Seller Common Shares ("Share Units"). The Seller shall take all actions necessary so that all Share Units outstanding immediately prior to the Effective Time shall be canceled immediately prior to the Effective Time in exchange for the right of each holder of Share Units to receive an amount in cash equal to the product of (A) the number of Share Units in such holder's Share Unit Account outstanding immediately prior to the Effective Time and (B) the Common Merger Consideration to be delivered by the Surviving Company immediately following the Effective Time. All applicable withholding taxes attributable to the payments contemplated by this Section 1.7(c) shall be deducted from the amounts payable under this Section 1.7(c) and any amounts payable under this Section 1.7(c) shall be payable without interest. Except as provided in this Section 1.7(c), the Fee Plan shall terminate at the Effective Time. 1.8 Transactions Relating to Seller Partnership. Contemporaneously with the execution of this Agreement, Parent and Buyer shall cause Buyer Operating Partnership to enter into the Partnership Merger Agreement with Seller Partnership pursuant to which, among other things, (i) Buyer Operating Partnership will be merged with and into Seller Partnership (the "Partnership Merger") with Seller Partnership surviving as the Surviving Operating Partnership and (ii) each holder ("Seller Unit Holder") of units in the Seller Partnership ("Seller OP Units") will be offered the option of receiving either (A) an amount per Seller OP Unit equal to the Common Merger Consideration or (B) one Class A Preferred Unit (as defined in the Partnership Merger Agreement) for each Seller OP Unit held by such holder or (C) one Class B Unit (as defined in the Partnership Merger Agreement) for each Seller OP Unit held by such holder. Seller hereby consents to the cancellation of the Seller OP Units it owns immediately prior to the effective time of the Partnership Merger in accordance with the provisions of the Partnership Merger Agreement. Buyer hereby consents to the cancellation of its general partnership interest in Buyer Operating Partnership owned immediately prior to the effective time of the -5- Partnership Merger in accordance with the provisions of the Partnership Merger Agreement. 1.9 Exchange of Certificates; Pre-Closing Dividends: Fractional Shares. (a) Prior to the Effective Time, Buyer shall appoint a paying agent reasonably acceptable to Seller to act as agent (the "Paying Agent") for the payment of the Merger Consideration upon surrender of certificates formerly representing issued and outstanding Seller Common Shares or Seller Preferred Shares, as applicable, and payment in respect of Seller Options and amounts owing under the Fee Plan. (b) Parent and Buyer shall provide to the Paying Agent on or before the Effective Time, for the benefit of the holders of Seller Common Shares, Seller Preferred Shares, Seller Options and Share Units, cash payable in exchange for the issued and outstanding Seller Common Shares, cash payable in exchange for the issued and outstanding Seller Preferred Shares, cash payable in respect of Seller Options and cash payable in respect of Share Units. (c) Promptly after the Effective Time, the Surviving Company shall cause the Paying Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding Seller Common Shares or Seller Preferred Shares (the "Certificates") (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Buyer may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such Certificate shall be entitled to receive in exchange therefor the applicable Merger Consideration, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Seller Common Shares or Seller Preferred Shares which is not registered in the transfer records of Seller, payment may be made to a Person (as defined in Section 2.2(a)) other than the Person in whose name the Certificate so surrendered is registered if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment either shall pay any transfer or other Taxes (as defined in Section 2.14(a)) required by reason of such payment being made to a Person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Company that such Tax or Taxes have been paid or are not applicable. Until surrendered as contemplated by this Section 1.9, each Certificate (other than Certificates representing Dissenting Shares) shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration, without interest. No interest will be paid or will accrue on the Merger Consideration upon the surrender of any Certificate. -6- (d) All Merger Consideration paid upon the surrender of Certificates in accordance with the terms of this Section 1.9 shall be deemed to have been paid in full satisfaction of all rights pertaining to the Seller Common Shares or Seller Preferred Shares, as applicable, formerly represented by such Certificates; provided, however, that Seller shall transfer to the Paying Agent cash sufficient to pay any dividends or make any other distributions with a record date on or prior to the Effective Time which may have been declared or made by Seller on such Seller Common Shares, including without limitation any dividends permitted by the second paragraph of Section 5.9 hereof, or Seller Preferred Shares, as applicable, in accordance with the terms of this Agreement or prior to the date of this Agreement and which remain unpaid at the Effective Time and have not been paid prior to such surrender, and there shall be no further registration of transfers on the stock transfer books of Seller of the Seller Common Shares and Seller Preferred Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Company for any reason, they shall be canceled and exchanged as provided in this Section 1.9. (e) None of Parent, Seller, Buyer, the Surviving Company or the Paying Agent shall be liable to any Person in respect of any Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Any portion of the Merger Consideration delivered to the Paying Agent pursuant to this Agreement that remains unclaimed for 12 months after the Effective Time shall be redelivered by the Paying Agent to the Surviving Company, upon demand, and any holders of Certificates who have not theretofore complied with Section 1.9(c) shall thereafter look only to the Surviving Company for delivery of the Merger Consideration and any unpaid dividends, subject to applicable escheat and other similar Laws (as defined in Section 2.5(b)). 1.10 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, Seller Common Shares and Seller Preferred Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such shares in accordance with Section 262 of the DGCL ("Dissenting Shares") shall not be converted into the right to receive the Merger Consideration as provided in Section 1.7, unless and until such holder fails to perfect or withdraws or otherwise loses his right to appraisal and payment under the DGCL. If, after the Effective Time, any such holder fails to perfect or withdraws or loses his right to appraisal, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration, if any, to which such holder is entitled, without interest thereon. Seller shall give Buyer prompt notice of any demands received by Seller for appraisal of shares and, prior to the Effective Time, Buyer shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, Seller shall not, except with the prior written consent of Buyer, make any payment with respect to, or settle or offer to settle, any such demands. -7- 1.11 Alternative Structure of Merger. While it is currently contemplated that the Merger shall be effected through the merger of Buyer with and into Seller, Parent shall have the option, in its sole discretion and without requiring the further consent of Seller or Seller's Board of Directors or stockholders, to cause the Merger to be effected through an alternative transaction structure of Seller merging into Parent, with Parent being the Surviving Company (the "Alternative Merger"), in which case (i) each general partnership interest and limited partnership interest of Parent issued and outstanding immediately prior to the Effective Time shall be converted in the Merger into a corresponding general partnership interest or limited partnership interest, as the case may be, of the Surviving Company, (ii) the limited partnership agreement of Parent shall be the limited partnership agreement of the Surviving Company and (iii) the general partners and officers of Parent shall be the general partners and officers of the Surviving Company. Parent shall make such election by delivering to Seller a notice (the "Election Notice") electing to effect the Alternative Merger. The Election Notice shall be available for the inspection of any stockholder of Seller upon request during normal business hours. Any such election may be made only after the respective approvals of the Merger and the Partnership Merger by the stockholders of Seller and Seller Unit Holders and after satisfaction (or waiver by the parties entitled to the benefits thereof) of all other conditions to the consummation of the Merger set forth in Article 6. For purposes of this Agreement, (i) all references to the term "Merger" shall be deemed to include the Alternative Merger, except for such references contained in the second sentence of Section 1.6 and in this Section 1.11, and (ii) all references to the term "Surviving Company" shall be deemed to include Parent in its capacity as the surviving entity in the Alternative Merger. As part of the Proxy Statement and the Consent Solicitation Statement and in the manner required by applicable law, Seller shall describe the provisions of this Section 1.11. In the event the Alternative Merger is effectuated, the parties agree that for Federal income tax purposes, the Merger shall be treated as an asset acquisition by Parent, followed by a liquidation of Seller. 1.12 Further Assurances. If, at any time after the Effective Time, the Surviving Company shall determine or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Company the right, title or interest in, to or under any of the rights, properties or assets of Seller acquired or to be acquired by the Surviving Company as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the Surviving Company shall be authorized to execute and deliver, in the name and on behalf of each of Parent, Buyer and Seller or otherwise, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of Parent, Buyer and Seller or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Company or otherwise to carry out this Agreement. -8- ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Parent and Buyer, except as set forth in the letter of even date herewith signed by the President of Seller and delivered to Buyer prior to the execution hereof (the "Seller Disclosure Letter") (it being understood that the Seller Disclosure Letter shall be arranged in sections corresponding to the sections contained in this Article 2, and the disclosures in any section of the Seller Disclosure Letter shall qualify all of the representations in the corresponding section of this Article 2 and, in addition, other sections in this Article 2 to the extent it is clear from a reading of the disclosure that such disclosure is applicable to such other sections) as follows: 2.1 Organization, Standing and Power of Seller. Seller is a corporation duly organized and validly existing under the Laws of Delaware. Seller has the requisite corporate power and authority to carry on its business as now being conducted. Seller is duly qualified or licensed to do business as a foreign corporation and is in good standing 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. Seller has delivered to Buyer complete and correct copies of Seller's Certificate of Incorporation and By-laws, in each case, as amended to the date of this Agreement. As used in this Agreement, "Seller Material Adverse Effect" shall mean a material adverse effect on the business, properties, assets, financial condition, or results of operations of Seller and its Subsidiaries, taken as a whole, including the prevention of the ability of Seller, the Seller General Partner (as defined below) or the Seller Partnership to consummate any of the Transactions (as defined below). 2.2 Seller Subsidiaries. (a) Section 2.2 of the Seller Disclosure Letter sets forth (i) each Subsidiary (as defined below) of Seller (the "Seller Subsidiaries"), (ii) the ownership interest therein of Seller, (iii) if not wholly owned by Seller, the identity and ownership interest of each of the other owners of such Seller Subsidiary and (iv) each apartment community owned by such Subsidiary. As used in this Agreement, "Subsidiary" of any Person (as defined below) means any corporation, partnership, limited liability company, joint venture, trust or other legal entity of which such Person (either directly or through or together with another Subsidiary of such Person) owns 50% or more of the capital stock or other equity interests of such corporation, partnership, limited liability company, joint venture or other legal entity, including, without limitation, the Seller Partnership, but does not include short-term money market investments and other participation interests in short-term investments. As used herein, "Person" means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity. -9- (b) (i) All the outstanding shares of capital stock owned by Seller of each Seller Subsidiary that is a corporation have been validly issued and are (A) fully paid, nonassessable and free of any preemptive rights, (B) owned by Seller or by another Seller Subsidiary and (C) owned free and clear of all pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, "Liens") or any other limitation or restriction (including any contractual restriction on the right to vote or sell the same) other than restrictions under applicable securities laws; and (ii) all equity interests in each Seller Subsidiary that is a partnership, joint venture, limited liability company or trust which are owned by Seller, by another Seller Subsidiary or by Seller and another Seller Subsidiary are owned free and clear of all Liens or any other limitation or restriction (including any contractual restriction on the right to vote or sell the same) other than restrictions under applicable securities laws. Each Seller Subsidiary that is a corporation is 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 Seller Subsidiary that is a partnership, limited liability company or trust is duly organized and validly existing under the Laws of its jurisdiction of organization and has the requisite power and authority to carry on its business as now being conducted. Each Seller Subsidiary is duly qualified or licensed to do business and is in good standing 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 certificate of incorporation, By-laws, organization documents and partnership, joint venture and operating agreements of each Seller Subsidiary, and all amendments to the date of this Agreement, have been made available or previously delivered to Buyer. 2.3 Capital Structure. (a) The authorized shares of capital stock of Seller consist of 60,000,000 shares of preferred stock, $0.01 par value per share, of which 2,737,000 shares are issued and outstanding as of the date hereof and are designated as Series 1997-A Convertible Preferred Shares (the "Seller Preferred Shares"), and 140,000,000 shares of Common Stock, $0.01 par value per share (the "Seller Common Shares"), of which 36,727,591 are issued and outstanding as of the date hereof. As of the date hereof, (i) 3,300,000 Seller Common Shares have been reserved for issuance under the Amended and Restated Stock Option Plan of Seller (the "Seller Plan"), under which options in respect of 1,534,300 Seller Common Shares have been granted and are outstanding as of the date hereof, (ii) 9,982,255 Seller Common Shares are reserved for issuance upon conversion of Seller OP Units, (iii) 5,680,917 Seller Common Shares are reserved for issuance upon conversion of the Seller Preferred Shares and (iv) no Seller Preferred Shares or Seller Common Shares are held in the Seller's treasury. -10- (b) Set forth in Section 2.3 of the Seller Disclosure Letter is a true and complete list of the following: (i) each qualified or nonqualified option to purchase Seller Common Shares granted under the Seller Plan or any other formal or informal arrangement ("Seller Options"); (ii) each grant of Seller Common Shares to employees which are subject to any risk of forfeiture; and (iii) all other warrants or other rights to acquire stock, all limited stock appreciation rights, phantom stock, dividend equivalents, performance units and performance shares granted under the Seller Plan which are outstanding as of the date hereof. On the date of this Agreement, except as set forth in this Section 2.3 or Section 2.3 of the Seller Disclosure Letter, no shares of capital stock of Seller were outstanding or reserved for issuance. (c) All outstanding shares of capital stock of Seller are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no bonds, debentures, notes or other indebtedness of Seller having the right under applicable law or Seller's Certificate of Incorporation or By-laws to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of Seller may vote. (d) There are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which Seller or any Seller Subsidiary is a party or by which any such entity is bound, obligating Seller or any Seller Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock, voting securities or other ownership interests of Seller or any Seller Subsidiary or obligating Seller or any Seller Subsidiary to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking (other than to Seller or a Seller Subsidiary). There are no outstanding obligations of Seller or any Seller Subsidiary to repurchase, redeem or otherwise acquire any shares of stock of Seller or shares of stock or other ownership interests of any Seller Subsidiary. (e) As of the date hereof, 46,376,824 Seller OP Units are validly issued and outstanding, fully paid and nonassessable except to the extent provided by applicable law, of which 36,414,986 are owned by Seller and 312,605 are owned by Berkshire Apartments, Inc. Section 2.3 of the Seller Disclosure Letter sets forth the name of each Seller Unit Holder and the number of Seller OP Units owned by each such Seller Unit Holder as of the date of this Agreement. The Seller OP Units are subject to no restriction established by Seller or under applicable law (other than restrictions on sale imposed by applicable securities laws) except as set forth in the Amended and Restated Limited Partnership Agreement of the Seller Partnership (the "Seller Partnership Agreement") and Seller Contribution Agreements. Seller Partnership has not issued or granted and is not a party to any outstanding commitments of any kind relating to, or any presently effective agreements or understandings with respect to, issuing interests in Seller Partnership or securities convertible into interests in Seller Partnership. -11- (f) All dividends on Seller Common Shares and distributions on Seller OP Units which have been declared prior to the date of this Agreement have been paid in full (except for the dividend on Seller Common Shares and distributions on Seller OP Units payable on May 15, 1999). 2.4 Other Interests. Neither Seller nor any of its Subsidiaries owns directly or indirectly any interest or investment (whether equity or debt) in any corporation, partnership, joint venture, business, trust or entity (other than investments in the Seller Subsidiaries and short-term investment securities). Neither Seller nor any of the Seller Subsidiaries is in material breach of any provision of any agreement, document or contract governing its rights in or to any such interests owned or held by it. To the Knowledge of Seller (as defined in Section 2.23), no other party to any such agreement, document or contract is in material breach of any of its obligations under any such agreement, document or contract, nor has Seller or any of Seller's Subsidiaries received any notice of any such material breach. 2.5 Authority; Noncontravention; Consents. (a) Seller has the requisite corporate power and authority to enter into this Agreement and, subject to the adoption of this Agreement by holders of (i) a majority of the outstanding Seller Preferred Shares and (ii) a majority of the Seller Common Shares and Seller Preferred Shares (voting on an as-converted basis), voting as a single class, representing a majority of the issued and outstanding Seller Common Shares (after giving effect to a deemed conversion of the Seller Preferred Shares) of the Seller (collectively, the "Seller Shareholder Approval"), to consummate the transactions contemplated by this Agreement to which Seller is a party. The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated by this Agreement to which Seller is a party have been duly authorized by all necessary corporate action on the part of Seller, except for and subject to the Seller Shareholder Approval and approval by the holders of a majority of the limited partnership interest in the Seller Partnership (the "Seller Partner Approval"). This Agreement has been duly executed and delivered by Seller and constitutes a valid and binding obligation of Seller, enforceable against Seller in accordance with and subject to its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar Laws relating to creditors' rights and general principles of equity. The respective Boards of Directors of Seller and the Seller General Partner have duly and validly approved, and taken all corporate or partnership action required to be taken by them for the consummation of the Transactions, including but not limited to all actions required to render inapplicable to the Merger and this Agreement (and the transactions provided for herein) the restrictions on "business combinations" (as defined in Section 203(a)(1) of the DGCL) set forth in Section 203 of the DGCL. (b) The execution and delivery of this Agreement by Seller do not, and the consummation of the transactions contemplated by this Agreement to which Seller is a party and compliance by Seller with the provisions of this Agreement will not, require any consent, approval or notice under, or conflict with, or result in any -12- 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 result in the creation of any Lien upon any of the properties or assets of Seller or any Seller Subsidiary under, (i) the Certificate of Incorporation or the Amended and Restated By-laws of Seller or the comparable certificate of incorporation or organizational documents or partnership or similar agreement (as the case may be) of any Seller Subsidiary, each as amended or supplemented to the date hereof, (ii) any loan or credit agreement, note, bond, mortgage, indenture, reciprocal easement agreement, lease, joint venture agreement, development agreement, benefit plan or other agreement, instrument, permit, concession, franchise or license applicable to Seller or any Seller Subsidiary or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in the following sentence, any judgment, order, decree, statute, law, ordinance, rule or regulation (collectively, "Laws") applicable to Seller or any Seller Subsidiary, or their respective properties or assets, other than, in the case of clause (ii) (other than such items relating to the incurrence of indebtedness) or (iii), any such conflicts, violations, defaults, rights, loss or Liens that individually or in the aggregate would not reasonably be expected to (x) have a Seller Material Adverse Effect or (y) prevent or delay beyond December 31, 1999 the consummation of the transactions contemplated by this Agreement. No consent, approval, order or authorization of, or registration, declaration 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 (a "Governmental Entity"), is required by or with respect to Seller or any Seller Subsidiary in connection with the execution and delivery of this Agreement by Seller or the consummation by Seller of the transactions contemplated by this Agreement, except for (i) the filing with the Securities and Exchange Commission (the "SEC") and the New York Stock Exchange of the Proxy Statement (as defined in Section 5.1(a)) and any filings required by the Exchange Act (including Schedule 13E-3), (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (iii) the filing of a certificate of merger with the Secretary of State of the State of Delaware with respect to the Partnership Merger, (iv) any filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (v) the filing of a Form D with the SEC with respect to the transaction contemplated by the Partnership Merger Agreement and (vi) such other consents, approvals, orders, authorizations, registrations, declarations and filings (A) as are set forth in Section 2.5 of the Seller Disclosure Letter, (B) as may be required under (y) federal, state or local environmental Laws or (z) the "blue sky" laws of various states, to the extent applicable or (C) which, if not obtained or made, would not prevent or delay beyond December 31, 1999 the consummation of any of the transactions contemplated by this Agreement or otherwise prevent or delay beyond December 31, 1999 Seller from performing its obligations under this Agreement in any material respect or have, individually or in the aggregate, a Seller Material Adverse Effect. -13- 2.6 SEC Documents; Financial Statements; Undisclosed Liabilities. (a) Seller has filed all Seller SEC Documents (as defined below) on a timely basis. Section 2.6 of the Seller Disclosure Letter contains a complete list of all Seller SEC Documents filed by Seller or Seller Partnership with the SEC since January 1, 1999 and on or prior to the date of this Agreement. All of the Seller SEC Documents (other than preliminary material), as of their respective filing dates, complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (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 will contain at the time of filing if not yet filed, any untrue statement of a material fact or omitted, or will omit at the time of filing if not yet filed, 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, except to the extent such statements have been modified or superseded by later Seller SEC Documents filed and publicly available. The consolidated financial statements of Seller included in the Seller SEC Documents complied (or, with respect to the Seller SEC Documents that have not been filed on or before the date hereof, will comply) as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared (or will be prepared) in accordance with generally accepted accounting principles ("GAAP") (except, in the case of unaudited statements, as permitted by the applicable rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly presented (or will fairly present) in all material respects, in accordance with the applicable requirements of GAAP and the applicable rules and regulations of the SEC, the consolidated financial position of Seller and its Subsidiaries, as of the dates thereof and the consolidated results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Seller has no Subsidiaries which are not consolidated for accounting purposes. (b) Except (i) for liabilities or obligations incurred in the ordinary course of business, (ii) for liabilities or obligations incurred in connection with the transactions contemplated by this Agreement, or (iii) as disclosed in the Seller SEC Documents filed after December 31, 1998 or in the Seller Disclosure Letter, Seller and its Subsidiaries have no material liabilities or obligations (whether absolute, accrued, contingent or otherwise). As used herein, "Seller SEC Documents" shall mean all reports, schedules, forms, statements and other documents required to be filed by the Seller with the SEC since January 1, 1996; provided that with respect to all representations and warranties of Seller contained in this Article 2 (except those contained in Section 2.6(a)), references to Seller SEC Documents shall refer only to those filings made prior to the date hereof. 2.7 Absence of Certain Changes or Events. Except as disclosed in the Seller SEC Documents, since the date of the most recent audited financial statements -14- included in the Seller SEC Documents (the "Seller Financial Statement Date"), Seller and its Subsidiaries have conducted their business only in the ordinary course (taking into account prior practices, including the acquisition of properties and issuance of securities) and, except as disclosed in the Seller SEC Documents or the Seller Disclosure Letter, there has not been (a) any Seller Material Adverse Change (as defined below), (b) except for regular quarterly distributions not in excess of $.25 per Seller Common Share or Seller OP Unit and dividends on the Seller Preferred Shares in accordance with the terms of Seller's Certificate of Incorporation, respectively (or as necessary to maintain REIT status), in each case subject to rounding adjustments as necessary and with customary record and payment dates, and except as permitted by Section 5.9 of 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 Seller Common Shares, the Seller OP Units or the Seller Preferred Shares, (c) any split, combination or reclassification of the Seller Common Shares, the Seller OP Units or the Seller Preferred Shares or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for, or giving the right to acquire by exchange or exercise, shares of stock of Seller or partnership interests in Seller partnerships or any issuance of an ownership interest in, any Seller Subsidiary, (d) any damage, destruction or loss, whether or not covered by insurance, that has or would reasonably be likely to have a Seller Material Adverse Effect, (e) any change in financial or tax accounting methods, principles or practices by Seller or any Seller Subsidiary materially affecting its assets, liabilities or business, except insofar as may have been required by a change in GAAP, (f) (x) any granting by Seller or any of its Subsidiaries to any officer or other key employee of Seller or any of its Subsidiaries of any increase in compensation, except for normal increases in the ordinary course of business consistent with past practice or as required under employment agreements in effect as of December 31, 1998, (y) any granting by Seller or any of its Subsidiaries to any such officer or key employee of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of December 31, 1998 or (z) any entry by Seller or any of its Subsidiaries into any employment, severance or termination agreement with any such officer or key employee except in the ordinary course of business consistent with past practice, (g) any acquisition or disposition of any real property, or any commitment to do so, made by Seller or any of its Subsidiaries or (h) any making or revocation of any material tax election. As used in this Agreement, "Seller Material Adverse Change" shall mean (i) any material adverse change in the business, properties, assets, financial condition or results of operations of Seller and its Subsidiaries, taken as a whole, or (ii) any other change that would prevent or delay beyond December 31, 1999 the ability of Seller, the Seller General Partner or the Seller Partnership from consummating any of the Transactions. 2.8 Litigation. Except as disclosed in the Seller SEC Documents, and other than personal injury and other routine tort litigation arising from the ordinary course of operations of Seller and its Subsidiaries (a) which are covered by adequate insurance or (b) for which all material costs and liabilities arising therefrom are reimbursable pursuant to common area maintenance or similar agreements, as of the -15- date hereof, there are no suits, actions or proceedings pending (in which service of process has been received by an employee of Seller or an Seller Subsidiary) or, to the Knowledge of Seller, threatened in writing against or affecting Seller or any Seller Subsidiary that, individually or in the aggregate, would reasonably be expected to (i) have a Seller Material Adverse Effect or (ii) prevent or delay beyond December 31, 1999 the consummation of any of the material transactions contemplated by this Agreement, nor are there any judgments, decrees, injunctions, rules or orders of any court or arbitrator or suits, actions or proceedings pending or threatened in writing by any Governmental Entity outstanding against Seller or any of its Subsidiaries with respect to any of the Transactions. Notwithstanding the foregoing, (y) Section 2.8 of the Seller Disclosure Letter sets forth, as of the date hereof, each and every (i) uninsured claim with respect to which if determined adversely would reasonably be expected to result in a dollar cost to Seller or its Subsidiaries in excess of $100,000, (ii) equal employment opportunity claim against Seller or a Seller Subsidiary with respect to which if determined adversely would reasonably be expected to result in a cost in excess of $100,000 and (iii) claim against Seller or a Seller Subsidiary relating to sexual harassment and/or discrimination pending or, to the Knowledge of Seller, threatened as of the date hereof with respect to which if determined adversely would reasonably be expected to result in a cost in excess of $100,000, in each case with a brief summary of such claim or threatened claim and (z) no claim is pending or has been made within the five-year period ending on the date of this Agreement under any director's or officer's liability insurance policy maintained at any time by Seller or by any of its Subsidiaries. 2.9 Properties. (a) Seller or a Seller Subsidiary set forth in Section 2.2 of the Seller Disclosure Letter owns good and marketable fee simple title to each of the real properties identified in Section 2.2 of the Seller Disclosure Letter (collectively, the "Seller Properties" and each, a "Seller Property"), which are all of the real properties owned by them as of the date hereof. Except as set forth in the existing title reports identified in clause (iii) below and except for any easements granted in the ordinary course of business since the date of such title reports which do not have a material adverse effect on the operation of any of the Seller Properties, no other Person has any real property ownership interest in any of the Seller Properties. The Seller Properties are not subject to any rights of way, written agreements, Laws, ordinances and regulations affecting building use or occupancy, or reservations of an interest in title (collectively, "Property Restrictions") or Liens (including Liens for Taxes), mortgages or deeds of trust, claims against title, charges which are Liens, security interests or other encumbrances on title (the "Encumbrances"), except for (i) Property Restrictions and Encumbrances set forth in Section 2.9(a)(i) of the Seller Disclosure Letter, (ii) Property Restrictions imposed or promulgated by law or any governmental body or authority with respect to real property, including zoning regulations, which, individually or in the aggregate, would not have a Seller Material Adverse Effect, (iii) Property Restrictions and Encumbrances disclosed on existing title reports or existing surveys (in either case copies of which title reports and -16- surveys have been delivered to Sullivan & Cromwell or made available to Buyer's representatives at the offices of Hale and Dorr LLP on or prior to February 18, 1999); provided that such Encumbrances secure either indebtedness which is described in the Seller Disclosure Letter or indebtedness which has been discharged in full, and (iv) mechanics', carriers', workmen's, repairmen's Liens and other Encumbrances and Property Restrictions, if any, which, individually or in the aggregate, would not have a Seller Material Adverse Effect. Section 2.9 of the Seller Disclosure Letter lists each of the Seller Properties which is under development as of the date of this Agreement and describes the status of such development as of the date hereof. (b) Valid policies of title insurance have been issued insuring Seller or the applicable Seller Subsidiary's fee simple title to each of the Seller Properties owned by it in amounts at least equal to the purchase price thereof paid by Seller or its Subsidiary subject only to the matters disclosed above and in Section 2.9(b) of the Seller Disclosure Letter. Such policies are, at the date hereof, in full force and effect. No claim has been made against any such policy. (c) Seller has not failed to obtain and maintain in full force and effect a certificate, permit or license from any governmental authority having jurisdiction over any of the Seller Properties which failure, individually or in the aggregate, would have a Seller Material Adverse Effect. There is no pending threat of modification or cancellation of any of same which, individually or in the aggregate, would have a Seller Material Adverse Effect. There is no notice of any violation of any federal, state or municipal law, ordinance, order, regulation or requirement issued by any governmental authority which, individually or in the aggregate, would have a Seller Material Adverse Effect. There has been no physical damage to any Seller Properties which, individually or in the aggregate, would have a Seller Material Adverse Effect for which there is no insurance in effect covering the cost of the restoration. (d) Neither Seller nor any of the Seller Subsidiaries has received any notice with respect to any Seller Property to the effect that any condemnation or rezoning proceedings are pending or threatened which, individually or in the aggregate, would have a Seller Material Adverse Effect. All work to be performed, payments to be made and actions to be taken by Seller or the Seller Subsidiaries prior to the date hereof pursuant to any agreement entered into with a governmental body or authority in connection with a site approval, zoning reclassification or other similar action (e.g., Local Improvement District, Road Improvement District, Environmental Mitigation) material to Seller and the Seller Subsidiaries taken as a whole have been performed, paid or taken, as the case may be, and Seller has no Knowledge of any planned or proposed work, payments or actions that may be required after the date hereof pursuant to such agreements that are material to Seller and the Seller Subsidiaries taken as a whole. (e) Except as set forth in Section 2.9(e) of the Seller Disclosure Letter, all of the Seller's Properties are self-managed. -17- (f) The rent roll for the Seller's Properties as of February 1, 1999 has been previously delivered to Buyer and was complete and correct in all material respects as of the date thereof. (g) Except as set forth in Section 2.9(g) of the Seller Disclosure Letter, no Seller Property is currently under development or subject to any agreement with respect to development, and neither Seller nor any Seller Subsidiary shall enter into any such agreements between the date hereof and the Effective Time without the prior written approval of Buyer; provided, however, that "development" shall not include capital improvements made in the ordinary course of business to existing Seller Properties and repairs made to existing Seller Properties. (h) No Governmental Entity having jurisdiction over any Seller Property under development has denied or rejected any applications by Seller for a certificate, permit or license with respect to such Seller Property, which denial or rejection, individually or in the aggregate, would have a Seller Material Adverse Effect. (i) For purposes of this Section 2.9, all individual items that are qualified by Seller Material Adverse Effect and do not cause a representation set forth in this Section 2.9 to be untrue because such items individually do not have a Seller Material Adverse Effect shall be aggregated and the representations set forth in this Section 2.9 shall be deemed to be untrue if the aggregate of all of such individual matters has a Seller Material Adverse Effect. (j) All buildings, structures and other improvements in, on or within the Seller Properties are in good operating condition and repair, subject to continued repair and replacement in accordance with past practice except for any failures to be in such condition and repair that would not, individually or in the aggregate, have a Seller Material Adverse Effect. 2.10 Environmental Matters. (a) Except as disclosed in the Seller SEC Documents and Seller's Environmental Reports (as defined below) previously made available to Buyer, to Seller's knowledge, none of Seller, any of the Seller Subsidiaries or any other Person has caused or permitted (i) the presence of any hazardous substances, hazardous materials, toxic substances or waste materials, pollutants, contaminants, and materials regulated or defined or designated as hazardous, extremely or imminently hazardous, dangerous, or toxic pursuant to any local, county, state, territorial or federal governmental authority or with respect to which such a governmental authority otherwise requires environmental investigation, monitoring, reporting or remediation (collectively, "Hazardous Materials") on any of the Seller Properties that is not in compliance with, or that would result in any liability under, any Environmental Law or (ii) any spills, releases, discharges or disposal of Hazardous Materials to have occurred or be presently occurring on or from the Seller Properties as a result of any -18- construction on or operation and use of the Seller Properties, which presence or occurrence would, individually or in the aggregate, have a Seller Material Adverse Effect; and in connection with the construction on or operation and use of the Seller Properties, Seller and the Seller Subsidiaries have complied with all applicable local, state and federal Environmental Laws, including all regulations, ordinances and administrative and judicial orders relating to the generation, recycling, reuse, sale, storage, handling, transport and disposal of any Hazardous Materials, except to the extent such failure to comply, individually or in the aggregate, would not have a Seller Material Adverse Effect. With respect to each Seller Property, since the date of the most recent Seller's Environmental Report relating to such Seller Property, except where the failure of any of the following to be true individually or in the aggregate would not have a Seller Material Adverse Effect, (i) the assets, properties, businesses and operations of Seller and its Subsidiaries are and have been in compliance with applicable Environmental Laws, (ii) Seller and its Subsidiaries have obtained, currently maintain and, as currently operating, are in compliance with all Seller Permits necessary under any Environmental Law for the conduct of the business and operations of Seller and its Subsidiaries in the manner now conducted, and there are no actions or proceedings pending or threatened to revoke or materially modify such Seller Permits, (iii) no Hazardous Materials have been used, stored, manufactured, treated, processed or transported to or from any such Seller Property except as necessary to the customary conduct of business and in compliance with law and in a manner that does not result in liability under Environmental Laws; (iv) there have been no spills, releases, discharges or disposals of Hazardous Materials on or from such Seller Property; and (v) Seller and Seller Subsidiaries have not received any notice of potential responsibility, letter of inquiry or notice of alleged liability from any Person regarding such Seller Property or the business conducted thereon. For the purposes of this Paragraph 2.10 only, "Seller Properties" shall be deemed to include all property formerly owned, operated or leased by Seller or Seller Subsidiaries; solely, however, as to the period of time when such property was so owned, operated or leased by Seller or the Seller Subsidiaries. Seller has previously delivered or made available to Buyer complete copies of all final versions of environmental investigations and testing or analysis (other than those which have been superseded by more recent investigations, testing or analyses) that are in the possession, custody or control of any of Seller or any of the Seller Subsidiaries with respect to the environmental condition of the Seller Properties, all of which are listed in Section 2.10 of the Seller Disclosure Letter ("Seller's Environmental Reports"). (b) Except as set forth in Seller's Environmental Reports, (i) there are no asbestos-containing materials, lead-based paints, or radon at, in or part of any facility owned, operated or leased by Seller or any of its Subsidiaries, the presence of which, individually or in the aggregate, would reasonably be expected to result in Seller incurring Environmental Liabilities and Costs aggregating $30 million or more and (ii) there are no underground storage tanks owned, operated or controlled by Seller or its Subsidiaries on any real property owned, operated or leased by Seller, the presence of which, individually or in the aggregate, would be reasonably expected to result in Seller incurring Environmental Liabilities and Costs aggregating $30 million or more. -19- (c) For purposes of this Agreement, the terms below shall have the following meanings: "Environmental Law" means any law (including, without limitation, common law), regulation, ordinance, guideline, code, decree, judgment, order, permit or authorization or other legally enforceable requirement of any Governmental Entity relating to or imposing liability with respect to worker or public safety or the indoor or outdoor environment or natural resources, including, without limitation, pollution, contamination, Hazardous Materials, cleanup, regulation and protection of the air, natural resources, water or soils in the indoor or outdoor environment; and "Environmental Liabilities and Costs" means all losses, liabilities, damages, fines, penalties, obligations, costs or expenses (including, without limitation, fees, disbursements, expenses of legal counsel, experts and engineers and the costs of investigation and cleanup studies and to remove, treat or clean up Hazardous Materials) incurred, assessed or levied pursuant to any Environmental Law. 2.11 Related Party Transactions. Set forth in Section 2.11 of the Seller Disclosure Letter is a list of all arrangements, agreements and contracts entered into by Seller or any of the Seller Subsidiaries with any Person who is an officer, director or Affiliate (as defined below) of Seller, or any entity of which any of the foregoing is an Affiliate, except those of a type available to Seller employees generally. Such documents, copies of all of which have previously been delivered or made available to Buyer, are listed in Section 2.11 of the Seller Disclosure Letter. As used in this Agreement, the term "Affiliate" shall have the same meaning as such term is defined in Rule 405 promulgated under the Securities Act. 2.12 Employee Benefits. As used herein, the term "Employee Plan" includes any pension, retirement, savings, disability, medical, dental, health, life, death benefit, group insurance, profit sharing, deferred compensation, stock option, bonus, incentive, vacation pay, tuition reimbursement, severance pay, or other material employee benefit plan, trust, employment agreement, contract, agreement, policy or commitment (including, without limitation, any pension plan, as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder ("ERISA") ("Pension Plan"), and any welfare plan as defined in Section 3(1) of ERISA ("Welfare Plan")), whether any of the foregoing is funded, insured or self-funded, written or oral, (i) sponsored or maintained by Seller or its Subsidiaries (each a "Controlled Group Member") and covering any Controlled Group Member's active or former employees (or their beneficiaries), (ii) to which any Controlled Group Member is a party or by which any Controlled Group Member (or any of the rights, properties or assets thereof) is bound or (iii) with respect to which any current Controlled Group Member may otherwise have any material liability (whether or not such Controlled Group Member still maintains such Employee Plan). Each Employee Plan is listed in Section 2.12 of the Seller Disclosure Letter. With respect to the Employee Plans: -20- (a) Except as disclosed in Section 2.12 of the Seller Disclosure Letter, no Controlled Group Member has any continuing liability under any Welfare Plan which provides for continuing benefits or coverage for any participant or any beneficiary of a participant after such participant's termination of employment, except as may be required by Section 4980B of the Internal Revenue Code of 1986, as amended (the "Code"), or Section 601 (et seq.) of ERISA, or under any applicable state law, and at the expense of the participant or the beneficiary of the participant. (b) Each Employee Plan complies in all material respects with the applicable requirements of ERISA and any other applicable law governing such Employee Plan, and each Employee Plan has at all times been properly administered in all material respects in accordance with all such requirements of law, and in accordance with its terms and the terms of any applicable collective bargaining agreement to the extent consistent with all such requirements of law. Each Pension Plan which is intended to be qualified is qualified under Section 401(a) of the Code, has received a favorable determination letter from the IRS stating that such Plan meets the requirements of Section 401(a) of the Code and that the trust associated with such Plan is tax exempt under Section 501(a) of the Code and to the Knowledge of Seller no event has occurred which would jeopardize the qualified status of any such plan or the tax exempt status of any such trust under Sections 401(a) and Section 501(a) of the Code, respectively, except in circumstances in which, individually or in the aggregate, the failure to so qualify or be tax exempt would not have a Seller Material Adverse Effect. No lawsuits, claims (other than routine claims for benefits) or complaints to, or by, any Person or Governmental Entity have been filed or are pending which, individually or in the aggregate, would have a Seller Material Adverse Effect and, to the Knowledge of Seller, there is no fact or contemplated event which would be expected to give rise to any such lawsuit, claim (other than routine claims for benefits) or complaint with respect to any Employee Plan that would have a Seller Material Adverse Effect. Without limiting the foregoing, except in the case of the following clauses (i) through (vi) as would not individually or in the aggregate have a Seller Material Adverse Effect, the following are true with respect to each Employee Plan: (i) all Controlled Group Members have filed or caused to be filed every material return, report statement, notice, declaration and other document required by any law or governmental agency, federal, state and local (including, without limitation, the Internal Revenue Service and the Department of Labor) with respect to each such Employee Plan, each of such filings has been complete and accurate in all material respects and no Controlled Group Member has incurred any material liability in connection with such filings; (ii) all Controlled Group Members have delivered or caused to be delivered to every participant, beneficiary and other party entitled to such material, all material plan descriptions, returns, reports, schedules, notices, statements and similar materials, including, without -21- limitation, summary plan descriptions and summary annual reports, as are required under Title I of ERISA, the Code, or both, and no Controlled Group Member has incurred any material liability in connection with such deliveries; (iii) all contributions and payments with respect to Employee Plans that are required to be made by a Controlled Group Member with respect to periods ending on or before the Closing Date (including periods from the first day of the current plan or policy year to the Closing Date) have been, or will be, made or accrued before the Closing Date in accordance with the appropriate plan document, actuarial report, collective bargaining agreements or insurance contracts or arrangements or as otherwise required by ERISA or the Code; (iv) with respect to each such Employee Plan, to the extent applicable, Seller has delivered to or has made available to Buyer true and complete copies of (A) plan documents, or any and all other documents that establish the existence of the plan, trust, arrangement, contract, policy or commitment and all amendments thereto, (B) the most recent determination letter, if any, received from the Internal Revenue Service, (C) the three most recent Form 5500 Annual Reports (and all schedules and reports relating thereto) and actuarial reports and (D) all related trust agreements, insurance contract or other funding agreements that implement each such Employee Plan; (v) no payment made or to be made to an officer, director or employee pursuant to an Employee Plan either before, on, or after consummation of the transactions contemplated by this Agreement shall constitute an "excess parachute payment" within the meaning of Section 280G of the Code; and (vi) consummation of the transactions contemplated by this Agreement shall not (A) give rise to a severance pay obligation with respect to those employees who continue employment with the Surviving Corporation or (B) enhance or trigger (including acceleration of vesting, payment or funding) any benefits under any Employee Plan. (c) With respect to each Employee Plan, there has not occurred, and no Person or entity is contractually bound to enter into, any "prohibited transaction" within the meaning of Section 4975(c) of the Code of Section 406 of ERISA, which transaction is not exempt under Section 4975(d) of the Code or Section 408 of ERISA which, individually or in the aggregate, would have a Seller Material Adverse Effect. -22- (d) No Controlled Group Member has maintained or been obligated to contribute to any Employee Plan subject to Code Section 412 or Title IV of ERISA. 2.13 Employee Matters. Neither Seller nor any of the Seller Subsidiaries is a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or other labor organization, nor has Seller or any of the Seller Subsidiaries agreed that any unit of its employees is appropriate for collective bargaining. No union or other labor organization has been certified as bargaining representative for any of Seller's employees. To the Knowledge of Seller, there are no organizational efforts with respect to the formation of a collective bargaining unit presently being made or threatened involving employees of Seller or any of the Seller Subsidiaries. 2.14 Taxes. (a) Each of Seller and the Seller Subsidiaries and any consolidated, combined, unitary or aggregate group for tax purposes of which Seller or any Seller Subsidiary is or has been a member has timely filed all Tax Returns (as defined below) required to be filed by it (after giving effect to any timely filed extension properly granted by a Tax Authority (as defined below) having authority to do so) and has timely paid (or Seller has timely paid on its behalf) all Taxes (as defined below) shown on such Tax Returns as required to be paid by it except (i) as set forth in Section 2.14 of the Seller Disclosure Letter, (ii) Taxes that are being contested in good faith by appropriate proceedings and for which Seller or the applicable Seller Subsidiary shall have set aside on its books adequate reserves or (iii) where the failure to file such Tax Returns or pay such Taxes would not have a Seller Material Adverse Effect. Each such Tax Return is complete and accurate except where any failure to be complete and accurate would not have a Seller Material Adverse Effect. The most recent audited financial statements contained in the Seller SEC Documents reflect an adequate reserve for all Taxes payable by Seller and the Seller Subsidiaries for all taxable periods and portions thereof through the date of such financial statements except where any failure would not have a Seller Material Adverse Effect. Since the Seller Financial Statement Date, Seller has incurred no liability for Taxes under Sections 857(b), 857(f), 860(c) or 4981 of the Code, including without limitation any Tax arising from a prohibited transaction described in Sec tion 857(b)(6) of the Code, and neither Seller nor any Seller Subsidiary has incurred any material liability for Taxes other than in the ordinary course of business. No event has occurred, and no condition or circumstance exists, which presents a risk that any Tax described in the preceding sentence will be imposed upon Seller or any Seller Subsidiary except where any failure would not have a Seller Material Adverse Effect. No material deficiencies for any Taxes have been proposed, asserted or assessed against Seller or any Seller Subsidiary, and no requests for waivers of the time to assess any such Taxes are pending and no extensions of time to assess any such Taxes are in effect. All Taxes required to be withheld, collected and paid over to any Tax Authority by the Seller and any Seller Subsidiary have been timely withheld, collected and paid over to the proper Tax Authority except where failure to -23- do so would not have a Seller Material Adverse Effect. Except as set forth in Section 2.14 of the Seller Disclosure Letter, there are no material pending actions or proceedings by any Taxing Authority for assessment or collection of any Tax. Complete copies of all federal, state and local income or franchise Tax Returns that have been filed by Seller and each Seller Subsidiary for all taxable years beginning on or after January 1, 1996, all extensions filed with any Tax Authority that are currently in effect and all written communications with a Taxing Authority relating thereto, have been or will hereafter promptly be delivered to the Buyer and the representatives of the Buyer. No claim has been made by a Taxing Authority in a jurisdiction where Seller or any Seller Subsidiary does not file Tax Returns that it is or may be subject to taxation by the jurisdiction except where the failure to file such Tax Return would not have a Seller Material Adverse Effect. Neither the Seller nor any Seller Subsidiary holds any material asset (A) the disposition of which would be subject to rules similar to Section 1374 of the Code as a result of an election under Internal Revenue Service Notice 88-19, or (B) that is subject to a consent filed pursuant to Section 341(f) of the Code and the regulations thereunder. Except as set forth in Section 2.14 of the Seller Disclosure Letter, neither the Seller, nor any Seller Subsidiary is obligated to make after the Closing any payment that would not be deductible pursuant to Section 162(m) of the Code except where the lack of such deduction would not have a Seller Material Adverse Effect. Except as set forth in Section 2.14 of the Seller Disclosure Letter, neither Seller nor any Seller Subsidiary is party to, nor has any liability under (including liability with respect to any predecessor entity), any indemnification, allocation or sharing agreement with respect to Taxes. As used in this Agreement, "Tax" or "Taxes" shall include all federal, state, local and foreign income, property, sales, use, occupancy, transfer, recording, withholding, franchise, employment, excise and other taxes, tariffs or governmental charges of any nature whatsoever, together with penalties, interest or additions to tax with respect thereto. As used in this Agreement, "Tax Return" or "Tax Returns" shall include all original and amended returns and reports (including elections, claims, declarations, disclosures, schedules, estimates, computations and information returns) required to be supplied to a Tax Authority in any jurisdiction. As used in this Agreement, "Tax Authority" shall mean the Internal Revenue Service and any other domestic or foreign bureau, department, entity, agency or other Governmental Entity responsible for the administration of any Tax. (b) Seller (i) for all taxable years commencing with its initial taxable year through December 31, 1998 has been properly subject to taxation as a real estate investment trust (a "REIT") within the meaning of Section 856 of the Code and has qualified as a REIT for such years, (ii) has operated since December 31, 1998, and will continue to operate to the Closing, in such a manner as to qualify as a REIT for the taxable year beginning January 1, 1999 determined as if the taxable year of the REIT ended as of the Closing and (iii) has not taken or omitted to take any action which would reasonably be expected to result in a challenge to its status as a REIT, and no such challenge is pending or to Seller's Knowledge threatened. Each Seller Subsidiary which is a partnership, joint venture or limited liability company (i) has been since its formation and continues to be treated for federal income tax purposes as a partnership or disregarded as a separate -24- entity, as the case may be, and has not been treated for federal income tax purposes as a corporation or an association taxable as a corporation and (ii) has not since the later of its formation or the acquisition by Seller of a direct or indirect interest therein owned any assets (including, without limitation, securities) that would cause Seller to violate Section 856(c)(4) of the Code. The nature of the assets of the Seller and the Seller Subsidiaries is such that the sale of all of the assets owned by them would not cause the Seller to be disqualified as a REIT under Code Section 856(c)(2) or 856(c)(3) or otherwise. The Seller has not elected and will not elect to pay Tax on any capital gain recognized on or after January 1, 1999. Each Seller Subsidiary which is a corporation has been since its formation a qualified REIT subsidiary under Section 856(i) of the Code. Seller Partnership is not a publicly traded partnership within the meaning of Section 7704 of the Code, and the interests in the Seller Partnership are not considered to be (i) traded on an established securities market or (ii) readily tradable on a secondary market or the substantial equivalent thereof under either Internal Revenue Service Notice 88-75 or Treasury Regulations Section 1.7704-1. In the case of a partner of Seller Partnership that is a Flow-Through Entity (as defined below), no Person owning an interest in such Flow-Through Entity (directly or through another Flow-Through Entity) is treated as a partner of the Seller Partnership under either Internal Revenue Service Notice 88-75 or Treasury Regulation Section 1.7704-1(h)(3). For purposes of this Section 2.14(b), "Flow-Through Entity" means an entity classified as a partnership, a grantor trust or an S corporation for federal income tax purposes. (c) For purposes of this Section 2.14, all individual items that are qualified by Seller Material Adverse Effect and do not cause a representation set forth in this Section 2.14 to be untrue because such items individually do not have a Seller Material Adverse Effect shall be aggregated and the representations set forth in this Section 2.14 shall be deemed to be untrue if the aggregate of all of such individual matters has a Seller Material Adverse Effect. 2.15 No Payments to Employees, Officers or Directors. Section 2.15 of the Seller Disclosure Letter contains a true and complete list of all cash and non-cash payments, rights to property or other contract rights which will become payable, accelerated or vested to or in each employee, officer or director of Seller or any Seller Subsidiary as a result of the Merger. There is no employment or severance contract, or other agreement requiring payments or an increase in existing payments, cancellation of indebtedness or other obligation to be made on a change of control or otherwise as a result of the consummation of any of the transactions contemplated by this Agreement, with respect to any employee, officer or director of Seller or any Seller Subsidiary. 2.16 Brokers. No broker, investment banker, financial advisor or other Person, other than Lazard Freres & Co. LLC ("Lazard"), Lehman Brothers Inc. ("Lehman") and Prudential Securities Incorporated ("Prudential"), the fees and expenses of which are as described in the engagement letters dated May 22, 1998, as amended on July 27, 1998, May 26, 1998, and December 17, 1998, respectively, and, in the case of Prudential, as further amended on April 13, 1999, true and -25- correct copies of which have previously been given to Buyer, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Seller or any Seller Subsidiary. 2.17 Compliance With Laws. Except as set forth on Section 2.17 of the Seller Disclosure Letter, (i) neither Seller nor any of the Seller Subsidiaries has violated or failed to comply with any statute, law, ordinance, regulation, rule, judgment, decree or order of any Governmental Entity applicable to its business, properties or operations, except to the extent that such violation or failure has not had or would not reasonably be expected to have a Seller Material Adverse Effect; (ii) Seller and its Subsidiaries have, and are in compliance with, all permits, licenses, certificates, franchises, registrations, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of their businesses, taken as a whole ("Seller Permits"), except where the failure to comply has not had or would not reasonably be expected to have a Seller Material Adverse Effect; and (iii) no investigation by any Governmental Entity with respect to the Seller or the Seller Subsidiaries is pending or, to the knowledge of the Seller, threatened, other than investigations which, individually or in the aggregate, would not reasonably be expected to have a Seller Material Adverse Effect. 2.18 Contracts; Debt Instruments. (a) Except as disclosed in the Seller SEC Documents, there is no contract or agreement that purports to limit in any material respect the geographic location in which Seller or any Seller Subsidiary may conduct its business. Neither Seller nor any Seller Subsidiary (i) is in violation of or in default under any material loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or any other material contract, agreement, arrangement or understanding, to which it is a party or by which it or any of its properties or assets is bound (each, a "Material Contract"), nor (ii) to the Knowledge of Seller does such a violation or default exist, except to the extent that such violation or default referred to in clauses (i) or (ii), individually or in the aggregate, would not have a Seller Material Adverse Effect. Each Material Contract which has not been filed as an Exhibit to any of the Seller SEC Documents has been previously delivered to Sullivan & Cromwell or made available to Buyer's representatives at the offices of Hale and Dorr LLP on or prior to February 18, 1999, and a list of all Material Contracts that have not been so filed is set forth in Section 2.18(a) of the Seller Disclosure Letter. Seller has previously delivered to Sullivan & Cromwell or made available to Buyer's representatives at the offices of Hale and Dorr LLP on or prior to February 18, 1999, all contracts and other agreements relating to the contribution of assets to Seller Partnership in exchange for Seller OP Units (the "Seller Contribution Agreements"). Except as set forth in Section 2.18(a) of the Seller Disclosure Letter, neither Seller nor any of its Subsidiaries is in default in any respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Material Contract to which it is a party where such -26- default, individually or in the aggregate, would reasonably be expected to have a Seller Material Adverse Effect. (b) Section 2.18(b) of the Seller Disclosure Letter sets forth a list as of the date hereof of each loan or credit agreement, note, bond, mortgage, indenture and any other agreement and instrument pursuant to which any Indebtedness (as defined below) of Seller or any of Seller Subsidiaries, other than Indebtedness payable to Seller or a Seller Subsidiary, is outstanding or may be incurred in an amount in excess of $50,000, together with the amount outstanding thereunder as of the date hereof. For purposes of this Section 2.18, "Indebtedness" shall mean (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 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) To the extent not set forth in response to the requirements of Section 2.18(b), Section 2.18 of the Seller Disclosure Letter sets forth as of the date hereof each interest rate cap, interest rate collar, interest rate swap, currency hedging transaction, and any other agreement relating to a similar transaction, in each case involving $50,000 or more, to which Seller or any Seller Subsidiary is a party or an obligor with respect thereto. (d) Neither Seller nor any of the Seller Subsidiaries is a party to any agreement relating to the management of any of the Seller Properties by any Person other than Seller Partnership. (e) Neither Seller nor any of the Seller Subsidiaries is a party to any agreement pursuant to which Seller or any Seller Subsidiary manages any real properties other than Seller Properties, except for the agreements described in Section 2.18 of the Seller Disclosure Letter (the "Outside Property Management Agreements"). The Outside Property Management Agreements constitute legal, valid, binding and enforceable obligations of Seller and, to Seller's Knowledge, of each other party thereto, and there exists no default of Seller or, to Seller's Knowledge, any other party thereto, except for any defaults that would not reasonably be expected to have a Seller Material Adverse Effect. (f) Section 2.18 of the Seller Disclosure Letter lists all agreements entered into by Seller or any of the Seller Subsidiaries relating to the development or construction of, or additions or expansions to, any Seller Properties which are currently in effect and under which Seller or any of the Seller Subsidiaries currently has, or expects to incur, any obligation in excess of $1,000,000 per Seller Property or $10,000,000 in the aggregate. True and correct copies of such agreements have previously been delivered or made available to Buyer. -27- (g) Section 2.18(g) of the Seller Disclosure Letter lists all agreements entered into by Seller or any of the Seller Subsidiaries providing for the sale or exchange of, or option to sell or exchange, any Seller Properties or the purchase of or exchange, or option to purchase or exchange, any real estate which are currently in effect. (h) Neither Seller 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 Seller or any Seller Subsidiary,(ii) to pay any additional purchase price for any of the Seller Properties, or (iii) to make any reprorations or adjustments to prorations involving an amount in excess of $100,000 that may previously have been made with respect to any property currently or formerly owned by Seller. (i) Neither Seller nor any Seller Subsidiary has entered into or is subject, directly or indirectly, to any "Tax Protection Agreements." As used herein, a Tax Protection Agreement is an agreement, oral or written, (A) that has as one of its purposes to permit a Person to take the position that such Person could defer federal taxable income that otherwise might have been recognized upon a transfer of property to Seller Partnership or any other Seller Subsidiary that is treated as a partnership for federal income tax purposes, and (B) that (i) prohibits or restricts in any manner the disposition of any assets of Seller or any Seller Subsidiary, (ii) requires that Seller or any Seller Subsidiary maintain, or put in place, or replace, indebtedness, secured by one or more of the Seller Properties, or (iii) requires that Seller or any Seller Subsidiary offer to any Person at any time the opportunity to guarantee or otherwise assume, directly or indirectly, the risk of loss for federal income tax purposes for indebtedness or other liabilities of Seller or any Seller Subsidiary. (j) Except as set forth in Section 2.18(j) of Seller Disclosure Letter and except for obligations to provide funds to the Seller Partnership or to Seller Subsidiaries owned entirely by Seller and/or Seller Partnership, there are no material outstanding contractual obligations of Seller or its Subsidiaries to provide any funds to, or make investments in, any other Person. (k) Except as set forth in Section 2.18(k) of the Seller Disclosure Letter and Section 2.18(i), neither Seller nor any of the Seller Subsidiaries is party to any agreement which would restrict any of them from prepaying any of their Indebtedness without penalty or premium at any time or which requires any of them to maintain any amount of Indebtedness with respect to any of the Seller Properties. 2.19 Opinions of Financial Advisors. Seller has received the opinions of Lazard, Lehman and Prudential, each dated April 13, 1999, a signed copy of each of which is being provided to Buyer concurrently with the execution and delivery of this Agreement, with respect to the fairness of the cash consideration to be received by the holders (other than Parent and its Subsidiaries) of Seller Common Shares and Seller OP Units in connection with the Merger and the Partnership Merger. -28- 2.20 State Takeover Statutes. Seller has taken all action necessary to exempt the transactions contemplated by this Agreement, including without limitation the Merger and the Alternative Merger, among Parent, Buyer and Seller and their respective Affiliates from the operation of any "fair price," "moratorium," "control share acquisition" or any other anti-takeover statute or similar statute other than Section 203 of the DGCL enacted under the state or federal Laws of the United States or similar statute or regulation (a "Takeover Statute"). Assuming the accuracy of the representation and warranty of Parent and Buyer set forth in Section 3.14, the action of the Board of Directors of the Seller in approving the Merger and this Agreement (and the transactions provided for herein) is sufficient to render inapplicable to the Merger and this Agreement (and the transactions provided for herein, including without limitation the Alternative Merger) the restrictions on "business combinations" (as defined in Section 203 of the DGCL) set forth in Section 203 of the DGCL. 2.21 Proxy Statement and Consent Solicitation Statement. The information relating to Seller and the Seller Subsidiaries included in the Proxy Statement (as defined in Section 5.1(a)) and the Consent Solicitation Statement (as defined in Section 5.1(a)) will not, as of the date of mailing of the Proxy Statement and the Consent Solicitation Statement, respectively, contain 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. 2.22 Investment Company Act of 1940. Neither Seller nor any of 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"). 2.23 Definition of Knowledge of Seller. As used in this Agreement, the phrase "Knowledge of Seller" (or words of similar import) means the knowledge of those individuals identified in Section 2.23 of the Seller Disclosure Letter. 2.24 Insurance. Seller and Seller Subsidiaries maintain insurance coverage for Seller and Seller Subsidiaries and their respective properties and assets of a type and in amounts typical of similar companies engaged in the respective businesses in which Seller and Seller Subsidiaries are engaged. All such insurance policies (a) are in full force and effect, and with respect to all policies neither of Seller nor any Seller Subsidiary is delinquent in the payment of any premiums thereon, and no notice of cancellation or termination has been received with respect to any such policy, and (b) are sufficient for compliance with all requirements of law and of all agreements to which Seller or the Seller Subsidiaries are a party or otherwise bound and are valid, outstanding, collectible, and enforceable policies, subject to any exception in the case of either clause (a) or (b), as would not, alone or in the aggregate, be reasonably expected to have a Seller Material Adverse Effect or prevent or materially delay the ability of Seller to consummate the transactions contemplated by this Agreement. Neither Seller nor any Seller Subsidiary has received written notice within the last 12 months from any insurance company or -29- board of fire underwriters of any defects or inadequacies that would materially adversely affect the insurability of, or cause any material increase in the premiums for, insurance covering either Seller or any Seller Subsidiary or any of their respective properties or assets that have not been cured or repaired to the satisfaction of the party issuing the notice, except as would not have a Seller Material Adverse Effect. 2.25 Board Recommendation. The Board of Directors of Seller, at a meeting duly called and held on April 13, 1999, based upon the recommendations of a special committee of the Board of Directors of the Seller consisting of four directors unaffiliated with Parent or Buyer, unanimously adopted resolutions adopting this Agreement and approving the transactions contemplated hereby, including the Merger and the Alternative Merger. The Board of Directors of the general partner of the Seller Partnership (the "Seller General Partner"), at a meeting duly called and held on April 13, 1999, unanimously adopted resolutions adopting the Partnership Merger Agreement and approving the transactions contemplated thereby, including, without limitation, the Partnership Merger (such transactions, together with the transactions contemplated by this Agreement, including, without limitation, the Merger and the Alternative Merger, are hereinafter collectively referred to as the "Transactions"). The Board of Directors of the Seller recommended that Seller's stockholders adopt this Agreement and approve the Merger and the Alternative Merger and the Board of Directors of the Seller General Partner recommended that the Seller Unit Holders adopt the Partnership Merger Agreement and approve the Partnership Merger. Such recommendations shall not be withdrawn, modified or amended, other than as expressly permitted under Section 4.1. 2.26 Representations in Partnership Merger Agreement. The representations and warranties of the Seller General Partner and the Seller Partnership set forth in the Partnership Merger Agreement are true and correct. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER Parent and Buyer, jointly and severally, represent and warrant to Seller, except as set forth in the letter of even date herewith signed by a general partner of Parent and the sole member of Buyer and delivered to Seller prior to the execution hereof (the "Buyer Disclosure Letter") (it being understood that the Buyer Disclosure Letter shall be arranged in sections corresponding to the sections contained in this Article 3, and the disclosures in any section of the Buyer Disclosure Letter shall qualify all of the representations in the corresponding section of this Article 3 and, in addition, other sections in this Article 3 to the extent it is clear from a reading of the disclosure that such disclosure is applicable to such other sections) as follows: -30- 3.1 Organization, Standing and Power of Parent and Buyer. (a) Parent is a limited partnership duly organized and validly existing under the Laws of Delaware and has the requisite power and authority to carry on its business as now being conducted. Parent is duly qualified or licensed to do business as a foreign limited partnership and is in good standing 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 material adverse effect on the ability of Parent and Buyer to consummate the transactions contemplated by this Agreement or the Partnership Merger Agreement ("Parent Material Adverse Effect"). Parent has delivered to Seller complete and correct copies of its organizational documents (including the partnership agreement of Parent) as amended or supplemented to the date of this Agreement. (b) Buyer is a limited liability company duly organized and validly existing under the Laws of Delaware and has the requisite power and authority to carry on its business as now being conducted. Buyer is duly qualified or licensed to do business as a foreign limited liability company and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualifications 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 material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Agreement or the Partnership Merger Agreement (a "Buyer Material Adverse Effect"). Buyer has delivered to Seller complete and correct copies of its organizational documents as amended or supplemented to the date of this Agreement. (c) Parent and Buyer are newly formed and, except for activities incident to the acquisition of Seller, neither Parent nor Buyer has (i) engaged in any business activities of any type or kind whatsoever or (ii) acquired any property of any type or kind whatsoever. 3.2 [Intentionally Omitted]. 3.3 Ownership of Parent and Buyer. All of Parent's partnership interests are owned by affiliates of The Berkshire Companies Limited Partnership, Whitehall Street Real Estate Limited Partnership XI and Blackstone Real Estate Acquisitions III L.L.C. Buyer is a wholly owned Subsidiary of Parent. 3.4 Authority; Noncontravention; Consents. (a) Each of Parent and Buyer has the requisite power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement to which it is a party. The execution and delivery of this Agreement by Parent and Buyer and the consummation by Parent and Buyer of the transactions -31- contemplated by this Agreement to which Parent and/or Buyer is a party have been duly authorized by all necessary partnership or limited liability company action on the part of Parent and Buyer. This Agreement has been duly executed and delivered by Parent and Buyer and constitutes a valid and binding obligation of each of Parent and Buyer, enforceable against each of Parent and Buyer in accordance with and subject to its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar Laws relating to creditors' rights and general principles of equity. (b) The execution and delivery of this Agreement by each of Parent and Buyer does not, and the consummation of the transactions contemplated by this Agreement to which Parent and/or Buyer is a party and compliance by each of Parent and Buyer with the provisions of this Agreement will 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 material obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Parent or any of its Subsidiaries under, (i) the organizational documents of Parent or Buyer or the comparable certificate of incorporation or organizational documents or partnership or similar agreement (as the case may be) of any other Subsidiary of the Parent, each as amended or supplemented to the date of this Agreement, (ii) any loan or credit agreement, note, bond, mortgage, indenture, reciprocal easement agreement, lease or other agreement, instrument, permit, concession, franchise or license applicable to Parent or any of its Subsidiaries or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in the following sentence, any Laws applicable to Parent or any of its Subsidiaries or their respective properties or assets, other than, in the case of clause (ii) or (iii), any such conflicts, violations, defaults, rights, loss or Liens that individually or in the aggregate would not reasonably be expected to (x) have a Parent Material Adverse Effect or a Buyer Material Adverse Effect or (y) prevent the consummation of the transactions contemplated by this Agreement. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Parent or any of its Subsidiaries in connection with the execution and delivery of this Agreement by Parent or Buyer or the consummation by Parent or Buyer of any of the transactions contemplated by this Agreement, except for (i) any filings required under the Exchange Act (including Schedule 13E-3), (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (iii) the filing of a certificate of merger with the Secretary of State of the State of Delaware with respect to the Partnership Merger, (iv) such filings as may be required in connection with the payment of any Transfer Taxes (as defined in Section 5.6), (v) any filings required under the HSR Act, (vi) the filing of a Form D with the SEC with respect to the transaction contemplated by the Partnership Merger Agreement and (vii) such other consents, approvals, orders, authorizations, registrations, declarations and filings (A) as may be required under federal, state or local environmental Laws, (B) as may be required under the "blue sky" laws of various states, to the extent applicable, or (C) which, if not obtained or made, would not prevent or delay beyond December 31, 1999 the consummation of any of the transactions contemplated by this Agreement or otherwise prevent Parent or Buyer -32- from performing its obligations under this Agreement in any material respect or have, individually or in the aggregate, a Parent Material Adverse Effect. 3.5 Litigation. As of the date of this Agreement, there is no suit, action or proceeding pending (in which service of process has been received by an employee of Parent or any of its Subsidiaries) or, to the Knowledge of Parent (as defined in Section 3.15), threatened in writing against or affecting Parent or any of its Subsidiaries that, individually or in the aggregate, would reasonably be expected to prevent or delay beyond December 31, 1999 the consummation of any of the material transactions contemplated by this Agreement, nor, as of the date of this Agreement, is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Parent or any of its Subsidiaries having, or which, insofar as reasonably can be foreseen, in the future would have, any such effect. 3.6 Undisclosed Liability. Neither Parent nor Buyer has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet of Parent or Buyer or in the notes thereto and which, individually or in the aggregate, would have a Parent Material Adverse Effect or Buyer Material Adverse Effect. 3.7 Brokers. No broker, investment banker, financial advisor or other Person, other than Greenhill & Co., LLC, the fees and expenses of which will be paid by Parent, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the Merger based upon arrangements made by or on behalf of Parent or any of its Subsidiaries. 3.8 Compliance With Laws. Neither Parent nor any of its Subsidiaries has violated or failed to comply with any statute, law, ordinance, regulation, rule, judgment, decree or order of any Governmental Entity applicable to its business, properties or operations, except to the extent that such violation or failure would not reasonably be expected to have a Parent Material Adverse Effect or Buyer Material Adverse Effect. 3.9 Contracts; Debt Instruments. Neither Parent nor any of its Subsidiaries (i) has received a written notice that Parent or any of its Subsidiaries is in violation of or in default under any material loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or any other material contract, agreement, arrangement or understanding, to which it is a party or by which it or any of its properties or assets is bound, nor (ii) to the Knowledge of Buyer (as defined in Section 3.15) does such a violation or default exist, except to the extent such violation or default referred to in clauses (i) or (ii), individually or in the aggregate, would not have a Parent Material Adverse Effect or a Buyer Material Adverse Effect. 3.10 Solvency. Immediately after giving effect to the transactions contemplated by this Agreement, the Partnership Merger Agreement and the Equity Commitments and the closing of any financing to be obtained by the Parent, Buyer or -33- Buyer Operating Partnership in order to effect the transactions contemplated by this Agreement, the Surviving Company and the Surviving Operating Partnership shall be able to pay their respective debts as they become due and shall each own property having a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities). Immediately after giving effect to the transactions contemplated by this Agreement, the Partnership Merger Agreement and the Equity Commitments and the closing of any financing to be obtained by Parent, Buyer or Buyer Operating Partnership in order to effect the transactions contemplated by this Agreement and the Partnership Merger Agreement, the Surviving Company and the Surviving Operating Partnership shall have adequate capital to carry on their respective businesses. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated by this Agreement and the Partnership Merger Agreement and the closing of any financing to be obtained by Parent, Buyer or Buyer Operating Partnership in order to effect the transactions contemplated by this Agreement and the Partnership Merger Agreement with the intent to hinder, delay or defraud either present or future creditors of Parent, Buyer, Buyer Operating Partnership, the Surviving Company or the Surviving Operating Partnership. 3.11 [Intentionally Omitted]. 3.12 Proxy Statement and Consent Solicitation Statement. The information provided by Parent or Buyer with respect to Parent and its Subsidiaries for inclusion in the Proxy Statement and the Consent Solicitation Statement will not, as of the date of mailing of the Proxy Statement and the Consent Solicitation Statement, respectively, contain 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. 3.13 Investment Company Act of 1940. Neither Parent nor any of its Subsidiaries is, or at the Effective Time will be, required to be registered under the 1940 Act. 3.14 Parent and Buyer Not Interested Stockholders. Neither Parent nor Buyer is an "interested stockholder" of Seller within the meaning of Section 203 of the DGCL. 3.15 Definition of Knowledge. As used in this Agreement, the phrase "Knowledge of Parent" or "Knowledge of Buyer" (or words of similar import) means the knowledge of those individuals identified in Section 3.15 of the Buyer Disclosure Letter. 3.16 [Intentionally Omitted]. 3.17 Sufficient Funds. After giving effect to Parent's equity commitments provided in the partnership agreement of Parent (the "Equity Commitments"), and to borrowings under Parent's financing commitments attached as Exhibit A (the -34- "Financing Commitments"), the Surviving Company and the Surviving Operating Partnership will have sufficient funds available to: (a) refinance or repay in cash all indebtedness for borrowed money of Seller or any Seller Subsidiary that will become due as a result of the transactions contemplated by this Agreement or the Partnership Merger Agreement, plus unpaid interest accrued thereon, and any prepayment, breakage or other costs associated with the repayment or refinancing, as the case may be; (b) pay all amounts required to be paid pursuant to this Agreement and the Partnership Merger Agreement; (c) pay all fees, costs and expenses incurred by Seller and the Seller Partnership in connection with this Agreement, the Partnership Merger Agreement and the transactions contemplated herein and therein assuming such fees, costs and expenses (other than severance costs) are not in excess of $11 million; and (d) pay all fees, costs and expenses incurred by Parent, Buyer and Buyer Operating Partnership in connection with this Agreement, the Partnership Merger Agreement and the other transactions contemplated herein and therein. 3.18 Pro Forma Capitalization Table. Attached hereto as Exhibit B is a true and correct pro forma capitalization table of Parent and its Subsidiaries, giving effect to the Equity Commitments, the Financing Commitments and consummation of the transactions contemplated by this Agreement and the Partnership Merger Agreement. 3.19 Representations in Partnership Merger Agreement. The representations and warranties of Parent and the Buyer Operating Partnership set forth in the Partnership Merger Agreement are true and correct. ARTICLE 4 COVENANTS 4.1 Acquisition Proposals. During the period from the date hereof and continuing through the Effective Time or the earlier termination of this Agreement in accordance with its terms, Seller agrees that: (a) neither it nor any of the Seller Subsidiaries shall initiate, solicit or knowingly encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer (including, without limitation, any proposal or offer to its stockholders) with respect to a merger, acquisition, tender offer, exchange offer, consolidation, sale of assets or similar transaction involving all or any significant portion of the assets or any equity securities of, Seller or any of its Subsidiaries, other than the transactions contemplated by this Agreement (any such proposal or offer being hereinafter referred to as an "Acquisition Proposal") or engage in any negotiations concerning or provide any confidential information or data -35- to, or have any discussions with, any Person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal; (b) it shall direct and use its best efforts to cause its officers, directors, employees, agents or financial advisors not to engage in any of the activities described in Section 4.1(a); (c) it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing and will take the necessary steps to inform the individuals or entities referred to in Section 4.1(b) of the obligations undertaken in this Section 4.1; and (d) it will notify Buyer promptly if Seller 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 Agreement shall prohibit the Board of Directors of Seller (and the officers, directors, employees, agents and financial advisors of Seller acting at the direction of the Board of Directors) from prior to the Seller Shareholders Meeting (as defined below) furnishing information to or entering into discussions or negotiations with, any Person that makes an unsolicited Acquisition Proposal, if, and only to the extent that (A) the Board of Directors of Seller determines in good faith that such action is required for the Board of Directors to comply with its duties to stockholders imposed by law and such proposal is a Superior Acquisition Proposal (as defined below), (B) prior to furnishing such information to, or entering into discussions or negotiations with, such Person, Seller provides written notice to Buyer to the effect that it is furnishing information to, or entering into discussions with, such Person and (C) subject to any confidentiality agreement with such Person, Seller keeps Buyer informed of the status (not the terms) of any such discussions or negotiations (Seller agreeing that it will not enter into any confidentiality agreement with any Person subsequent to the date hereof which prohibits Seller from providing such information to Buyer); and (ii) to the extent applicable, taking and disclosing to the Seller stockholders a position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal; provided, however, that the Board of Directors of Seller may not approve or recommend an Acquisition Proposal, or withdraw or modify its approval or recommendation of this Agreement and the Merger, unless such Acquisition Proposal is a Superior Acquisition Proposal. Nothing in this Section 4.1 shall (x) permit Seller to terminate this Agreement (except as specifically provided in Article 7 hereof), (y) permit Seller to enter into an agreement with respect to an Acquisition Proposal during the term of this Agreement (other than a confidentiality agreement in customary form executed as provided above) or (z) affect any other obligation of Seller under this Agreement; provided, however, that the Board of Directors of Seller may approve and recommend a Superior Acquisition Proposal and, in connection therewith, withdraw or modify its approval or -36- recommendation of this Agreement and the Merger. As used herein, "Superior Acquisition Proposal" means a bona fide Acquisition Proposal made by a third party which the Board of Directors of Seller (or a duly constituted committee thereof charged with considering Acquisition Proposals) determines in good faith (after consultation with its financial advisor) to be more favorable to Seller's stockholders than the Merger and which the Board of Directors of Seller (or any such committee) determines is reasonably capable of being consummated. 4.2 Conduct of Seller's Business Pending Merger. During the period from the date hereof and continuing through the Effective Time, except as consented to in writing by Buyer or as contemplated by this Agreement, specifically including Section 1.7(b), and except as set forth on Section 4.2 of the Seller Disclosure Letter, Seller shall, and shall cause each of the Seller Subsidiaries to: (a) conduct its business only in the usual, regular and ordinary course and in substantially the same manner as heretofore conducted and take all action necessary to continue to qualify as a REIT; (b) use its reasonable efforts to (i) preserve intact its business (corporate or otherwise) organizations and goodwill; provided that Seller may cause Seller General Partner to be converted into a Delaware limited liability company on or prior to the Closing Date and take such actions to cause the conversions and liquidations contemplated by Section 6.2(g) to occur, (ii) keep available the services of its officers and key employees and (iii) keep intact the relationship with its customers, tenants, suppliers and others having business dealings with Seller and Seller's Subsidiaries; (c) confer on a regular basis with one or more representatives of Buyer to report operational matters of materiality and, subject to Section 4.1, any proposals to engage in material transactions; (d) promptly notify Buyer of any material emergency or other material adverse change in the condition (financial or otherwise), 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 (or communications indicating that the same may be contemplated); (e) promptly deliver to Buyer true and correct copies of any report, statement or schedule to be filed with the SEC subsequent to the date of this Agreement and prior to the Closing Date; (f) maintain its books and records in accordance with GAAP consistently applied and not change in any material manner any of its methods, principles or practices of accounting in effect at the Seller Financial Statement Date, except as may be required by the SEC, applicable law or GAAP; -37- (g) duly and timely file all material Tax Returns and other documents required to be filed with federal, state, local and other Tax Authorities, subject to timely extensions permitted by law, provided Seller notifies Buyer that it is availing itself of such extensions and provided such extensions do not adversely affect Seller's status as a qualified REIT under the Code; (h) not make or rescind any material express or deemed election relative to Taxes (unless required by law or necessary to preserve Seller's status as a REIT or the status of any Seller Subsidiary as a partnership for federal income tax purposes or as a qualified REIT subsidiary under Section 856(i) of the Code, as the case may be); (i) not acquire, enter into any option to acquire, or exercise an option or contract to acquire, additional real property, incur additional indebtedness except for working capital under its revolving lines of credit, encumber assets or commence construction of, or enter into any agreement or commitment to develop or construct, other real estate projects, except with respect to the construction of the multi-family residential projects described in the Seller SEC Documents or the Seller Disclosure Letter as being under development in accordance with the agreements in existence on the date of this Agreement and previously furnished to Buyer (the "Development Agreements"); (j) not (except as contemplated by this Agreement) amend its certificate of incorporation or By-laws, or the articles or certificate of incorporation, bylaws, code of regulations, partnership agreement, operating agreement or joint venture agreement or comparable charter or organization document of any Seller Subsidiary; (k) make no change in the number of its shares of capital stock, membership interests or units of limited partnership interest (as the case may be) issued and outstanding or reserved for issuance, other than pursuant to (i) the exercise of options or other rights disclosed in Section 2.3 of the Seller Disclosure Letter, (ii) the conversion of Seller Preferred Shares, or (iii) the conversion or redemption of Seller OP Units pursuant to the Seller Partnership Agreement for Seller Common Shares or cash, at Seller's option; (l) except as set forth in Section 4.2(l) of the Seller Disclosure Letter, grant no options or other rights or commitments relating to its shares of capital stock, membership interests or units of limited partnership interest or any security convertible into its shares of capital stock, membership interests or units of limited partnership interest, or any security the value of which is measured by shares of capital stock, or any security subordinated to the claim of its general creditors and, except as contemplated by this Agreement, not amend or waive any rights under any of the Seller Options; (m) except as provided in Section 5.9 and in connection with the use of Seller Common Shares to pay the exercise price or tax withholding in -38- connection with equity-based employee benefit plans by the participants therein, not (i) authorize, declare, set aside or pay any dividend or make any other distribution or payment with respect to any Seller Common Shares, Seller Preferred Shares or Seller OP Units or (ii) directly or indirectly redeem, purchase or otherwise acquire any shares of capital stock, membership interests or units of partnership interest or any option, warrant or right to acquire, or security convertible into, shares of capital stock, membership interests, or units of partnership interest, except for (a) redemptions of Seller Common Shares required under Article V of the Restated Certificate of Incorporation of Seller in order to preserve the status of Seller as a REIT under the Code or (b) conversions or redemptions of Seller OP Units, whether or not outstanding on the date of this Agreement, for cash or Seller Common Shares in accordance with the terms of the Seller Partnership Agreement; (n) not sell, lease, mortgage, subject to any material Lien or otherwise dispose of any of the Seller Properties; (o) not sell, lease, mortgage, subject to any material Lien or otherwise dispose of any of its personal property or intangible property, except sales of equipment which are not material to Seller and its Subsidiaries taken as a whole which are made in the ordinary course of business; (p) not make any loans, advances or capital contributions to, or investments in, any other Person, other than loans, advances and capital contributions to Seller Subsidiaries in existence on the date hereof; (q) not pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) which are material to Seller and its Subsidiaries taken as a whole, other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) furnished to Buyer or incurred in the ordinary course of business consistent with past practice (collectively, "Ordinary Course Liabilities"), nor fail to pay Ordinary Course Liabilities as they come due consistent with past practice; (r) except as provided in Section 4.2(i) above, not enter into any commitment, contractual obligation or transaction (each, a "Commitment") for the purchase of any real estate; provided that expansion or improvements made in the ordinary course of business to existing real property shall not be considered a purchase of real property; (s) 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; -39- (t) not enter into any contractual obligation with any officer, director or Affiliate of Seller; (u) not increase any compensation or enter into or amend any employment, severance or other agreement with any of its officers, directors or employees earning a base salary of more than $100,000 per annum, other than as required by any contract or Employee Plan or pursuant to waivers by employees of benefits under such agreements; (v) not adopt any new employee benefit plan or amend, terminate or increase any existing plans or rights, not grant any additional options, warrants, rights to acquire stock, stock appreciation rights, phantom stock, dividend equivalents, performance units or performance stock to any officer, employee or director, or accelerate vesting with respect to any grant of Seller Common Shares to employees which are subject to any risk of forfeiture, except for changes which are required by law and changes which are not more favorable to participants than provisions presently in effect; (w) not change the ownership of any of its Subsidiaries, except changes which arise as a result of the conversion of Seller OP Units into Seller Common Shares or cash; (x) not accept a promissory note in payment of the exercise price payable under any option to purchase Seller Common Shares; (y) not enter into or amend or otherwise modify or waive any material rights under any agreement or arrangement for the Persons that are executive officers or directors of Seller or any Seller Subsidiary; (z) not directly or indirectly or through a subsidiary, merge or consolidate with, acquire all or substantially all of the assets of, or acquire the beneficial ownership of a majority of the outstanding capital stock or a majority of any other equity interest in, any Person; (aa) perform all agreements required to be performed by the Seller and its Subsidiaries (including the Seller General Partner and the Seller Partnership) under the Partnership Merger Agreement; (bb) not make or revoke any material tax election or settle or compromise any material tax liability; and (cc) not agree, commit or arrange to take any action prohibited under this Section. Notwithstanding anything in this Agreement to the contrary, Seller shall have the right, in accordance (except with respect to timing) with the applicable provisions of its Restated Certificate of Incorporation, as amended, to submit to its stockholders -40- a proposal to liquidate the Seller (the "Liquidation Vote") and to make all required filings with the SEC and take all such other necessary or appropriate actions in connection therewith. 4.3 Conduct of Parent's and Buyer's Business Pending Merger. Prior to the Effective Time, except as (i) contemplated by this Agreement, or (ii) consented to in writing by Seller, Parent shall, and shall cause Buyer to: (a) use its reasonable efforts to preserve intact its business organizations and goodwill and keep available the services of its officers and employees; (b) promptly notify Seller of any material emergency or other material change in the condition (financial or otherwise), business, properties, assets, liabilities, prospects or the normal course of its businesses or in the operation of its properties, or of any material governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated); (c) not amend its certificate of limited partnership or limited partnership agreement, or the articles or certificate of incorporation, bylaws, code of regulations, partnership agreement, operating agreement or joint venture agreement or comparable charter or organization document of any Subsidiary of the Parent; provided, however, that any such amendment may be made (1) in connection with the financing of Parent, Buyer and Buyer Operating Partnership in accordance with the terms of the Equity Commitments and the Financing Commitments, so long as any such amendment would not reasonably be expected to materially adversely affect Seller's stockholders, the Seller Unit Holders, the Merger or the transactions contemplated by the Partnership Merger Agreement or (2) so long as such amendment would not, under Sections 3.7 or 11.1 of the limited partnership agreement of Parent, require the consent of any holder of Class A Preferred Units or Class B Units if such securities were issued and outstanding at the time of such amendment and the holders of such securities were then limited partners of the Partnership; (d) not enter into any Commitment for the acquisition of any interest in real property if the amount of such Commitment would cause the aggregate amount of all such Commitments subsequent to the date hereof to exceed $1,000,000 unless such Commitment has been approved by Seller; (e) not directly or indirectly, through a subsidiary or otherwise, merge or consolidate with, or acquire all or substantially all of the assets of, or the beneficial ownership of a majority of the outstanding capital stock or other equity interests in any Person whose securities are registered under the Exchange Act unless such transaction has been approved by Seller; (f) except as contemplated by this Agreement, not issue any Buyer or Buyer Operating Partnership securities pursuant to a Registration Statement filed -41- with the SEC relating to the public offering of any Buyer or Buyer Operating Partnership securities from the date hereof until the date of the Proxy Statement (as defined in Section 5.1(a)) unless such issuance has been approved by Seller; (g) use reasonable best efforts to do all necessary things required to close the equity funding contemplated by the Equity Commitments and the borrowings contemplated by the Financing Commitments and to cause such equity funding and such borrowings to be made available to Parent, Buyer and Buyer Operating Partnership as provided therein; and (h) not agree, commit or arrange to take any action prohibited under this Section. 4.4 Other Actions. Each of Seller on the one hand and Parent and Buyer on the other hand shall not knowingly take, and shall use commercially reasonable efforts to cause their Subsidiaries not to take, any action that would result in (i) any of the representations and warranties of such party (without giving effect to any "knowledge" qualification) set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties (without giving effect to any "knowledge" qualification) that are not so qualified becoming untrue in any material respect or (iii) except as contemplated by Section 4.1, any of the conditions to the Merger set forth in Article 6 not being satisfied. 4.5 Partnership Merger Agreement. Parent shall, and shall cause its Subsidiaries to, perform all agreements required to be performed by the Parent and its Subsidiaries (including the Buyer Operating Partnership) under the Partnership Merger Agreement. 4.6 Private Placement. Parent shall take all actions necessary for Parent to offer and sell interests in Parent to holders of Seller OP Units in the manner contemplated by the Partnership Merger Agreement and Section 5.1 hereof and as shall be required for the offering and sale of such units of limited partnership interest to be exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D. 4.7 Irrevocable Letter of Credit. (a) Parent has delivered to American Stock Transfer and Trust Company (the "Escrow Agent") $29,500,000 (the "Cash Collateral") in cash to secure the obligation of Parent and Buyer to pay certain fees and expenses pursuant to Section 7.2 and to be held in accordance with the terms of an Escrow Agreement dated as of date hereof among the Escrow Agent, Seller, Seller Partnership and Parent (the "Escrow Agreement"). At the election of Parent and if Seller has not given a notice to the Escrow Agent directing the Escrow Agent to terminate Parent's right to receive any part of the Cash Collateral, Parent may deliver to the Escrow Agent an irrevocable letter of credit in the amount of the Cash Collateral, substantially in the form attached hereto as Exhibit C, with such changes as shall be -42- reasonably satisfactory to Seller and from a bank reasonably satisfactory to Seller (the "Letter of Credit"). Upon delivery of such Letter of Credit and if Seller has not given a notice to the Escrow Agent directing the Escrow Agent to terminate Parent's right to receive any part of the Cash Collateral, the full amount of the Cash Collateral then held by the Escrow Agent shall be immediately returned to Buyer. Seller shall, simultaneously with delivering any direction to the Escrow Agent to terminate Parent's right to receive any part of the Cash Collateral as provided in the Escrow Agreement or to make a draw under the Letter of Credit, deliver to Parent and Buyer a certificate confirming that Seller is entitled to make such direction pursuant to Section 7.2 and, if such certification is false or Seller is not otherwise entitled to make such direction pursuant to Section 7.2, Parent and Buyer shall be entitled to all remedies available at law or in equity (including recovery of any amounts improperly withdrawn or drawn); provided, however, that Parent and Buyer shall notify the Seller within 30 days after receiving such certificate if they wish to assert that Seller is not entitled to so direct the Escrow Agent and any failure to provide such notice within such 30 day period shall irrevocably prohibit Parent and Buyer from maintaining that Seller was not so entitled. (b) If Parent elects to extend the Closing Date as contemplated under Section 1.2(b), then on or prior to the Additional Collateral Date (as defined below), Parent shall increase the Cash Collateral by either delivering an additional $25,000,000 to the Escrow Agent in cash to be held in accordance with the terms of the Escrow Agreement or, if Parent has previously delivered a Letter of Credit to the Escrow Agent as contemplated under Section 4.7(a), by amending such Letter of Credit to increase the amount available thereunder by an additional $25,000,000. As used herein, the term "Additional Collateral Date" shall mean the first business day following the Satisfaction Date; provided, however, that if the conditions set forth in Sections 6.1 and 6.2 (other than Sections 6.2(g) and 6.2(i)) are satisfied (or waived by Parent and Buyer), and if the certificates and other documents required to be delivered pursuant to Section 6.2 are delivered, in each case as of the Satisfaction Date and at or prior to 9:30 a.m. on such date, then the term "Additional Collateral Date" shall mean the Satisfaction Date. ARTICLE 5 ADDITIONAL COVENANTS 5.1 Preparation of the Proxy Statement; Seller Stockholders Meeting. (a) The parties shall cooperate and promptly prepare and Seller shall file with the SEC as soon as practicable a proxy statement with respect to the meeting of the stockholders of Seller in connection with the Merger (the "Proxy Statement"). The parties shall cooperate and promptly prepare and the appropriate party shall file with the SEC as soon as practicable any other filings required under the Exchange Act ("Additional Filings"), including without limitation, a Rule 13e-3 Transaction Statement on Schedule 13E-3 with respect to the Merger to be filed jointly by Seller, Parent and Buyer, together with any required amendments thereto. -43- The parties shall cooperate and promptly prepare a Consent Solicitation/Information Statement of Seller Partnership and Parent for use in connection with the solicitation of consents to the matters described in the definition of Seller Partner Approval and the offering of units of limited partnership interest in Parent (the "Consent Solicitation Statement"). Each of Seller, Seller Partnership, Parent, Buyer and Buyer Operating Partnership agrees that the information provided by it for inclusion in the Proxy Statement, the Additional Filings, the Consent Solicitation Statement and each amendment or supplement thereto, at the time of mailing thereof and at the time of the meeting of stockholders of Seller and at the time of the taking of consent in respect of the Seller Partner Approval, 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. Parent, Buyer and Buyer Operating Partnership shall, with respect to the Seller Partner Approval and the offering of units of limited partnership interest in Parent to holders of Seller OP Units, comply with Regulation D of the Securities Act, as applicable. Seller will use its reasonable best efforts, and Parent, Buyer and Buyer Operating Partnership will cooperate with Seller to (i) file a preliminary Proxy Statement with the SEC and (ii) cause the Proxy Statement to be mailed to Seller's stockholders, in each case, as promptly as practicable (including clearing the Proxy Statement with the SEC). Seller will use its reasonable best efforts, and Parent, Buyer and Buyer Operating Partnership will cooperate with Seller, to cause the Consent Solicitation Statement to be mailed to the Seller Unit Holders as promptly as practicable after the SEC has cleared the Proxy Statement. Seller will notify Buyer promptly of the receipt of any comments from the SEC and of any request by the SEC for amendments or supplements to the Proxy Statement or the Additional Filings or for additional information and will supply Buyer with copies of all correspondence between such party or any of its representatives and the SEC, with respect to the Proxy Statement or the Additional Filings. The parties shall cooperate to cause the Proxy Statement, the Consent Solicitation Statement and any Additional Filings to comply in all material respects with all applicable requirements of law. Whenever any event occurs which is required to be set forth in an amendment or supplement to the Proxy Statement, the Additional Filings or the Consent Solicitation Statement, Seller on the one hand, and Parent and Buyer on the other hand, shall promptly inform the other of such occurrence and cooperate in filing with the SEC and/or mailing to the stockholders of Seller or holders of Seller OP Units, as applicable, such amendment or supplement to the Proxy Statement or the Consent Solicitation Statement. (b) It shall be a condition to the mailing of the Proxy Statement and the Consent Solicitation Statement that if they so request, Buyer and Buyer Operating Partnership shall have received a "comfort" letter or an "agreed upon procedures" letter from PricewaterhouseCoopers LLP, independent public accountants for Seller and Seller Partnership, of the kind contemplated by the Statement of Auditing Standards with respect to Letters to Underwriters promulgated by the American Institute of Certified Public Accountants (the "AICPA Statement"), dated as of the date on which the Proxy Statement is to be mailed to the stockholders of Seller, addressed to Parent, Buyer and Buyer Operating Partnership, in form and substance -44- reasonably satisfactory to Buyer and Buyer Operating Partnership, concerning the procedures undertaken by PricewaterhouseCoopers LLP with respect to the financial statements and information of Seller, Seller Partnership and their Subsidiaries contained in the Proxy Statement and the other matters contemplated by the AICPA Statement and otherwise customary in scope and substance for letters delivered by independent public accountants in connection with transactions such as those contemplated by this Agreement. (c) Seller will, as soon as practicable following the date of this Agreement duly call, give notice of, convene and hold a meeting of its stockholders, such meeting to be held no sooner than 20 business days nor later than 45 days following the date the Proxy Statement is mailed to the stockholders of Seller (the "Seller Shareholders Meeting") for the purpose of obtaining the Seller Shareholder Approval. Seller shall be required to hold the Seller Shareholders Meeting, regardless of whether the Board of Directors of Seller has withdrawn, amended or modified its recommendation that its stockholders adopt this Agreement and approve the Merger, unless this Agreement has been terminated pursuant to the provisions of Section 7.1. Seller will, through its Board of Directors, recommend that its stockholders adopt this Agreement and approve the transactions contemplated hereby, including the Merger and the Alternative Merger; provided, that prior to the Seller Shareholders Meeting, such recommendation may be withdrawn, modified or amended if Seller shall have received a Superior Acquisition Proposal, but only to the extent expressly permitted under Section 4.1. (d) If on the date for the Seller Shareholders Meeting established pursuant to Section 5.1(c) of this Agreement, Seller 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 (but less than a majority of the outstanding Seller Common Shares (including the Seller Preferred Shares voting with the Seller Common Shares on an as-converted basis) have indicated their intention to vote against, or have submitted duly executed proxies voting against, the adoption of this Agreement), then Seller shall recommend the adjournment of its stockholders meeting until the date ten (10) days after the originally scheduled date of the stockholders meeting. 5.2 Access to Information: Confidentiality. Subject to the requirements of confidentiality agreements with third parties, each of Seller, Parent and Buyer shall, and shall cause each of its Subsidiaries to, afford to the other party and to the officers, employees, accountants, counsel, financial advisors and other representatives of such other party, reasonable access during normal business hours prior to the Effective Time to all their respective properties, books, contracts, commitments, personnel and records and, during such period, each of Seller, Parent and Buyer shall, and shall cause each of its Subsidiaries to, furnish promptly to the other party all other information concerning its business, properties and personnel as such other party may reasonably request. Parent and Buyer shall have the right to conduct non- intrusive environmental and engineering inspections at the Seller Properties; provided -45- that in no event shall Parent or Buyer have the right to conduct so-called "Phase II" environmental tests. Notwithstanding anything in this Section 5.2 to the contrary, all of Parent's and Buyer's activities pursuant to this Section 5.2 must be conducted in a manner that does not unreasonably interfere with the ongoing operations of Seller and Seller Subsidiaries. 5.3 Reasonable Best Efforts; Notification. (a) Subject to the terms and conditions herein provided, Seller, Parent and Buyer shall: (i) use all reasonable best efforts to cooperate with one another in (A) determining which filings are required to be made prior to the Effective Time with, and which consents, approvals, permits or authorizations are required to be obtained prior to the Effective Time from, governmental or regulatory authorities of the United States, the several states and foreign jurisdictions and any third parties in connection with the execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, including without limitation any required filings and consents under the HSR Act, and (B) timely making all such filings and timely seeking all such consents, approvals, permits and authorizations; (ii) use all reasonable best efforts (other than the payment of money) to obtain in writing any consents required from third parties to effectuate the Merger and avoid defaults or acceleration of the rights of third parties under contracts with Seller or Seller Subsidiaries as a result of the consummation of the Merger, such consents to be in form reasonably satisfactory to Seller and Buyer; and (iii) use all reasonable best efforts 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. In furtherance thereof, Seller agrees to vote in favor of the transactions contemplated by the Partnership Merger Agreement in its capacity as a limited partner of the Seller Partnership, and to cause the Seller General Partner to so vote in its capacity as a general partner of the Seller Partnership. If at any time after the Effective Time any further action is necessary or desirable to carry out the purpose of this Agreement, Parent and the Surviving Company shall take all such necessary action. (b) Seller shall give prompt notice to Parent and Buyer, and Parent and Buyer shall give prompt notice to Seller, (i) if any representation or warranty made by it or them contained in this Agreement that is qualified as to materiality becomes untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becomes untrue or inaccurate in any material respect or (ii) of the failure by it or them to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. 5.4 Tax Treatment. The Surviving Operating Partnership will use the "traditional method" under Treasury Regulations Section 1.704-3(b) for purposes of making allocations under Section 704(c) of the Code with respect to the properties of -46- or interests in the Seller Partnership as of the Effective Time. The Surviving Company shall prepare and file all Tax Returns of Seller and Seller Subsidiaries due after the Effective Time. 5.5 Public Announcements. Parent, Buyer and Seller will consult with each other before issuing, and 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 shall not 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 will be in the form agreed to by the parties hereto prior to the execution of this Agreement. 5.6 Transfer Taxes. Buyer and Seller shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees and any similar taxes which become payable in connection with the transactions contemplated by this Agreement (together with any related interests, penalties or additions to tax, "Transfer Taxes"). From and after the Effective Time, the Surviving Company shall, or shall cause the Surviving Operating Partnership, as appropriate, to pay or cause to be paid, without deduction or withholding from any amounts payable to the holders of Seller Common Shares or Seller OP Units, all Transfer Taxes. 5.7 Benefit Plans. After the Effective Time, all employees of Seller who are employed by the Surviving Company shall, at the option of the Surviving Company, either continue to be eligible to participate in an "employee benefit plan," as defined in Section 3(3) of ERISA, of Seller which is, at the option of the Surviving Company, continued by the Surviving Company, or alternatively shall be eligible to participate in any "employee benefit plan," as defined in Section 3(3) of ERISA, established, sponsored or maintained by the Surviving Company after the Effective Time. With respect to each such employee benefit plan not formerly maintained by Seller, service with Seller or any Seller Subsidiary (as applicable) shall be included for purposes of determining eligibility to participate, vesting (if applicable) and entitlement to benefits and all pre-existing condition exclusions shall be waived and expenses incurred by any employee for deductibles and copayments in the portion of the year prior to the date employee first becomes a participant in such employee benefit plan shall be credited to the benefit of such employee under such employee benefit plan for the year in which the employee's participation commences. 5.8 Indemnification. (a) From and after the Effective Time, the Surviving Company shall provide exculpation and indemnification for each Person who is now or has been at any time prior to the date hereof or who becomes prior to the Effective -47- Time, an officer, employee or director of Seller or any Seller Subsidiary (the "Indemnified Parties") which is the same as the exculpation and indemnification provided to the Indemnified Parties by Seller and the Seller Subsidiaries immediately prior to the Effective Time in their respective certificate of incorporation and Bylaws or other organizational documents, as in effect on the date hereof; provided, that such exculpation and indemnification covers actions on or prior to the Effective Time, including, without limitation, all transactions contemplated by this Agreement. (b) In addition to the rights provided in Section 5.8(a) above, in the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, including without limitation, any action by or on behalf of any or all security holders of Seller, Parent or Buyer, or any Subsidiary of the Seller or Parent, or by or in the right of Seller, Parent or Buyer, or any Subsidiary of the Seller or Parent, or any claim, action, suit, proceeding or investigation (collectively, "Claims") in which any Indemnified Party is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he is or was an officer, employee or director of Seller or any of the Seller Subsidiaries or any action or omission or alleged action or omission by such Person in his capacity as an officer, employee or director, or (ii) this Agreement or the Partnership Merger Agreement or the transactions contemplated by this Agreement or the Partnership Merger Agreement, whether in any case asserted or arising before or after the Effective Time, Parent and the Surviving Company (the "Indemnifying Parties") shall from and after the Effective Time jointly and severally indemnify and hold harmless the Indemnified Parties from and against any losses, claims, liabilities, expenses (including reasonable attorneys' fees and expenses), judgments, fines or amounts paid in settlement arising out of or relating to any such Claims. Parent, the Surviving Company and the Indemnified Parties hereby agree to use their reasonable best efforts to cooperate in the defense of such Claims. In connection with any such Claim, the Indemnified Parties shall have the right to select and retain one counsel, at the cost of the Indemnifying Parties, subject to the consent of the Indemnifying Parties (which consent shall not be unreasonably withheld or delayed). In addition, after the Effective Time, in the event of any such threatened or actual Claim, the Indemnifying Parties shall promptly pay and advance reasonable expenses and costs incurred by each Indemnified Person as they become due and payable in advance of the final disposition of the Claim to the fullest extent and in the manner permitted by law. Notwithstanding the foregoing, the Indemnifying Parties shall not be obligated to advance any expenses or costs prior to receipt of an undertaking by or on behalf of the Indemnified Party, such undertaking to be accepted without regard to the creditworthiness of the Indemnified Party, to repay any expenses advanced if it shall ultimately be determined that the Indemnified Party is not entitled to be indemnified against such expense. Notwithstanding anything to the contrary set forth in this Agreement, the Indemnifying Parties (i) shall not be liable for any settlement effected without their prior written consent (which consent shall not be unreasonably withheld or delayed), and (ii) shall not have any obligation hereunder to any Indemnified Party to the extent that a court of competent jurisdiction shall determine in a final and non-appealable order that such indemnification is prohibited by applicable law. In -48- the event of a final and non-appealable determination by a court that any payment of expenses is prohibited by applicable law, the Indemnified Party shall promptly refund to the Indemnifying Parties the amount of all such expenses theretofore advanced pursuant hereto. Any Indemnified Party wishing to claim indemnification under this Section 5.8, upon learning of any such Claim, shall promptly notify the Indemnifying Parties of such Claim and the relevant facts and circumstances with respect thereto; provided however, that the failure to provide such notice shall not affect the obligations of the Indemnifying Parties except to the extent such failure to notify materially prejudices the Indemnifying Parties' ability to defend such Claim; and provided, further, however, that no Indemnified Party shall be obligated to provide any notification pursuant to this Section 5.8(b) prior to the Effective Time. (c) At or prior to the Effective Time, Buyer shall purchase directors' and officers' liability insurance policy coverage for Seller's and each Seller Subsidiaries' directors and officers for a period of six years which will provide the directors and officers with coverage on substantially similar terms as currently provided by Seller and the Seller Subsidiaries to such directors and officers. At or prior to the Effective Time, Seller shall have the right to reasonably review and approve any such policy, which approval shall not be unreasonably withheld. (d) This Section 5.8 is intended for the irrevocable benefit of, and to grant third party rights to, the Indemnified Parties and their successors, assigns and heirs and shall be binding on all successors and assigns of Parent and Buyer, including without limitation the Surviving Company. Each of the Indemnified Parties shall be entitled to enforce the covenants contained in this Section 5.8 and Parent and Buyer acknowledge and agree that each Indemnified Party would suffer irreparable harm and that no adequate remedy at law exists for a breach of such covenants and such Indemnified Party shall be entitled to injunctive relief and specific performance in the event of any breach of any provision in this Section 5.8. (e) In the event that the Surviving Company or any of its respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, the successors and assigns of such entity shall assume the obligations set forth in this Section 5.8, which obligations are expressly intended to be for the irrevocable benefit of, and shall be enforceable by, each director and officer covered hereby. Parent guarantees, unconditionally and absolutely, the performance of Surviving Company's and Buyer's obligations under this Section 5.8. 5.9 Declaration of Dividends and Distributions. From and after the date of this Agreement, Seller shall not make any dividend or distribution to its stockholders without the prior written consent of Buyer; provided, however, the written consent of Buyer shall not be required for the authorization and payment of quarterly distributions (i) with respect to the Seller Common Shares, (a) for the dividend for -49- the second and third quarters of 1999 (i.e., $.25 per share with a record date of May 1, 1999 and August 1, 1999) and (b) as permitted under Section 1.2(g), and (ii) with respect to the Seller Preferred Shares for the dividend for the second quarter of 1999 and for each quarterly dividend thereafter in the amounts provided for in the Certificate of Designation in respect of the Seller Preferred Shares. From and after the date of this Agreement, Seller Partnership shall not make any distribution to the holders of Seller OP Units except a distribution per Seller OP Unit in the same amount as a dividend per Seller Common Share permitted pursuant to this Section 5.9 (including without limitation pursuant to the following paragraph), with the same record and payment dates as such dividend on the Seller Common Shares. The foregoing restrictions shall not apply, however, to the extent a distribution by Seller is necessary for Seller to maintain REIT status or to prevent Seller from having to pay federal income tax; provided that in the event of such a distribution, the aggregate cash consideration payable to holders of Seller Common Shares in the Merger shall be reduced by the aggregate amount of such distribution, and the Common Merger Consideration per share shall be reduced accordingly. Notwithstanding the foregoing, if the Effective Time occurs on a date after November 1, 1999, the Seller may declare or establish a record date and set aside funds for payment of a dividend for the period commencing November 1, 1999 and ending on the date on which the Effective Time occurs (the "Partial Period"). The amount of the dividend per Seller Common Share for such Partial Period shall equal a fraction, (I) the numerator of which equals (a) $.25, times (b) the number of days comprising such Partial Period, and (II) the denominator of which is 90. 5.10 Resignations. On the Closing Date, Seller shall use its best efforts to cause the directors and officers of Seller or any of the Seller Subsidiaries to submit their resignations from such positions as may be requested by Buyer, effective immediately after the Effective Time; provided, however, that by resigning, such officers and directors will not lose the benefit of any "change of control" provisions of any employment agreement or other instruments to which they would otherwise be entitled. 5.11 Outside Property Management Agreements. Seller will not, and will not permit any of its Subsidiaries to, amend the Outside Property Management Agreements. Seller will not, and will not permit any of its Subsidiaries to, renew any Outside Property Management Agreement except as approved by Buyer, which approval shall not be unreasonably withheld or delayed. 5.12 Stockholder Claims. Seller shall not settle or compromise for an amount in excess of $10,000,000 any claim relating to the Transactions brought by any current, former or purported holder of any securities of Seller or the Seller Partnership without the prior written consent of Buyer, which consent will not be unreasonably withheld. 5.13 Cooperation with Proposed Financings and Asset Sales. At the request of the Buyer, the Seller will, at the Buyer's expense, reasonably cooperate with the -50- Buyer in connection with the proposed financing of the Transactions by the Parent and its Subsidiaries or proposed post-closing sales of the Seller Properties, provided that such requested actions do not unreasonably interfere with the ongoing operations of Seller and Seller Subsidiaries. ARTICLE 6 CONDITIONS 6.1 Conditions to Each Party's Obligation to Effect the Merger. The obligations of each party to effect the Merger and to consummate the other transactions contemplated by this Agreement to occur on the Closing Date shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (a) Stockholder Approvals. This Agreement shall have been adopted by the Seller Shareholder Approval. (b) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger, the Partnership Merger or any of the other transactions contemplated hereby shall be in effect. (c) HSR. All applicable waiting periods (and any extensions thereof) under the HSR Act shall have expired or otherwise been terminated. 6.2 Conditions to Obligations of Parent and Buyer. The obligations of Parent and Buyer to effect the Merger and to consummate the other transactions contemplated to occur on the Closing Date are further subject to the following conditions, any one or more of which may be waived by Buyer: (a) Representations and Warranties. The representations and warranties of Seller set forth in this Agreement shall be true and correct in all material respects (except for the representations set forth in Section 2.3 or representations having a materiality or Seller Material Adverse Effect qualification, which shall be correct in all respects) as of the date of this Agreement and as of the Closing Date, as though made on and as of the Closing Date, except to the extent the representation or warranty is expressly limited by its terms to another date, in which case such representation or warranty shall be true and correct in all material respects (except for representations having a materiality or Seller Material Adverse Effect qualification, which shall be correct in all respects) only as of such specific date, and Parent and Buyer shall have received a certificate (which certificate may be qualified by Knowledge to the same extent as the representations and warranties of Seller contained herein are so qualified) signed on behalf of Seller by the chief executive officer or the chief financial officer of Seller, in such capacity, to such effect. -51- (b) Performance of Obligations of Seller. Seller 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, and Parent and Buyer shall have received a certificate signed on behalf of Seller by the chief executive officer or the chief operating officer of Seller, in such capacity, to such effect. (c) Material Adverse Change. Since the date of this Agreement through and including the Satisfaction Date, (i) there shall have been no Seller Material Adverse Change and (ii) Parent and Buyer shall have received a certificate of the chief executive officer or chief financial officer of Seller, in such capacity, certifying to such effect. For purposes of this Section 6.2(c), it is understood and agreed that a Seller Material Adverse Change shall be deemed to have occurred, without regard to any certificate provided pursuant to clause (ii) of the first sentence of this Section 6.2(c), if as a result of a "change of law" after the date hereof there shall exist at the Effective Time a material increase in the risk that the Seller would not qualify (at or prior to the Effective Time) as a REIT. For this purpose, the term "change in law" shall mean any amendment to or change (including any announced prospective change having a proposed effective date at or prior to the Effective Time) in the federal tax laws of the United States, including any statute, regulation or proposed regulation or any official administrative pronouncement (consisting of the issuance or revocation of any revenue ruling, revenue procedure, notice, private letter ruling or technical advice memorandum) or any judicial decision interpreting such federal tax laws (whether or not such pronouncement or decision is issued to, or in connection with, a proceeding involving the Seller or a Seller Subsidiary or is subject to review or appeal). (d) Tax Opinions Relating to REIT Status of Seller And Partnership Status of Seller Partnership. Parent and Buyer shall have received an opinion of Hale and Dorr LLP, or other counsel to Seller reasonably acceptable to Parent and Buyer, and of Baker & Hostetler LLP, each dated as of the Effective Time, in the form attached hereto as Exhibit D. Each of such opinions may be based on certificates in the form of Section 6.2(d) of the Seller Disclosure Letter. (e) Consents. All consents and waivers (including, without limitation, waivers of rights of first refusal) from third parties necessary in connection with the consummation of the transactions contemplated by this Agreement (including the Merger) shall have been obtained and not subsequently been revoked, as of the Satisfaction Date other than such consents and waivers from third parties, which, if not obtained, would not result, individually or in the aggregate, in a Buyer Material Adverse Effect or a Seller Material Adverse Effect; provided, however, that the failure to obtain any consent or waiver in connection with any instrument, obligation or matter set forth in the Seller Disclosure Letter shall not constitute a failure of the condition set forth in this Section 6.2(e). (f) [Intentionally omitted]. -52- (g) Conversion of Corporate Subsidiaries. Seller shall have, at or prior to the Effective Time, either converted each of its direct or indirect corporate Subsidiaries into Delaware limited liability companies or liquidated such subsidiaries into Seller; provided that this condition shall not apply to corporations that are Subsidiaries of Seller and that serve as general partners of limited partnerships if the organizational documents of such corporations or limited partnerships would, as of the date hereof, prevent such conversions or liquidations; provided that no consequence of Seller's performance of this condition will be taken into account in determining the satisfaction of any other conditions to Parent's and Buyer's obligations to effect the Merger. (h) Partnership Merger Conditions. All conditions set forth in Sections 5.1(c), 5.1(d) and 5.3 of the Partnership Merger Agreement shall have been waived or satisfied as of the Satisfaction Date in accordance with the terms of the Partnership Merger Agreement. (i) Partnership Merger. The Partnership Merger shall have been consummated. Notwithstanding anything to the contrary in this Agreement, none of the initiation, threat or existence of any legal action of any kind with respect to this Agreement or the Partnership Merger Agreement or any transaction contemplated hereby or thereby, including without limitation any action initiated, threatened or maintained by any stockholder of Seller or any partner in the Seller Partnership, whether alleging rights with respect to Dissenting Shares, claims under any Federal or state securities law, contract or tort claims, claims for breach of fiduciary duty or otherwise, will constitute a failure of the conditions set forth in Section 6.2(a), 6.2(b), 6.2(c), 6.2(e), 6.2(h), 6.3(a), 6.3(b), 6.3(c), 6.3(e) or 6.3(f) (and no such action shall cause the chief executive officer or chief financial officer of Seller or of Parent or Buyer to be unable to deliver a certificate attesting to compliance with such conditions) unless that action has resulted in the granting of injunctive relief that prevents the consummation of the Merger and the other transactions contemplated hereby or thereby, and such injunctive relief has not been dissolved or vacated. 6.3 Conditions to Obligations of Seller. The obligation of Seller to effect the Merger and to consummate the other transactions contemplated to occur on the Closing Date is further subject to the following conditions, any one or more of which may be waived by Seller: (a) Representations and Warranties. The representations and warranties of Parent and Buyer set forth in this Agreement shall be true and correct in all material respects (except for representations having a materiality or Parent Material Adverse Effect or Buyer Material Adverse Effect qualification, which shall be correct in all respects) as of the date of this Agreement and as of the Closing Date, as though made on and as of the Closing Date, except to the extent the representation or warranty is expressly limited by its terms to another date, in which case such representation or warranty shall be true and correct in all material respects -53- (except for representations having a materiality or Parent Material Adverse Effect or Buyer Material Adverse Effect qualification, which shall be correct in all respects) only as of such specific date, and Seller shall have received a certificate (which certificate may be qualified by Knowledge to the same extent as the representations and warranties of Parent and Buyer contained herein are so qualified) signed on behalf of Parent and Buyer by the chief executive officer or the chief financial officer of such party, in such capacity, to such effect. (b) Performance of Obligations of Buyer. Each of Parent and Buyer 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, and Seller shall have received a certificate of Parent and Buyer signed on behalf of Buyer by the chief executive officer or the chief financial officer of Parent and Buyer, in such capacity, to such effect. (c) Material Adverse Change. Since the date of this Agreement, there shall have been no change in the business, financial condition or results of operations of Parent and its Subsidiaries, taken as a whole, or of Buyer and the Buyer Subsidiaries, taken as a whole, that has had or would reasonably be expected to have a material adverse effect on the ability of Parent, Buyer or Buyer Operating Partnership to consummate the transactions contemplated by this Agreement and the Partnership Merger Agreement, and Seller shall have received a certificate of the chief executive officer or chief financial officer of Parent and Buyer, in such capacity, certifying to such effect. (d) Tax Opinion Relating to the Partnership Merger. Seller shall have received an opinion dated the Closing Date from Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Buyer, based upon such certificates and letters dated the Closing Date as are acceptable to such special counsel, to the effect that, for federal income tax purposes, Seller Unit Holders (other than persons that are not United States persons within the meaning of Section 7701(a)(30) of the Code) who elect to exchange all Seller OP Units held by them for Class A Preferred Units or Class B Units in Parent pursuant to the Partnership Merger shall recognize no income, gain or loss upon the exchange. For purposes of such opinion, counsel may assume that each Seller Unit Holder shall enter into a guarantee of indebtedness of Parent in accordance with Section 4.8 of the partnership agreement of Parent in an amount equal to such Seller Unit Holder's negative tax capital account and that such guarantee shall be effective to cause the Seller Unit Holder to bear the "economic risk of loss" (within the meaning of Treasury Regulation Section 1.752-2) associated with the portion of the indebtedness so guaranteed. (e) Consents. All consents and waivers (including, without limitation, waivers of rights of first refusal) from third parties necessary in connection with the consummation of the transactions contemplated hereby (including the Merger) shall have been obtained, other than such consents and waivers from third parties, which, if not obtained, would not result, individually or in the aggregate, in a Parent Material Adverse Effect, a Buyer Material Adverse Effect or a -54- Seller Material Adverse Effect; provided, however, that the failure to obtain any consent or waiver in connection with any instrument, obligation or matter set forth in the Seller Disclosure Letter shall not constitute a failure of the condition set forth in this Section 6.3(e). (f) Partnership Merger. All conditions set forth in Sections 5.1(c), 5.1(d) and 5.2 of the Partnership Merger Agreement shall have been waived or satisfied in accordance with the terms of the Partnership Merger Agreement. (g) Solvency Opinion. Seller and the Seller Partnership shall have received an opinion, by a reputable expert firm selected by Parent and reasonably acceptable to the Seller, in a customary form for transactions of this type as to the solvency and adequate capitalization of the Seller and the Seller Partnership immediately before and of the Surviving Company and the Surviving Operating Partnership immediately after giving effect to the Transactions, which opinion shall be reasonably satisfactory to the Seller. ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER 7.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after the Seller Shareholder Approvals are obtained: (a) by mutual written consent duly authorized by Parent and the Board of Directors of Seller; (b) by Parent or Buyer, upon a breach of any representation, warranty, covenant, obligation or agreement on the part of Seller set forth in this Agreement, in any case such that the conditions set forth in Section 6.2(a) or Section 6.2(b), as the case may be, are not satisfied or would be incapable of being satisfied within 30 days after the giving of written notice to Seller; (c) by Seller, upon a breach of any representation, warranty, covenant obligation or agreement on the part of Parent or Buyer set forth in this Agreement, in either case such that the conditions set forth in Section 6.3(a) or Section 6.3(b), as the case may be, are not satisfied or would be incapable of being satisfied within 30 days after the giving of written notice to Parent or Buyer; (d) by Parent, Buyer or Seller, if any judgment, injunction, order, decree or action by any Governmental Entity of competent authority preventing the consummation of the Merger shall have become final and nonappealable (an "Injunction"); (e) by Parent, Buyer or Seller, if the Merger shall not have been consummated on or before December 31, 1999; provided, however, that a party may -55- not terminate pursuant to this clause (e) if the terminating party shall have breached in any material respect its representations or warranties or its obligations under this Agreement in any manner that shall have proximately contributed to the occurrence of the failure referred to in this clause; (f) by either Seller (unless Seller is in breach of its obligations under Section 5.1) or Parent or Buyer if, upon a vote at a duly held Seller Shareholders Meeting or any adjournment thereof, Seller Shareholder Approvals shall not have been obtained as contemplated by Section 5.1; (g) by Seller, prior to the Seller Shareholders Meeting, if the Board of Directors of Seller shall have withdrawn or modified its approval or recommendation of the Merger or this Agreement in connection with, or approved or recommended, a Superior Acquisition Proposal; provided, however, that no termination shall be effective pursuant to this Section 7.1(g) under circumstances in which a Break-Up Fee (as defined in Section 7.2(a)) is payable pursuant to Section 7.2(a)(vi), unless within 15 days after such termination, such Break-Up Fee is paid in full by the Seller and Seller Partnership in accordance with Section 7.2(a)(vi); (h) by Parent or Buyer if (i) prior to the Seller Shareholders Meeting, the Board of Directors of Seller shall have withdrawn or modified in any manner adverse to Buyer its approval or recommendation of the Merger or this Agreement, or approved or recommended any Acquisition Proposal; or (ii) Seller shall have entered into a definitive agreement with respect to any Acquisition Proposal; (i) by Seller, if Buyer has not closed the equity funding contemplated by the Equity Commitments and the borrowings contemplated by the Financing Commitments (x) on or prior to the Satisfaction Date or (y) on or prior to December 29, 1999, if (1) Parent elects to extend the Closing Date as contemplated by Section 1.2(b), (2) the conditions set forth in Section 6.1(b) shall have been satisfied and (3) Seller shall have delivered a written notice to Parent and Buyer certifying its ability to satisfy the conditions set forth in Section 6.2(g); (j) by either Seller or Parent or Buyer, if the stockholders of Seller adopt the Liquidation Vote; or (k) by Parent or Buyer, if an Acquisition Proposal that is publicly announced shall have been commenced or communicated in writing to Seller and contains a proposal as to price and (i) Seller shall not have rejected such proposal within ten business days after the date of the receipt thereof by Seller or after the date of its existence first becomes publicly announced, if sooner, or (ii) Seller shall have failed to confirm its recommendation described in Section 2.25 within ten business days after being requested by Buyer to do so. -56- 7.2 Certain Fees and Expenses. (a) If this Agreement shall be terminated: (i) pursuant to Section 7.1(b), and the breach by Seller was willful, then Seller and Seller Partnership will pay Parent an aggregate amount equal to the Break-Up Fee (defined below) plus the lesser of $10,500,000 and the BreakUp Expenses (defined below), (ii) pursuant to Section 7.1(b), and the breach by Seller was not willful, then Seller and Seller Partnership will pay Parent an aggregate amount equal to the lesser of $15,000,000 and the Break-Up Expenses (provided that, in the case of a termination by Buyer pursuant to Section 7.1(b) on the basis of a breach of the representation in Section 2.10(b), Buyer shall not be entitled to such amount), (iii) pursuant to Section 7.1(c), and the breach by Parent or Buyer was willful, then Parent and Buyer will pay Seller an aggregate amount equal to the Break-Up Fee plus the lesser of $4,500,000 and the Break-Up Expenses, (iv) pursuant to Section 7.1(c), and the breach by Parent or Buyer was not willful, then Parent and Buyer will pay Seller an aggregate amount equal to the lesser of $4,500,000 and the Break-Up Expenses, (v) pursuant to Section 7.1(f), then Seller and Seller Partnership will pay Parent an aggregate amount equal to the lesser of $15,000,000 and the Break-Up Expenses, (vi) pursuant to Section 7.1(g), 7.1(h) or 7.1(k), then Seller and Seller Partnership will pay Parent an aggregate amount equal to the Break-Up Fee plus the lesser of $10,500,000 and the Break-Up Expenses, (vii) pursuant to Section 7.1(i), then Parent and Buyer will pay Seller an aggregate amount equal to the Break-Up Fee plus the lesser of $4,500,000 and the Break-Up Expenses, (viii) pursuant to Section 7.1(j), then Seller and Seller Partnership will pay Parent an aggregate amount equal to the lesser of $10,500,000 and the Break-Up Expenses; and (ix) pursuant to Section 7.1(d), and the subject of the Injunction (as defined in Section 7.1(d)) is a stockholder claim that was the subject of a bona fide settlement proposal with respect to which Buyer withheld its consent after Seller's request for same pursuant to Section 5.12, then Parent and Buyer will pay -57- Seller an aggregate amount equal to the lesser of $4,500,000 and the Break-Up Expenses. Notwithstanding anything in this Agreement to the contrary, the right of a party to receive payment of the Break-Up Fee, Break-Up Expenses or other amounts in accordance with this Section 7.2(a) shall be the exclusive remedy of such party for the loss suffered by such party as a result of the failure of the Merger and the Partnership Merger to be consummated, and no party shall have any other liability to any other party after the payment of the Break-Up Fee, Break-Up Expenses or other amounts (as applicable). The Break-Up Fee, Break-Up Expenses or other amounts payable by Seller and Seller Partnership in accordance with this Section 7.2(a) shall be paid by Seller and Seller Partnership to Buyer, in immediately available funds within fifteen (15) days after the date the event giving rise to the obligation to make such payment occurred. Except as provided in Section 7.2(b), the Break-Up Fee, the Break-Up Expenses or other amounts payable by Parent and Buyer to Seller in accordance with this Section 7.2(a) shall be paid by Parent or Buyer to Seller, in immediately available funds within fifteen (15) days after the day the event giving rise to the obligation to make such payment occurred. As used in this Agreement, "Break Up Fee" shall be an amount equal to $25,000,000; provided that if the Cash Collateral has been increased by $25,000,000, or the Letter of Credit has been amended to increase the amount available thereunder by $25,000,000, each as provided in Section 4.7(b), the Break-Up Fee payable to Seller shall be an amount equal to $50,000,000. The "Break-Up Expenses" payable to Parent or Seller, as the case may be, shall be an amount equal to the out-of-pocket expenses of such party (and, in the case of Parent, including Buyer and Parent's general partners and limited partners) incurred in connection with this Agreement and the transactions contemplated hereby (including, without limitation, all fees and expenses payable to financing sources or hedging counterparties, attorneys', accountants' and investment bankers' fees and expenses). Such Break-Up Expenses shall be reflected on invoices or other means verifying the incurrence of such Break-Up Expenses. (b) If this Agreement shall be terminated by Seller and, as provided in Section 7.2(a), Parent and Buyer are required to pay to Seller a Break-Up Fee or Break-Up Expenses, then Seller shall be entitled to direct the Escrow Agent (i) to terminate Parent's rights to receive any part of the Cash Collateral or (ii) if the Letter of Credit has been delivered to the Escrow Agent in substitution for the Cash Collateral, to draw on the Letter of Credit in accordance with the terms thereof. Except as described in the preceding sentence, in no other circumstances shall Seller have any right to receive any part of the Cash Collateral or to draw on the Letter of Credit. If this Agreement is terminated in any circumstance other than as described in the first sentence of this Section 7.2(b), Seller shall direct the Escrow Agent to return the Cash Collateral or Letter of Credit, as applicable, to Parent within one business day of any such termination. Notwithstanding anything in this Agreement to the contrary, the right of Seller to receive amounts with respect to which Parent's -58- rights to receive any part of the Cash Collateral is terminated or which are drawn on the Letter of Credit in accordance with this Section 7.2(b) shall be the exclusive remedy of Seller, and its stockholders, the Seller Partnership and the OP Unitholders for any and all losses suffered as a result of the failure of the Merger and the Partnership Merger to be consummated and upon payment of such amounts neither Parent nor Buyer shall have any other liability to Seller hereunder (including under Section 7.2(a)). Any amounts which Seller has the right to receive pursuant to this Section 7.2(b) shall be applied as set forth in the Escrow Agreement. (c) Except as specifically provided in this Section 7.2, each party shall bear its own expenses in connection with this Agreement and the Transactions. 7.3 Effect of Termination. In the event of termination of this Agreement by Seller, Buyer or Parent as provided in Section 7.1, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Parent, Buyer, or Seller, other than in accordance with Section 7.2, this Section 7.3 and Article 8. 7.4 Amendment. This Agreement may be amended by Parent, Buyer and Seller in writing by action of their respective Boards of Directors at any time before or after any Seller Shareholder Approvals are obtained and prior to the Effective Time; provided, however, that, after the Seller Shareholder Approvals are obtained, no such amendment, modification or supplement shall be made which by law requires the further approval of stockholders without obtaining such further approval. The parties agree to amend this Agreement in the manner provided in the immediately preceding sentence to the extent required to continue the status of Seller as a REIT. 7.5 Extension: Waiver. At any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of any other party, (b) waive any inaccuracies in the representations and warranties of any other party contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the proviso of Section 7.4, waive compliance with any of the agreements or conditions of any other party contained in this Agreement. 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. -59- ARTICLE 8 GENERAL PROVISIONS 8.1 Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement confirming the representations and warranties in this Agreement shall survive the Effective Time. This Section 8.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. 8.2 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) 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 Parent or Buyer, to: Berkshire Realty Holdings, L.P. One Beacon Street Suite 1500 Boston, Massachusetts 02108 Attention: Douglas S. Krupp Fax: (617) 423-8916 with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, NY 10019-6064 Attention: James M. Dubin, Esq. Michele R. Jenkinson, Esq. Fax: (212) 757-3990 and Sullivan & Cromwell 125 Broad Street New York, NY 10004 Attention: Anthony J. Colletta, Esq. Fax: (212) 558-3588 -60- and Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3954 Attention: Gregory J. Ressa, Esq. Brian M. Stadler, Esq. Fax: (212) 455-2502 (b) if to Seller, to: Berkshire Realty Company, Inc. One Beacon Street Suite 1550 Boston, Massachusetts 02108 Attention: President Fax: (617) 646-2373 with a copy to: Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 Attention: David E. Redlick, Esq. and Kenneth A. Hoxsie, Esq. Fax: (617) 526-5000 and Baker & Hostetler LLP 1900 East Ninth Street, Suite 3200 Cleveland, Ohio 44114 Attention: Robert A. Weible, Esq. Fax: (216) 696-0740 All notices shall be deemed given only when actually received. 8.3 Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or Interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." -61- 8.4 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. 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement, the Seller Disclosure Letter, the Buyer Disclosure Letter, the Confidentiality Agreement dated September 16, 1998 between Greenhill & Co., LLC and Lazard on behalf of Seller, the Partnership Merger Agreement and the other agreements entered into in connection with the Merger (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement and (b) except as provided in Section 5.8 (the "Third Party Provision") are not intended to confer upon any Person other than the parties hereto any rights or remedies. The Third Party Provision may be enforced by the beneficiaries thereof or on behalf of the beneficiaries thereof by the directors of Seller who had been members of the Board of Directors of Seller prior to the Effective Time. 8.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF. 8.7 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 will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. 8.8 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by Seller in accordance with their specific terms or were otherwise breached. It is accordingly agreed that Parent and Buyer shall be entitled to an injunction or injunctions to prevent breaches of this Agreement by Seller and to enforce specifically the terms and provisions of this Agreement in any federal court located in Delaware or in Chancery Court in Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. The parties acknowledge that Seller shall not be entitled to an injunction or injunctions to prevent breaches of this Agreement by Parent or Buyer or to enforce specifically the terms and provisions of this Agreement and that Seller's sole and exclusive remedy with respect to any such breach shall be the remedy set forth in Section 7.2. In addition, each of the parties -62- hereto (a) consents to submit itself (without making such submission exclusive) to the personal jurisdiction of any federal court located in Delaware or Chancery Court located in Delaware in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement and (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court. 8.9 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. -63- IN WITNESS WHEREOF, Parent, Buyer and Seller have caused this Agreement to be signed by their respective officers thereunto duly authorized all as of the date first written above. BERKSHIRE REALTY HOLDINGS, L.P., a Delaware limited partnership By: /s/ Douglas S. Krupp -------------------- Douglas S. Krupp Authorized Signatory BRI ACQUISITION, LLC, a Delaware limited liability company By: /s/ Douglas S. Krupp -------------------- Douglas S. Krupp Authorized Signatory BERKSHIRE REALTY COMPANY, INC., a Delaware corporation By: /s/ David F. Marshall --------------------- Name: David F. Marshall Title: President and Chief Executive Officer -64- BRI OP LIMITED PARTNERSHIP, a Delaware limited partnership joins in this Agreement solely with respect to Section 7.2 By: Berkshire Apartments, Inc. By: /s/ David F. Marshall --------------------- Name: David F. Marshall Title: President and Chief Executive Officer -65- EX-11 5 EXHIBIT 11 ================================================================================ AGREEMENT AND PLAN OF MERGER by and among BERKSHIRE REALTY HOLDINGS, L.P., BRI ACQUISITION SUB, LP, BERKSHIRE APARTMENTS, INC. and BRI OP LIMITED PARTNERSHIP ------------------ April 13, 1999 ------------------ ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE 1 THE MERGER.............................................................2 Section 1.1 The Partnership Merger....................................2 Section 1.2 Closing; Effective Time...................................2 Section 1.3 Certificate and Agreement of Limited Partnership; Officers..................................................2 Section 1.4 Conversion of Seller OP Units.............................3 Section 1.5 Conversion of Units Owned by Seller General Partner.......3 Section 1.6 Parent and Seller-Owned Interests.........................4 Section 1.7 Conversion of Interests in Buyer Operating Partnership....4 Section 1.8 Cancellation and Retirement of Seller OP Units............4 Section 1.9 Interest Elections........................................4 Section 1.10 Payment for Seller OP Units...............................5 Section 1.11 Further Assurances........................................6 ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER GENERAL PARTNER AND THE SELLER PARTNERSHIP.....................................................6 Section 2.1 Organization, Standing and Power..........................6 Section 2.2 Authority; Noncontravention; Consents.....................7 Section 2.3 Information Supplied......................................8 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER OPERATING PARTNERSHIP............................................................8 Section 3.1 Organization, Standing and Power..........................8 Section 3.2 Authority; Noncontravention; Consents.....................9 Section 3.3 Information Supplied.....................................10 ARTICLE 4 COVENANTS.............................................................11 Section 4.1 Reasonable Best Efforts; Additional Actions..............11 Section 4.2 Notification of Certain Matters..........................11 Section 4.3 Consent Solicitation Statement; Securities Filings.......11 i Page ---- ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE PARTNERSHIP MERGER..................12 Section 5.1 Conditions to Each Party's Obligations to Effect the Partnership Merger.......................................12 Section 5.2 Conditions to Seller General Partner's and the Seller Partnership's Obligations to Effect the Partnership Merger.......................................13 Section 5.3 Conditions to Parent's and Buyer Operating Partnership's Obligations to Effect the Partnership....................14 ARTICLE 6 TERMINATION...........................................................15 Section 6.1 Termination..............................................15 Section 6.2 Procedure for and Effect of Termination..................15 ARTICLE 7 MISCELLANEOUS.........................................................15 Section 7.1 Amendment and Modification...............................15 Section 7.2 Waiver of Compliance; Consents...........................15 Section 7.3 Survival.................................................15 Section 7.4 Notices..................................................15 Section 7.5 Assignment...............................................17 Section 7.6 GOVERNING LAW............................................17 Section 7.7 Counterparts.............................................17 Section 7.8 Enforcement..............................................18 Section 7.9 Interpretation...........................................18 Section 7.10 Entire Agreement.........................................18 Section 7.11 No Third Party Beneficiaries.............................18 Section 7.12 Severability.............................................18 Section 7.13 Tax Election.............................................18 EXHIBITS Exhibit A Partnership Agreement ii AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of April 13, 1999, by and among BERKSHIRE REALTY HOLDINGS, L.P., a Delaware limited partnership ("Parent"), BRI ACQUISITION SUB, LP, a Delaware limited partnership ("Buyer Operating Partnership"), BERKSHIRE APARTMENTS, INC., a Delaware corporation ("Seller General Partner"), and BRI OP LIMITED PARTNERSHIP, a Delaware limited partnership (the "Seller Partnership"). WHEREAS, the respective Boards of Directors (or comparable body or entity) of Parent, BRI Acquisition, LLC ("Buyer") and Berkshire Realty Company, Inc., a Delaware corporation (the "Seller"), have approved the acquisition of the Seller and its assets (including, without limitation, the Seller's direct and indirect interest in the Seller Partnership) by Parent on the terms and subject to the conditions set forth in the Agreement and Plan of Merger, dated as of April 13, 1999 (the "Merger Agreement"), by and among Parent, Buyer and the Seller; WHEREAS, it is proposed that, immediately prior to the merger of the Buyer and Seller as contemplated by the Merger Agreement (the "Merger"), Buyer Operating Partnership will merge with and into the Seller Partnership (the "Partnership Merger") on the terms and subject to the conditions of this Agreement; WHEREAS, the Board of Directors of Seller General Partner, in light of and subject to the terms and conditions set forth herein, (i) approved this Agreement and (ii) resolved to recommend that the holders of Seller OP Units adopt this Agreement and approve the Partnership Merger; WHEREAS, Parent, Buyer Operating Partnership, Seller General Partner and the Seller Partnership desire to make certain representations, warranties, covenants and agreements in connection with the Partnership Merger and also to prescribe various conditions thereto; and WHEREAS, capitalized terms used herein and not otherwise defined have the respective meanings given them in the Merger Agreement. NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: 2 ARTICLE 1 THE MERGER Section 1.1 The Partnership Merger. Upon the terms and subject to the conditions of this Agreement, at the Effective Time (as defined in Section 1.2) and in accordance with the Revised Uniform Limited Partnership Act of the State of Delaware (the "DRULPA"), Buyer Operating Partnership shall be merged with and into the Seller Partnership, with the Seller Partnership as the surviving partnership in the Partnership Merger (the "Surviving Operating Partnership"). At the Effective Time, the separate existence of Buyer Operating Partnership shall cease and the other effects of the Partnership Merger shall be as set forth in Section 17-211 of the DRULPA. Section 1.2 Closing; Effective Time. Provided that the conditions set forth in Article 5 have been satisfied (or waived by the appropriate party), the closing of the Partnership Merger (the "Closing") shall take place at the place of the closing of the Merger set forth in Section 1.2(a) of the Merger Agreement, on the Closing Date immediately prior to the closing of the Merger, or at such other place, at such other time or on such other date as the parties hereto may mutually agree. At the Closing, the parties hereto shall cause a certificate of merger (the "Certificate of Merger") to be executed and filed with the Secretary of State of the State of Delaware in accordance with the DRULPA. The Partnership Merger shall become effective as of the date and time of such filing, or such other time within 24 hours after such filing as the parties hereto shall agree to be set forth in the Certificate of Merger (the "Effective Time"), which, in either case, shall be immediately prior to the effective time of the Merger. If the closing date of the Merger has been extended as contemplated under Section 1.2(b) of the Merger Agreement, then for purposes of the conditions set forth in Section 5.3 hereof, all references in the lettered subsections thereof to the term "Closing Date" shall be deemed to mean the Satisfaction Date, and the certificates and other documents to be delivered by the parties pursuant to Section 5.3 hereof shall be delivered on and as of the Satisfaction Date. The parties hereto agree that none of the conditions set forth in Section 5.3 shall be required to be satisfied at any time after the Satisfaction Date. Section 1.3 Certificate and Agreement of Limited Partnership; Officers. (a) At the Effective Time, and without any further action on the part of Buyer Operating Partnership or the Seller Partnership, the agreement of limited partnership and the certificate of limited partnership of the Seller Partnership, as in effect immediately prior to the Effective Time, shall become, from and after the Effective Time, the agreement of limited partnership and the certificate of limited partnership of the Surviving Operating Partnership, until thereafter amended as provided therein and under applicable law. 3 (b) The officers of the Seller Partnership immediately prior to the Effective Time shall become, from and after the Effective Time, the officers of the Surviving Operating Partnership, until their respective successors are duly elected or appointed and shall qualify or their earlier resignation or removal. Section 1.4 Conversion of Seller OP Units. The Seller OP Units issued and outstanding immediately prior to the Effective Time (other than Seller OP Units owned by Seller General Partner, which shall be treated as set forth in Section 1.5, and other than Seller OP Units to be canceled in accordance with Section 1.6) shall, at the Effective Time, be converted into the following (the consideration set forth in clauses (a), (b) and (c) below being collectively referred to as the "Merger Consideration"): (a) for each Seller OP Unit with respect to which an election to receive a Class A Preferred Unit (as defined below) has been effectively made pursuant to Section 1.9 and not revoked or lost ("Class A Electing Units"), the right to receive one fully paid and nonassessable "Class A Preferred Unit" (each, a "Class A Preferred Unit") as defined in the partnership agreement of Parent attached hereto as Exhibit A (the "Partnership Agreement"); (b) for each Seller OP Unit with respect to which an election to receive a Class B Unit (as defined below) has been effectively made pursuant to Section 1.9 and not revoked or lost ("Class B Electing Units"), the right to receive one fully paid and nonassessable "Class B Unit" as defined in the Partnership Agreement (each, a "Class B Unit"); and (c) for each Seller OP Unit, other than Class A Electing Units and Class B Electing Units, the right to receive in cash, without interest, an amount equal to the Common Merger Consideration (the "Cash Election Price"). Notwithstanding the foregoing, if between the date of this Agreement and the Effective Time the outstanding Seller OP Units, Class A Preferred Units (if any) or Class B Units (if any) shall have been changed into a different number of units or a different class by reason of any distribution, dividend, subdivision, reclassification, recapitalization, split, combination or exchange of Seller OP Units, Class A Preferred Units (if any) or Class B Units (if any), the Merger Consideration shall be correspondingly adjusted to reflect such distribution, dividend, subdivision, reclassification, recapitalization, split, combination or exchange. Section 1.5 Conversion of Units Owned by Seller General Partner. The Seller OP Units that are owned by Seller General Partner immediately prior to the Effective Time (collectively, the "Seller GP Interest") shall, at the Effective Time, by virtue of the Partnership Merger and without any action on the part of 4 Seller General Partner, be converted into a 1% general partnership interest in the Surviving Operating Partnership. Section 1.6 Parent and Seller-Owned Interests. Each Seller OP Unit that is owned by Parent or the Seller immediately prior to the Effective Time shall, at the Effective Time, by virtue of the Partnership Merger and without any action on the part of Parent or the Seller, automatically be canceled and retired and cease to exist, and no consideration shall be delivered in exchange therefor. Section 1.7 Conversion of Interests in Buyer Operating Partnership. The aggregate limited partnership interests in Buyer Operating Partnership issued and outstanding immediately prior to the Effective Time shall, at the Effective Time, by virtue of the Partnership Merger and without any action on the part of Parent, be converted into a 99% limited partnership interest in the Surviving Operating Partnership. The aggregate general partnership interests in Buyer Operating Partnership issued and outstanding immediately prior to the Effective Time shall, at the Effective Time, by virtue of the Partnership Merger and without any action on the part of Buyer, automatically be canceled and retired and cease to exist, and no consideration shall be delivered in exchange therefor. Section 1.8 Cancellation and Retirement of Seller OP Units. Each Seller OP Unit converted into the right to receive the Merger Consideration pursuant to Section 1.4 shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a Seller OP Unit shall cease to have any rights with respect thereto, except for the right to receive the Merger Consideration, if any, applicable thereto. Section 1.9 Interest Elections. (a) Subject to Section 1.9(e), each holder of a Seller OP Unit shall be entitled, with respect to all, but not less than all, of such holder's Seller OP Units, to make an unconditional election, on or prior to the Election Date (as defined in Section 1.9(b)), to receive (i) Class A Preferred Units or Class B Units (a "Non-Cash Election") or (ii) the Cash Election Price (a "Cash Election"), on the basis hereinafter set forth. (b) Buyer Operating Partnership shall prepare, and the Seller Partnership shall mail pursuant to Section 4.3(a), a form of election, which form shall be subject to the reasonable approval of Seller General Partner (the "Form of Election"). The Form of Election shall be used by each holder of a Seller OP Unit to designate such holder's election to exchange all, but not less than all, of the Seller OP Units held by such holder into either Class A Preferred Units, Class B Units or the Cash Election Price. Any such holder's election to receive Class A Preferred Units, Class B Units or the Cash Election Price shall be deemed to have been properly made only if Parent shall have received at its principal executive office, not later than 5 5:00 p.m., New York City time on the date that is five business days before the scheduled date of the Seller Shareholders Meeting (the "Election Date"), a Form of Election specifying whether such holder elects to receive Class A Preferred Units, Class B Units or the Cash Election Price and otherwise properly completed and signed. The Form of Election shall state therein the date that constitutes the Election Date. (c) A Form of Election may be revoked by any holder of a Seller OP Unit only by written notice received by Parent prior to 5:00 p.m., New York City time, on the Election Date. In addition, all Forms of Election shall automatically be revoked if the Partnership Merger has been abandoned. (d) The reasonable determination of Parent shall be binding as to whether or not elections to receive Class A Preferred Units, Class B Units or the Cash Election Price have been properly made or revoked pursuant to this Section 1.9 and when elections and revocations were received by it. If Parent determines that any election to receive Class A Preferred Units, Class B Units or the Cash Election Price was not properly made, the Seller OP Units with respect to which such election was not properly made shall be treated by Parent as Seller OP Units for which a Cash Election was made, and such Seller OP Units shall be converted in accordance with Section 1.4(c). Parent may, with the agreement of Seller General Partner, make such rules as are consistent with this Section 1.9 for the implementation of the elections provided for herein as shall be necessary or desirable fully to effect such elections. (e) Parent reserves the right to require any holder of Seller OP Units, as a condition to making a Non-Cash Election with respect to such holder's Seller OP Units, to (i) represent to Parent that such holder is an "Accredited Investor" (as such term is defined under Rule 501 promulgated under the Securities Act) and (ii) agree to abide by the terms of the Partnership Agreement and to become a party thereto. Section 1.10 Payment for Seller OP Units. (a) Payment. Promptly after the Effective Time, Parent shall pay the Merger Consideration to which holders of Seller OP Units shall be entitled at the Effective Time pursuant to Section 1.4(c). Parent shall be entitled to deduct and withhold, from the consideration otherwise payable pursuant to Section 1.4(c) to any former holder of Seller OP Units, such amounts as Parent is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Parent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the former holder of Seller OP Units in respect of which such deduction and withholding was made by Parent. 6 (b) No Further Ownership Rights in Seller OP Units. The Merger Consideration delivered in accordance with the terms of Article 1 shall be deemed to have been issued (or paid, as applicable) in full satisfaction of all rights pertaining to the Seller OP Units. Section 1.11 Further Assurances. If, at any time after the Effective Time, the Surviving Operating Partnership shall determine or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Operating Partnership the right, title or interest in, to or under any of the rights, properties or assets of the Seller Partnership acquired or to be acquired by the Surviving Operating Partnership as a result of, or in connection with, the Partnership Merger or otherwise to carry out this Agreement, the Surviving Operating Partnership shall be authorized to execute and deliver, in the name and on behalf of each of Buyer Operating Partnership and the Seller Partnership or otherwise, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of Buyer Operating Partnership and the Seller Partnership or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Operating Partnership or otherwise to carry out this Agreement. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER GENERAL PARTNER AND THE SELLER PARTNERSHIP Each of Seller General Partner and the Seller Partnership represents and warrants to Parent and Buyer Operating Partnership as follows: Section 2.1 Organization, Standing and Power. Each of Seller General Partner and Seller Partnership is duly organized and validly existing under the Laws of Delaware. Each of Seller General Partner and Seller Partnership has the requisite corporate or limited partnership power and authority to carry on its business as now being conducted. Each of Seller General Partner and Seller Partnership is duly qualified or licensed to do business as a foreign corporation or limited partnership and is in good standing 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. Each of Seller General Partner and Seller Partnership has delivered to Parent complete and correct copies of its Certificate of Incorporation and By-laws or similar organizational documents, in each case, as amended to the date of this Agreement. 7 Section 2.2 Authority; Noncontravention; Consents. (a) Each of Seller General Partner and Seller Partnership has the requisite corporate or limited partnership power and authority to enter into this Agreement and, subject to the Seller Partner Approval, to consummate the transactions contemplated by this Agreement to which it is a party. The execution and delivery of this Agreement by Seller General Partner and Seller Partnership and the consummation by Seller General Partner and Seller Partnership of the transactions contemplated by this Agreement to which Seller General Partner and/or Seller Partnership is a party have been duly authorized by all necessary corporate or limited partnership action on the part of Seller General Partner and Seller Partnership, except for and subject to the Seller Partner Approval. This Agreement has been duly executed and delivered by Seller General Partner and Seller Partnership and constitutes a valid and binding obligation of each of Seller General Partner and Seller Partnership, enforceable against each of Seller General Partner and Seller Partnership in accordance with and subject to its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar Laws relating to creditors' rights and general principles of equity. (b) The execution and delivery of this Agreement by each of Seller General Partner and Seller Partnership does not, and the consummation of the transactions contemplated by this Agreement to which it is a party and compliance by it with the provisions of this Agreement will not, require any consent, approval or notice under, or 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 result in the creation of any Lien upon any of the properties or assets of Seller General Partner, Seller Partnership or any of their Subsidiaries under, (i) the Certificate of Incorporation or the By-laws or the comparable certificate of incorporation or organizational documents or partnership or similar agreement (as the case may be) of Seller General Partner, Seller Partnership or any of their Subsidiaries, each as amended or supplemented to the date hereof, (ii) any loan or credit agreement, note, bond, mortgage, indenture, reciprocal easement agreement, lease, joint venture agreement, development agreement, benefit plan or other agreement, instrument, permit, concession, franchise or license applicable to Seller General Partner, Seller Partnership or any of their Subsidiaries or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in the following sentence, any judgment, order, decree, statute, law, ordinance, rule or regulation (collectively, "Laws") applicable to Seller General Partner, Seller Partnership or any of their Subsidiaries, or their respective properties or assets, other than, in the case of clause (ii) (other than such items relating to the incurrence of indebtedness) or (iii), any such conflicts, violations, defaults, rights, loss or Liens that individually or in the aggregate would not reasonably be expected to (x) have a Seller Material Adverse Effect or (y) prevent or delay beyond December 31, 1999 the consummation of the transactions contemplated by this Agreement. No consent, approval, order or 8 authorization of, or registration, declaration 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 (a "Governmental Entity"), is required by or with respect to Seller General Partner, Seller Partnership or any of their Subsidiaries in connection with the execution and delivery of this Agreement or the consummation by Seller General Partner or Seller Partnership of the transactions contemplated by this Agreement, except for (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (ii) any filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iii) the filing of a Form D with the SEC and (iv) such other consents, approvals, orders, authorizations, registrations, declarations and filings (A) as are set forth in Schedule 2.5 to the Seller Disclosure Letter, (B) as may be required under (y) federal, state or local environmental Laws or (z) the "blue sky" laws of various states, to the extent applicable or (C) which, if not obtained or made, would not prevent or delay beyond December 31, 1999 the consummation of any of the transactions contemplated by this Agreement or otherwise prevent or delay beyond December 31, 1999 Seller from performing its obligations under this Agreement in any material respect or have, individually or in the aggregate, a Seller Material Adverse Effect. Section 2.3 Information Supplied. None of the information supplied by Seller General Partner or the Seller Partnership for inclusion or incorporation by reference in the Consent Solicitation Statement (as defined in Section 4.3) or the other Solicitation Documents (as defined Section 4.3) shall, at the time the Solicitation Documents are mailed to the holders of Seller OP Units and at the Closing Date, contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER OPERATING PARTNERSHIP Each of Parent and Buyer Operating Partnership represents and warrants to Seller General Partner and the Seller Partnership as follows: Section 3.1 Organization, Standing and Power. (a) Parent is a limited partnership duly organized and validly existing under the Laws of Delaware and has the requisite power and authority to carry on its business as now being conducted. Parent is duly qualified or licensed to do business as a foreign limited partnership and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its 9 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 material adverse effect on the ability of Parent to consummate the transactions contemplated by this Agreement. Parent has delivered to Seller complete and correct copies of its organizational documents as amended or supplemented to the date of this Agreement. Attached hereto as Exhibit A is a complete and correct copy of the Partnership Agreement. The Partnership Agreement has not been amended subsequent to the date hereof, except for such amendments as are permitted under Section 4.3(c) of the Merger Agreement. (b) Buyer Operating Partnership is a limited partnership duly organized and validly existing under the Laws of Delaware and has the requisite power and authority to carry on its business as now being conducted. Buyer Operating Partnership is duly qualified or licensed to do business as a foreign limited partnership and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualifications 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 material adverse effect on the ability of Buyer Operating Partnership to consummate the transactions contemplated by this Agreement. Buyer Operating Partnership has delivered to Seller complete and correct copies of its organizational documents as amended or supplemented to the date of this Agreement. (c) Parent and Buyer Operating Partnership are newly formed and, except for activities incident to the acquisition of Seller Partnership, neither Parent nor Buyer Operating Partnership has (i) engaged in any business activities of any type or kind whatsoever or (ii) acquired any property of any type or kind whatsoever. Section 3.2 Authority; Noncontravention; Consents. (a) Each of Parent and Buyer Operating Partnership has the requisite power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement to which it is a party. The execution and delivery of this Agreement by Parent and Buyer Operating Partnership and the consummation by Parent and Buyer Operating Partnership of the transactions contemplated by this Agreement to which Parent and/or Buyer Operating Partnership is a party have been duly authorized by all necessary partnership action on the part of Parent and Buyer Operating Partnership (including, without limitation, the issuance of the Class A Preferred Units and the Class B Units in the Partnership Merger). This Agreement has been duly executed and delivered by Parent and Buyer Operating Partnership and constitutes a valid and binding obligation of each of Parent and Buyer Operating Partnership, enforceable against each of Parent and Buyer Operating Partnership in accordance with and subject to its terms, subject to applicable 10 bankruptcy, insolvency, moratorium or other similar Laws relating to creditors' rights and general principles of equity. (b) The execution and delivery of this Agreement by each of Parent and Buyer Operating Partnership does not, and the consummation of the transactions contemplated by this Agreement to which Parent and/or Buyer is a party and compliance by each of Parent and Buyer Operating Partnership with the provisions of this Agreement will 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 material obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Parent or any of its Subsidiaries under, (i) the organizational documents of Parent (including the Partnership Agreement) or Buyer Operating Partnership or the comparable certificate of incorporation or organizational documents or partnership or similar agreement (as the case may be) of any other Subsidiary of the Parent, each as amended or supplemented to the date of this Agreement, (ii) any loan or credit agreement, note, bond, mortgage, indenture, reciprocal easement agreement, lease or other agreement, instrument, permit, concession, franchise or license applicable to Parent or any of its Subsidiaries or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in the following sentence, any Laws applicable to Parent or any of its Subsidiaries or their respective properties or assets, other than, in the case of clause (ii) or (iii), any such conflicts, violations, defaults, rights, loss or Liens that individually or in the aggregate would not reasonably be expected to (x) have a Parent Material Adverse Effect or (y) prevent the consummation of the transactions contemplated by this Agreement. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Parent or any of its Subsidiaries in connection with the execution and delivery of this Agreement by Parent or Buyer Operating Partnership or the consummation by Parent or Buyer Operating Partnership of any of the transactions contemplated by this Agreement, except for (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (ii) such filings as may be required in connection with the payment of any Transfer Taxes, (iii) any filings required under the HSR Act, (iv) the filing of a Form D with the SEC and (v) such other consents, approvals, orders, authorizations, registrations, declarations and filings (A) as may be required under federal, state or local environmental Laws, (B) the "blue sky" laws of various states, to the extent applicable, or (C) which, if not obtained or made, would not prevent or delay beyond December 31, 1999 the consummation of any of the transactions contemplated by this Agreement or otherwise prevent Parent or Buyer Operating Partnership from performing its obligations under this Agreement in any material respect or have, individually or in the aggregate, a Parent Material Adverse Effect. Section 3.3 Information Supplied. None of the information supplied by Parent or Buyer Operating Partnership for inclusion or incorporation by reference in the Consent Solicitation Statement or the other Solicitation Documents shall, at the 11 time the Solicitation Documents are mailed to the holders of Seller OP Units and at the Closing Date, contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. ARTICLE 4 COVENANTS Section 4.1 Reasonable Best Efforts; Additional Actions. Upon the terms and subject to the conditions of this Agreement, each of the parties hereto shall use all reasonable best efforts to take, or cause to be taken, all actions, and to do or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by, and in connection with, this Agreement. In connection with and without limiting the foregoing, Seller General Partner shall take all necessary action to obtain the requisite consent of the holders of Seller OP Units to adopt this Agreement and approve the Partnership Merger prior to the closing of the Merger. Section 4.2 Notification of Certain Matters. Each of Seller General Partner and the Seller Partnership shall give notice to Parent and Buyer Operating Partnership, and each of Parent and Buyer Operating Partnership shall give notice to Seller General Partner and the Seller Partnership, promptly upon becoming aware of (a) any occurrence, or failure to occur, of any event, which occurrence or failure to occur has caused or would reasonably be expected to cause any representation or warranty that is qualified as to materiality in this Agreement to be untrue or inaccurate or any representation or warranty that is not so qualified to be untrue or inaccurate in any material respect at any time after the date hereof and prior to the Closing Date and (b) any material failure on its part to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided that the delivery of any notice pursuant to this Section 4.2 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. Section 4.3 Consent Solicitation Statement; Securities Filings. (a) Seller Partnership and Parent shall jointly and promptly prepare a Consent Solicitation Statement soliciting the written consent of the holders of Seller OP Units to the adoption of this Agreement and the approval of the Partnership Merger (the "Consent Solicitation Statement"), which Consent Solicitation Statement shall contain a description of the terms of the Class A Preferred Units and the Class B Units and the recommendation of Seller General Partner's Board of Directors that the holders of Seller OP Units consent to the adoption of this Agreement and the approval of the Partnership Merger. The Consent Solicitation 12 Statement shall comply as to form in all material respects with the requirements of the Securities Act and the rules and regulations thereunder applicable to an offering of securities exempt from registration under the Securities Act pursuant to Rule 506 thereunder. As soon as practicable following the mailing of the Proxy Statement in connection with the Merger, Seller Partnership shall mail the Consent Solicitation Statement, together with a form of written consent, a Form of Election and any other documents relating thereto (collectively, the "Solicitation Documents"), to the holders of Seller OP Units. Seller Partnership and Parent shall consult and cooperate with each other in the preparation of the Solicitation Documents. All mailings to the holders of Seller OP Units in connection with the Partnership Merger, including the Solicitation Documents, shall be subject to the prior review, comment and approval of Parent (such approval not to be unreasonably withheld or delayed). Parent shall take all actions required to be taken under any applicable federal and state securities laws in connection with the issuance of the Class A Preferred Units and the Class B Units in the Partnership Merger pursuant to this Agreement, including but not limited to the filing with the SEC of a "Notice of Sale of Securities Pursuant to Regulation D" on Form D. (b) Parent, on the one hand, and Seller Partnership, on the other hand, shall each advise the other promptly if, prior to the Closing Date, it obtains knowledge of any facts that would make it necessary to amend any of the Solicitation Documents in order to render the statements therein not false or misleading or to comply with applicable law. Seller Partnership and Parent shall promptly amend or supplement any information in such documents if and to the extent that such information has become false or misleading, and Seller Partnership shall take all steps necessary to disseminate the amended documents or supplements to the holders of Seller OP Units, in each case, as and to the extent required by applicable law. ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE PARTNERSHIP MERGER Section 5.1 Conditions to Each Party's Obligations to Effect the Partnership Merger. The respective obligations of each party hereto to effect the Partnership Merger is subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the parties hereto with respect to such party's conditions, to the extent permitted by applicable law: (a) Conditions to the Merger. All of the conditions to the closing of the Merger shall have been satisfied or waived in accordance with the terms of the Merger Agreement (other than those set forth in Section 6.2(h), 6.2(i) or 6.3(f) of the Merger Agreement). 13 (b) Unitholders' Consent. The requisite consent of the holders of the Seller OP Units to adopt this Agreement and approve the Partnership Merger shall have been obtained; and (c) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Partnership Merger or any of the other transactions contemplated hereby shall be in effect. (d) HSR Act. All applicable waiting periods (and any extensions thereof) under the HSR Act shall have expired or otherwise been terminated. Section 5.2 Conditions to Seller General Partner's and the Seller Partnership's Obligations to Effect the Partnership Merger. The obligation of Seller General Partner and the Seller Partnership to effect the Partnership Merger is also subject to the satisfaction (or waiver by Seller General Partner and the Seller Partnership) on or prior to the Closing Date of each of the following additional conditions: (a) Accuracy of Representations and Warranties. All representations and warranties made by each of Parent and Buyer Operating Partnership herein shall be true and correct in all material respects (except for representations having a materiality, Parent Material Adverse Effect or Buyer Material Adverse Effect qualification, which shall be true and correct in all respects) as of the date of the Agreement and as of the Closing Date with the same force and effect as though such representations and warranties had been made on and as of the Closing Date, except for representations and warranties that are made as of a specified date or time, which shall be true and correct in all material respects (except for representations having a materiality, Parent Material Adverse Effect or Buyer Material Adverse Effect qualification, which shall be true and correct in all respects) only as of such specific date or time. (b) Compliance with Covenants. Each of Parent and Buyer Operating Partnership shall have performed in all material respects all obligations and agreements, and complied in all material respects with covenants, contained in this Agreement to be performed or complied with by it prior to or as of the Closing Date. (c) Officer's Certificate. Seller General Partner and the Seller Partnership shall have received a certificate of Parent, dated as of the Closing Date, signed by an executive officer of Parent to evidence satisfaction of the conditions set forth in Sections 5.2(a) and (b). 14 Section 5.3 Conditions to Parent's and Buyer Operating Partnership's Obligations to Effect the Partnership. The obligation of Parent and Buyer Operating Partnership to effect the Partnership Merger is also subject to the satisfaction (or waiver by Parent and Buyer Operating Partnership) at or prior to the Closing Date of each of the following additional conditions: (a) Accuracy of Representations and Warranties. All representations and warranties made by each of Seller General Partner and the Seller Partnership herein shall be true and correct in all material respects (except for representations having a materiality or Seller Material Adverse Effect qualification, all of which shall be true and correct in all respects) as of the date of this Agreement and as of the Closing Date, with the same force and effect as though such representations and warranties had been made on and as of the Closing Date, except for representations and warranties that are made as of a specified date or time, which shall be true and correct in all material respects (except for representations having a materiality or Seller Material Adverse Effect qualification, which shall be correct in all respects) only as of such specific date or time. (b) Compliance with Covenants. Each of Seller General Partner and the Seller Partnership shall have performed in all material respects all obligations and agreements, and complied in all material respects with covenants, contained in this Agreement to be performed or complied with by it prior to or as of the Closing Date. (c) Officer's Certificate. Parent and Buyer Operating Partnership shall have received a certificate of Seller General Partner, dated as of the Closing Date, signed by an executive officer of Seller General Partner to evidence satisfaction of the conditions set forth in Sections 5.3(a) and (b). Notwithstanding anything to the contrary in this Agreement, none of the initiation, threat or existence of any legal action of any kind with respect to this Agreement or the Merger Agreement or any transaction contemplated hereby or thereby, including without limitation any action initiated, threatened or maintained by any stockholder of the Seller or any holders of Seller OP Units, whether alleging rights with respect to Dissenting Shares, claims under any Federal or state securities law, contract or tort claims, for breach of fiduciary duty or otherwise, will constitute a failure of the conditions set forth in Sections 5.2(a), 5.2(b), 5.3(a) or 5.3(b) (and no such action shall cause an executive officer of Seller General Partner or of Parent to be unable to deliver a certificate attesting to compliance with such conditions) unless that action has resulted in the granting of injunctive relief that prevents the consummation of the Partnership Merger and the other transaction contemplated hereby or thereby, and such injunctive relief has not been dissolved or vacated. 15 ARTICLE 6 TERMINATION Section 6.1 Termination. This Agreement shall terminate, without any further action on the part of the parties hereto, upon the termination of the Merger Agreement in accordance with its terms. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date by the mutual written consent of the parties hereto. Section 6.2 Procedure for and Effect of Termination. If this Agreement is terminated as provided herein, no party hereto shall have any liability or further obligation to any other party under the terms of this Agreement. ARTICLE 7 MISCELLANEOUS Section 7.1 Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified or supplemented only by a written agreement signed by each of the parties hereto at any time prior to the Closing Date with respect to any of the terms contained herein; provided, however, that after this Agreement is adopted by the holders of Seller OP Units, no such amendment shall be made which requires the approval of such holders. Section 7.2 Waiver of Compliance; Consents. Any failure of Parent or Buyer Operating Partnership, on the one hand, or Seller General Partner or the Seller Partnership, on the other hand, to comply with any obligation, covenant, agreement or condition herein may, subject to Section 7.1, be waived by Parent and Buyer Operating Partnership or Seller General Partner and the Seller Partnership, respectively, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 7.2 and in Section 7.1. Section 7.3 Survival. The respective representations and warranties of Parent and Buyer Operating Partnership and Seller General Partner and the Seller Partnership contained herein shall not survive the Closing hereunder. Section 7.4 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be delivered 16 personally, sent by overnight courier (providing proof 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 Parent or Buyer Operating Partnership, to: Berkshire Realty Holdings, L.P. One Beacon Street Suite 1500 Boston, Massachusetts 02108 Attention: Douglas S. Krupp Telecopier: (617) 423-8916 with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, NY 10019-6064 Attention: James M. Dubin, Esq. Michele R. Jenkinson, Esq. Telecopier: (212) 757-3990 and Sullivan & Cromwell 125 Broad Street New York, NY 10004-2498 Attention: Anthony J. Colletta, Esq. Telecopier: (212) 558-3588 and Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3954 Attention: Gregory J. Ressa, Esq. Brian M. Stadler, Esq. Telecopier: (212) 455-2502 17 (b) if to Seller General Partner or the Seller Partnership, to: Berkshire Realty Company, Inc. One Beacon Street Suite 1550 Boston, Massachusetts 02108 Attention: President Telecopier: (617) 646-2373 with a copy to: Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 Attention: David E. Redlick, Esq. Kenneth A. Hoxsie, Esq. Telecopier: (617) 526-5000 and Baker & Hostetler LLP 1900 East Ninth Street, Suite 3200 Cleveland, Ohio 44114 Attention: Robert A. Weible, Esq. Telecopier: (216) 696-0740 All notices shall be deemed given only when actually received. Section 7.5 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties. Section 7.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF. Section 7.7 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 18 Section 7.8 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by Seller General Partner and Seller Partnership in accordance with their specific terms or were otherwise breached. It is accordingly agreed that Parent and Buyer Operating Partnership shall be entitled to an injunction or injunctions to prevent breaches of this Agreement by Seller General Partner and Seller Partnership and to enforce specifically the terms and provisions of this Agreement in any federal court located in Delaware or in Chancery Court in Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. The parties acknowledge that Seller General Partner and Seller Partnership shall not be entitled to an injunction or injunctions to prevent breaches of this Agreement by Parent or Buyer Operating Partnership or to enforce specifically the terms and provisions of this Agreement and that Seller General Partner's and Seller Partnership's sole and exclusive remedy with respect to any such breach shall be the remedy set forth in Section 7.2 of the Merger Agreement. In addition, each of the parties hereto (a) consents to submit itself (without making such submission exclusive) to the personal jurisdiction of any federal court located in Delaware or Chancery Court located in Delaware in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement and (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court. Section 7.9 Interpretation. The article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. Section 7.10 Entire Agreement. The Merger Agreement (including the schedules, exhibits, documents or instruments referred to herein) and this Agreement together embody the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and thereof and supersede all prior agreements and understandings, both written and oral, among the parties, or between any of them, with respect to the subject matter hereof and thereof. Section 7.11 No Third Party Beneficiaries. This Agreement is not intended to, and does not, create any rights or benefits of any party other than the parties hereto. Section 7.12 Severability. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. Section 7.13 Tax Election. The parties hereby agree that an election pursuant to Section 754 of the Internal Revenue Code shall be made for the Seller 19 Partnership and each partnership which is a subsidiary of the Seller Partnership (or shall be in effect) with respect to any transfers of interests in the Seller Partnership pursuant to the Merger and the Partnership Merger. [Signatures appear on next page] 20 IN WITNESS WHEREOF, the Parent, Buyer Operating Partnership, Seller General Partner and the Seller Partnership have caused this Agreement and Plan of Merger to be signed by a person duly authorized to do so as of the date first above written. BERKSHIRE REALTY HOLDINGS, L.P. By: /s/ Douglas Krupp ----------------- Name: Title: BRI ACQUISITION SUB, LP By: /s/ Douglas Krupp ----------------- Name: Title: BERKSHIRE APARTMENTS, INC. By: /s/ David F. Marshall --------------------- Name: Title: BRI OP LIMITED PARTNERSHIP By: BERKSHIRE APARTMENTS, INC., its general partner By: /s/ David F. Marshall --------------------- Name: Title: EX-12 6 EXHIBIT 12 ESCROW AGREEMENT This Escrow Agreement is made and entered into as of April 13, 1999, by and among BRI OP Limited Partnership, a Delaware limited partnership (the "Partnership"), Berkshire Realty Company, Inc., a Delaware corporation ("BRI"), Berkshire Realty Holdings, L.P., a Delaware limited partnership ("Parent"), and American Stock Transfer and Trust Company, a New York corporation, as escrow agent (the "Escrow Agent"). BRI, the Partnership, Parent and the Escrow Agent are referred to individually herein as a "Party" and are referred to together herein as the "Parties." WITNESSETH: WHEREAS, BRI, BRI Acquisition, L.L.C., a Delaware limited liability company (the "Buyer") whose sole member is Parent, and Parent have entered into an Agreement and Plan of Merger dated of even date herewith (the "Merger Agreement"); and WHEREAS, the Partnership, Parent and BRI Acquisition Sub, LP have entered into an Agreement and Plan of Merger of even date herewith (the "Partnership Merger Agreement"); and WHEREAS, pursuant to the Merger Agreement, Buyer will be merged with BRI; and WHEREAS, pursuant to the Partnership Merger Agreement, BRI Acquisition Sub, LP, a Delaware limited partnership, will be merged with the Partnership; and WHEREAS, Section 4.7 of the Merger Agreement requires the Buyer to provide cash in the amount of $29,500,000, which amount may be increased to $54,500,000 as provided in said Section 4.7 (the "Cash Collateral") for the benefit of the Escrow Agent on behalf of the Partnership, the holders of common stock of BRI ("Common Stock") and the holders of units of limited partnership in the Partnership other than BRI (the "Units") (the Partnership, the holders of Common Stock and such holders of Units, collectively being sometimes referred to as the "Beneficiaries"); and WHEREAS, Section 4.7 of the Merger Agreement provides that the Buyer, at its election, may provide a letter of credit substantially in the form of Attachment A, which letter of credit may be amended as provided in said Section 4.7 to increase the amount available thereunder to $54,500,000 (the "Letter of Credit"), with such changes 2 as shall be reasonably satisfactory to Seller and from a bank satisfactory to Seller, in substitution of the Cash Collateral; and WHEREAS, BRI conducts substantially all of its operations through the Partnership; and WHEREAS, Section 7.2(b) of the Merger Agreement provides for the payment of a Break-Up Fee and/or Break-Up Expenses as liquidated damages in certain circumstances, which obligation is secured by the Cash Collateral or Letter of Credit, as applicable; and WHEREAS, Parent, BRI and the Partnership wish to appoint the Escrow Agent as escrow agent for such escrow account and to hold and draw upon the Letter of Credit, and the Escrow Agent wishes to accept such appointment, upon the terms and conditions set forth below. NOW, THEREFORE, the Parties hereto hereby agree as follows: 1. Defined Terms. Capitalized terms used in this Agreement and not otherwise defined shall have the meanings given them in the Merger Agreement. 2. Cash Collateral. The Cash Collateral shall be held by the Escrow Agent in a segregated trust account designated as the "BRI Cash Collateral Account" or in an account having a similar designation. The Cash Collateral shall be invested in accordance with Section 6 hereof pursuant to the written instruction of BRI on behalf of the Beneficiaries. The Escrow Agent agrees to accept delivery of the Cash Collateral and to hold such Cash Collateral subject to the terms and conditions of this Agreement. 3. Escrow Fund. Promptly upon receipt from BRI of a certificate (the "Draw Certificate") certifying that a payment of the Break-Up Fee and/or the Break-Up Expenses is owing pursuant to Section 7.2(b) of the Merger Agreement and the amount thereof, the Escrow Agent shall (i) if the Letter of Credit has been substituted for the Cash Collateral, draw the amount of the Letter of Credit specified by BRI in the Draw Certificate, and at the direction and expense of BRI, take all actions necessary to collect such amount, employing such counsel in connection therewith as BRI may direct; or (ii) if the Letter of Credit has not been substituted for the Cash Collateral, segregate a portion of the Cash Collateral equal to the amount specified by BRI in the Draw Certificate (with any balance of the Cash Collateral being subject to Section 5(a) hereof), which segregation shall terminate any right of Parent to the return of such portion of the Cash Collateral. The portion of the Cash Collateral so segregated and/or any amounts drawn 3 under the Letter of Credit, are referred to herein as the "Escrow Fund" and shall be held by the Escrow Agent in a segregated trust account designated as "BRI Escrow Account" or in an account having such other similar designation. The Escrow Fund shall be invested in accordance with Section 6 hereof pursuant to the written instructions of BRI on behalf of the Beneficiaries. The Escrow Agent agrees to accept delivery of the Escrow Fund and to hold such Escrow Fund in escrow subject to the terms and conditions of this Agreement. 4. Release of Escrow Fund. With respect to each taxable year of BRI (for federal income tax purposes) in which the undistributed Escrow Fund is a positive number, all or a portion of the undistributed Escrow Fund shall be distributable to the Beneficiaries in accordance with Sections 4(a) and (b), below. The amounts to be distributed to each Beneficiary with respect to any taxable year shall be calculated by BRI (after consultation with BRI's independent accountants (the "Accountants")) as soon as practicable after the end of BRI's taxable year (or such later time as BRI shall determine in its sole discretion if litigation with regard to the Beneficiaries' right to liquidated damages pursuant to the Merger Agreement has commenced or been threatened) based upon the facts in existence as of the end of such taxable year. Following such calculations, BRI shall promptly notify the Escrow Agent by delivery of a certificate (the "Disbursement Certificate") of the amounts, if any, to be distributed to each Beneficiary together with the full name and address of the Beneficiary. Promptly after receipt of a Disbursement Certificate for a taxable year of BRI, the Escrow Agent shall distribute all or a portion of the undistributed Escrow Fund in the amounts and to the recipients specified in the Disbursement Certificate. Any Disbursement Certificate shall direct the Escrow Agent to disburse the undistributed Escrow Fund only as follows: (a) First, to the Partnership in an amount equal to the sum of (i) any portion of the undistributed Escrow Fund that is determined pursuant to a BreakUp Fee Tax Opinion (as defined below) or a Ruling (as defined below)to be either (A) income described in Section 856(c)(2) of the Internal Revenue Code of 1986, as amended ("Qualifying Income") or (B) income of a nature that it is not includable in BRI's gross income for purposes of determining whether BRI meets the requirement of Section 856(c)(2) (the "REIT Requirement") for such year and (ii) the quotient of (A) the excess of (I) 4.95% of BRI's federal gross income for such taxable year over (II) the amount of gross income of BRI for the taxable year from all other sources to the extent such income is not Qualifying Income and (B) BRI's percentage share of the capital of the Partnership (determined in accordance with Treasury Regulation Section 1.856-3(g) or any applicable successor provision) for such year. As used herein, "Break-Up Fee Tax Opinion" means an opinion letter from BRI's outside counsel, and "Ruling" means a private letter ruling from the Internal Revenue Service. In the event that the foregoing 4 does not permit the distribution to the Partnership of the entire undistributed Escrow Fund for any taxable year of BRI, the Escrow Agent shall retain the unpaid amount in escrow for distribution pursuant to (x) this Section 4(a) in subsequent taxable years of BRI, (y) Section 4(b) or (z) Section 4(c), as applicable. (b) Second, if the amount of any undistributed Escrow Fund is greater than zero and outside counsel to BRI informs BRI in writing that such counsel believes that BRI is unlikely to receive a Break-Up Fee Tax Opinion or Ruling with respect to the distribution to the Partnership of the undistributed Escrow Fund, then the undistributed Escrow Fund shall be distributed to holders of Common Stock and Units, in equal amounts per share of Common Stock and per Unit; provided, however, that amounts shall only be so distributed to the holders of Common Stock and Units if, and to the extent, BRI receives a Break-Up Fee Tax Opinion or a Ruling with respect to such distributions. (c) Third, any amounts remaining in escrow at the end of the ten (10) year period commencing on the date the Draw Certificate is delivered shall be paid to a charity chosen by Parent that qualifies as a charity under Section 501(c)(3) of the Code. 5. Substitution or Return of Collateral. (a) At the direction of BRI and following the delivery to the Escrow Agent of the Letter of Credit, the Escrow Agent shall disburse the Cash Collateral (other than any portion thereof that has become part of the Escrow Fund) to Parent, together with all interest thereon. BRI agrees that it shall provide the foregoing direction to the Escrow Agent promptly upon notice from the Escrow Agent that it has received the Letter of Credit. (b) The Escrow Agent shall return the Letter of Credit to Parent when and as BRI may direct. BRI shall so direct the Escrow Agent within five business days of Parent's becoming entitled to such return in accordance with Section 7.2(b) of the Merger Agreement. 6. Investment of Escrow Fund. (a) Any monies held as Cash Collateral or in the Escrow Fund shall be invested by the Escrow Agent, to the extent permitted by law and as directed in writing by BRI on behalf of the Beneficiaries, in (i) obligations having a maturity date of 30 days or less issued or guaranteed by the United States of America or any agency or instrumentality thereof, (ii) obligations having a maturity date of 30 days or less (including certificates of deposit and bankers' acceptances) of banks which at the date of their last public reporting had total assets in excess of $500 million, (iii) commercial paper having a maturity date of 30 days or less 5 rated at least A-1 or P-1 or, if not rated, issued by companies having outstanding debt rated at least AA or Aa and (iv) money market mutual funds invested primarily in the securities described in the foregoing clauses (i), (ii) and (iii). (b) Any interest earned on the Cash Collateral shall be for the account of Parent. Any interest earned on the Escrow Fund shall be for the account of the Beneficiaries and shall be included in the amounts distributed pursuant to Section 4 hereof. 7. Fees and Expenses. BRI and the Partnership shall be jointly and severally liable for the fees of the Escrow Agent, including, but not limited to, reasonable legal fees and expenses for the services rendered by the Escrow Agent hereunder and for its attorney's fees and expenses incurred in connection with the preparation of this Agreement. In furtherance of the foregoing, BRI and the Partnership agree to pay or reimburse the Escrow Agent for the Escrow Agent's reasonable compensation for its normal services hereunder and the preparation of this Agreement in accordance with the fee schedule attached hereto as Attachment B. The Escrow Agent shall be entitled to reimbursement on demand for all expenses incurred in connection with the administration of the escrow created hereby that are in excess of its compensation for normal services hereunder, including, without limitation, payment of any legal fees and expenses incurred by the Escrow Agent in connection with the resolution of any claim by any Party hereunder. 8. Limitation of Escrow Agent's Liability. (a) Neither the Escrow Agent nor any of its directors, officers or employees shall incur liability with respect to any action taken or suffered by it in reliance upon any notice, direction, instruction, consent, statement or other documents believed by it to be genuine and duly authorized, nor for other action or inaction except its own willful misconduct or gross negligence; provided, that with respect to the custody of the Cash Collateral and Escrow Fund, the Escrow Agent shall use the standard care of customarily used by custodians of funds. The Escrow Agent shall not be responsible for the validity or sufficiency of this Agreement and shall not be responsible for any of the agreements referred to herein, including the Merger Agreement and the Partnership Merger Agreement, but shall be obligated only for the performance of such duties as are specifically set forth in this Escrow Agreement. Without limiting the foregoing, the Escrow Agent (i) shall not be obligated to inquire as to the accuracy of any calculations used in preparing the Disbursement Certificate and (ii) shall have no obligation to inquire whether the Partnership has the right to liquidated damages pursuant to the Merger Agreement. In all questions arising under this Agreement, the Escrow Agent may rely 6 on the advice of counsel, including in-house counsel, and for anything done, omitted or suffered in good faith by the Escrow Agent based on such advice the Escrow Agent shall not be liable to anyone. The Escrow Agent shall not be required to take any action hereunder involving any expense unless the payment of such expense is made or provided for in a manner reasonably satisfactory to it. The Escrow Agent shall not be liable for any losses resulting from the investments made in accordance with this Agreement. In no event shall the Escrow Agent be liable for indirect, punitive, special or consequential damages. (b) BRI and the Partnership shall jointly and severally indemnify the Escrow Agent for, and hold it harmless against, any loss, liability or expense (including reasonable attorneys' fees and expenses) incurred without gross negligence or willful misconduct on the part of the Escrow Agent, arising out of or in connection with its carrying out of its duties hereunder, including without limitation drawing on the Letter of Credit. (c) BRI and the Partnership jointly and severally hereby agree to assume any and all obligations imposed now or hereafter by any applicable tax law with respect to the payment of Escrow Funds under this Agreement, and to indemnify and hold the Escrow Agent harmless from and against any taxes, additions for late payment, interest, penalties and other expenses, that may be assessed against the Escrow Agent in any such payment or other activities under this Agreement (other than taxes on the net income of the Escrow Agent attributable to the payment of fees hereunder). BRI and the Partnership undertake to instruct the Escrow Agent in writing with respect to the Escrow Agent's responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting in connection with its acting as Escrow Agent under this Agreement. BRI and the Partnership jointly and severally hereby agree to indemnify and hold the Escrow Agent harmless from any liability on account of taxes, assessments or other governmental charges, including without limitation the withholding or deduction or the failure to withhold or deduct the same, and any liability for failure to obtain proper certifications or to properly report to governmental authorities, to which the Escrow Agent may be or become subject in connection with or which arises out of this Agreement, including costs and expenses (including reasonable legal fees and expenses), interest and penalties. 9. Termination. This Agreement shall terminate upon the earliest of (i) notice from BRI to the Escrow Agent that the transactions contemplated by the Merger Agreement have been consummated, (ii) notice from BRI to the Escrow Agent that the Merger Agreement has been terminated without giving rise to the right to realize on the Cash Collateral or draw on the Letter of Credit, or (iii) the disbursement by the Escrow 7 Agent of all of the Escrow Funds (except in accordance with Section 5(a)) in accordance with this Agreement; provided, however, that the provisions of Sections 7 and 8 shall survive such termination. 10. Notices. All notices, instructions and other communications given hereunder or in connection herewith shall be in writing. Any such notice, instruction or communication shall be sent either (i) by registered or certified mail, return receipt requested, postage prepaid or (ii) via a reputable nationwide overnight courier service, in each case to the address set forth below. Any such notice, instruction or communication shall be deemed to have been delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid; or one business day after it is sent via a reputable nationwide overnight courier service. If to BRI or the Partnership: Berkshire Realty Company, Inc. One Beacon Street Suite 1550 Boston, MA 02108 Attention: Chief Executive Officer Copies to: Hale and Dorr LLP 60 State Street Boston, MA 02109 Attention: David E. Redlick, Esq. and Kenneth A. Hoxsie, Esq. Fax: (617) 526-5000 Baker & Hostetler LLP 3200 National City Center 1900 East 9th Street Cleveland, OH 44114 Attention: Robert A. Weible, Esq. 8 If to Parent: Berkshire Realty Holdings, L.P. One Beacon Street Suite 1500 Boston, MA 02108 Attention: Douglas S. Krupp Fax: (617) 423-8916 with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, NY 10019-6064 Attention: James M. Dubin, Esq. and Michele R. Jenkinson, Esq. Fax: (212) 757-3990 and Sullivan & Cromwell 125 Broad Street New York, NY 10004 Attention: Anthony J. Colletta Fax: (212) 558-3588 and Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3954 Attention: Gregory J. Ressa Fax: (212) 455-2502 If to the Escrow Agent: American Stock Transfer and Trust Company 40 Wall Street New York, NY 10005 9 Any Party may give any notice, instruction or communication in connection with this Agreement using any other means (including personal delivery, telecopy or ordinary mail), but no such notice, instruction or communication shall be deemed to have been delivered unless and until it is actually received by the Party to whom it was sent. Any Party may change the address to which notices, instructions or communications are to be delivered by giving the other Parties to this Agreement notice thereof in the manner set forth in this Section 10. 11. Successor Escrow Agent. In the event the Escrow Agent becomes unavailable or unwilling to continue in its capacity hereunder, the Escrow Agent may resign and be discharged from its duties or obligations hereunder by delivering a resignation to the Parties to this Escrow Agreement, not less than 60 days' prior to the date when such resignation shall take effect. BRI may appoint a successor Escrow Agent so long as such successor is a bank with assets of at least $500 million. If, within such notice period, BRI provides to the Escrow Agent written instructions with respect to the appointment of a successor Escrow Agent and directions for the transfer of the Letter of Credit, the Cash Collateral or any Escrow Fund then held by the Escrow Agent to such successor, the Escrow Agent shall act in accordance with such instructions and promptly transfer the Letter of Credit, the Cash Collateral and such Escrow Fund to such designated successor. If no successor escrow agent is named by BRI within such notice period, the Escrow Agent may apply to a court of competent jurisdiction for appointment of a successor escrow agent. 12. General. (a) Governing Law. This Agreement shall be governed by, enforced under and construed in accordance with the laws of the Commonwealth of Massachusetts without regard to conflict-of-law principles. (b) Counterparts. This Agreement may be executed in two or more counterparts (which need not each be signed by all of the Parties hereto), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (c) Entire Agreement. This Agreement constitutes the entire understanding and agreement of the Parties with respect to the subject matter hereof and supersedes all prior agreements or understandings, written or oral, between the Parties with respect to the subject matter hereof. 10 (d) Waivers. No waiver by any Party hereto of any condition or of any breach of any provision of this Escrow Agreement shall be effective unless in writing. No waiver by any Party of any such condition or breach, in any one instance, shall be deemed to be a further or continuing waiver of any such condition or breach or a waiver of any other condition or breach of any other provision contained herein. (e) Amendment. This Agreement may be amended only by a written instrument signed by the Parties hereto. (f) Consent to Jurisdiction and Service. BRI and the Partnership hereby absolutely and irrevocably consent and submit to the jurisdiction of the courts in the Commonwealth of Massachusetts and of any federal court located in the Commonwealth of Massachusetts in connection with any actions or proceedings brought against BRI and the Partnership by the Escrow Agent arising out of or relating to this Escrow Agreement. In any such action or proceeding, BRI and the Partnership hereby absolutely and irrevocably waive personal service of any summons, complaint, declaration or other process and hereby absolutely and irrevocably agree that the service thereof may be made in accordance with the notice provisions of Section 10 hereof, directed to BRI and the Partnership, as the case may be, at their respective addresses set forth in Section 10 hereof. (g) Force Majeure. Neither BRI, the Partnership nor the Escrow Agent shall be responsible for delays or failures in performance resulting from acts beyond its, his or her control. Such acts shall include but not be limited to acts of God, strikes, lockouts, riots, acts of wars, epidemics, governmental regulations superimposed after the fact, fire, communication line failures, computer viruses, power failures, earthquakes or other disasters. (h) Binding Effect, Assigns. This Agreement shall be binding upon and inure to the benefit of the respective Parties hereto and their heirs, executors, successors and assigns. (i) Reproduction of Documents. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications which may hereafter be executed, and (b) certificates and other information previously or hereafter furnished, may be reproduced by any photographic, photostatic, microfilm, optical disk, micro-card, miniature photographic or other similar process. The Parties agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a Party in the regular course 11 of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the day and year first above written. BERKSHIRE REALTY COMPANY, INC. By: /s/ David F. Marshall --------------------- Name:________________ Title:_______________ BRI OP LIMITED PARTNERSHIP By: BERKSHIRE APARTMENTS, INC. By: /s/ David F. Marshall --------------------- Name:________________ Title:_______________ 12 AMERICAN STOCK TRANSFER AND TRUST COMPANY, as Escrow Agent By: /s/ Herbert J. Lemmer --------------------- Name:________________ Title:_______________ Berkshire Realty Holdings, L.P. joins in this Agreement solely with respect to Section 4(c). BERKSHIRE REALTY HOLDINGS, L.P. By: /s/ Douglas Krupp ----------------- Douglas S. Krupp, Authorized Signatory EX-13 7 EXHIBIT 13 THE CHASE MANHATTAN BANK ISSUED DATE: APRIL 13, 1999 GLOBAL TRADE SERVICES GROUP L/C NO.: U-287508 P.O. BOX 44 CHURCH STREET STATION NEW YORK, N.Y. 10008-0044 ATTACHMENT A ------------ CABLE ADDRESS: CHAMANBANK NEW YORK ADVISING BANK APPLICANT: ************DIRECT************ BERKSHIRE REALTY HOLDINGS, L.P. 345 PARK AVENUE NEW YORK, N.Y. 10154 BENEFICIARY AMERICAN STOCK TRANSFER AND AMOUNT: USD 29,500,000.00 TRUST COMPANY, (TWENTY NINE MILLION FIVE AS ESCROW AGENT HUNDRED THOUSAND AND 00/100 40 WALL STREET UNITED STATES DOLLARS NEW YORK, NY 10005 IRREVOCABLE LETTER OF CREDIT NUMBER U-287508 LADIES AND GENTLEMEN: FOR THE ACCOUNT OF BERKSHIRE REALTY HOLDINGS, L.P., A DELAWARE LIMITED PARTNERSHIP, WE HEREBY AUTHORIZE AMERICAN STOCK TRANSFER AND TRUST COMPANY, AS ESCROW AGENT (THE "BENEFICIARY"), TO DRAW ON US UP TO AN AGGREGATE AMOUNT OF TWENTY-NINE MILLION FIVE HUNDRED THOUSAND UNITED STATES DOLLARS (US$29,500,000.00) (THE "CREDIT AMOUNT") AVAILABLE BY PRESENTATION TO US AT OUR COUNTERS LOCATED AT 4 CHASE METROTECH CENTER, 8TH FLOOR, BROOKLYN, NEW YORK 11245, ATTENTION: STANDBY LETTER OF CREDIT DEPARTMENT OF THE BENEFICIARY'S DRAFT AT SIGHT ON US ACCOMPANIED BY A WRITTEN STATEMENT PURPORTEDLY SIGNED BY AN AUTHORIZED OFFICER OF THE BENEFICIARY IN THE FORM OF EXHIBIT A ATTACHED HERETO (THE "CERTIFICATE TO ACCOMPANY DRAFT"). ANY DRAFT SO DRAWN MUST BE MARKED: "DRAWN UNDER THE CHASE MANHATTAN BANK LETTER OF CREDIT NO. U-287508" WE ENGAGE WITH YOU THAT ALL DRAFTS DRAWN BY YOU UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT WILL BE DULY HONORED BY US ON DELIVERY OF DOCUMENTS AS SPECIFIED IF PRESENTED AT THIS OFFICE ON OR BEFORE JANUARY 31, 2000 (THE "EXPIRATION DATE"). THERE SHALL BE NO CONDITIONS TO DRAWINGS OTHER THAN AS STATED ABOVE. WE HEREBY AGREE TO HONOR A DRAWING MADE HEREUNDER IN COMPLIANCE WITH THIS LETTER OF CREDIT BY TRANSFERRING IN IMMEDIATELY AVAILABLE FUNDS THE AMOUNT SPECIFIED IN THE DRAFT, IN ACCORDANCE WITH THE PAYMENT INSTRUCTIONS CONTAINED IN THE CERTIFICATE TO ACCOMPANY DRAFT. THIS LETTER OF CREDIT MAY NOT BE TRANSFERRED BY BENEFICIARY. THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING AND SUCH UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED, AMENDED OR AMPLIFIED BY REFERENCE TO ANY DOCUMENT, INSTRUMENT OR AGREEMENT REFERRED TO HEREIN OR IN WHICH THIS LETTER OF CREDIT IS REFERRED TO OR TO WHICH THIS LETTER OF CREDIT RELATES, AND ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY DOCUMENT, INSTRUMENT OR AGREEMENT. THIS LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES ("ISP 98"), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 590 (THE "ISP"). THIS LETTER OF CREDIT, AS TO MATTERS NOT GOVERNED BY THE ISP, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF NEW YORK. /s/ [Authorized Signatory] -------------------------- Authorized Signature 2 EX-14 8 EXHIBIT 14 April 13, 1999 Reference is hereby made to (i) that certain Agreement of Limited Partnership of Berkshire Realty Holdings, L.P. dated as of the date hereof (as it may be amended, modified or supplemented from time to time, the "Partnership Agreement") and (ii) that certain commitment letter dated as of the date hereof (the "Bridge Loan Commitment Letter") issued by Whitehall Street Real Estate Limited Partnership XI and Blackstone Real Estate Acquisitions III L.L.C. All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Partnership Agreement. Each General Partner hereby acknowledges and agrees that any election or decision to be made by the Partnership with respect to the Bridge Loan Commitment Letter, including, without limitation, the election by the Partnership to borrow the Bridge Loan thereunder, shall require the approval of both the Blackstone GP and WHGP, each of which approvals may be withheld in their sole discretion. BGP and Berkshire acknowledge that in the event the Blackstone GP and WHGP elect not to authorize a borrowing under the Bridge Loan Commitment Letter, the Partnership may be unable to satisfy its obligations under the Merger Agreements and as a result, the Cash Collateral (as defined in the Merger Agreement)(or its substitute) may be forfeited thereunder. Failure of the Blackstone GP or WHGP to approve the Partnership's borrowing of the Bridge Loan, whether or not such failure leads to a loss of the Cash Collateral or other assets of the Partnership, shall not (i) constitute a default by such Partner under the Partnership Agreement, including under Section 12.21 of the Partnership Agreement, (ii) otherwise constitute a breach of any obligations, express or implied, at law or in equity, which otherwise may be owed by the Blackstone GP or WHGP to the Partnership or (iii) excuse Berkshire or BGP from any of its obligations under Section 12.21 of the Partnership Agreement. The Partners acknowledge that, on the date hereof, the Partnership will deliver a letter of credit issued by The Chase Manhattan Bank ("Chase") in the amount of $29,500,000 (the "LC") to American Stock Transfer Trust Company, as escrowee, pursuant to the terms of the Merger Agreement. In connection with the issuance of the LC, each of the Investor Group Partners have entered into reimbursement obligations with Chase with respect to the LC as follows: (i) the members of the Blackstone Group have jointly agreed to reimburse Chase for up to 40% of amounts due with respect to the LC; (ii) the members of the Whitehall Group have jointly agreed to reimburse Chase for up to 40% of amounts due with respect to the LC; and (iii) the members of the Berkshire Group have jointly agreed to reimburse Chase for up to 20% of amounts due with respect to the LC. The foregoing obligations of the members of the Blackstone Group shall be several from the foregoing obligations of the members of the Whitehall Group and the Berkshire Group; the foregoing obligations of the members of the Whitehall Group shall be several from the foregoing obligations of the members of the Blackstone Group and the Berkshire Group; and the foregoing obligations of the members of the Berkshire Group shall be several from the foregoing obligations of the members of the Whitehall Group and the Blackstone Group. The Partners 2 further acknowledge and agree that for the purposes of Section 12.21 of the Partnership Agreement, the amount any Partner shall be responsible for in connection with its reimbursement obligations with respect to the LC shall be deemed to be such Partner's Capital Contributions made to the Partnership which will be reimbursed by a defaulting Partner in accordance with the provisions of Section 12.21. The Partners acknowledge and agree that as promptly as practicable after the full execution and delivery of the BRI Merger Agreement and BRI OP Merger Agreement (and in any event within seven (7) days after the date hereof), the General Partners shall cause the Partnership to purchase an interest rate hedge agreement having the following characteristics (such agreement, the "Hedge"): (i) the Hedge will be a European style put option with a strike rate equal to 50 basis points (0.50%) above the yield on the five year U.S. Treasury security on the date of purchase; (ii) the expiration date of the Hedge will be August 4, 1999 (or as soon thereafter as is available); and (iii) the notional amount of the Hedge will be approximately $593,000,000. Any two General Partners shall have the authority to execute on behalf of the Partnership any and all documentation required to implement the Hedge and all of the Partners agree to take any steps reasonably required to implement the Hedge. Each of the Investor Group Partners shall fund its pro rata share of the cost of the Hedge, based on its Partnership Percentage Interest. By its execution below, each of The Berkshire Companies Limited Partnership and Douglas Krupp, jointly and severally, hereby guarantees to the Partnership and the Partners the full payment and performance of all of the obligations of BGP and Berkshire under Section 12.21 of the Agreement. By its execution below, Blackstone Real Estate Acquisitions III L.L.C. hereby guarantees to the Partnership and the Partners the full payment and performance of all of the obligations of the Blackstone GP and the Blackstone LP under Section 12.21 of the Agreement. By its execution below, Whitehall Street Real Estate Limited Partnership XI hereby guarantees to the Partnership and the Partners the full payment and performance of all of the obligations of WHGP, Whitehall, StoneStreet, BridgeStreet and StoneCorp under Section 12.21 of the Agreement. The Partnership Agreement, as modified hereby, is and remains in full force and effect and is hereby ratified and confirmed. This terms of this letter shall be binding upon, and inure to the benefit of, each of the parties hereto and their respective successors and assigns. This letter shall be governed by and construed in accordance with the laws of the State of Delaware. 3 IN WITNESS WHEREOF, the parties hereto have executed this letter as of the date written above. GENERAL PARTNERS: WXI/BRH GEN-PAR LLC By: /s/ STEVEN FELDMAN ------------------ Name: Steve Feldman Title: Vice President BRE/BERKSHIRE GP L.L.C. By: /s/ KENNETH C. WHITNEY ---------------------- Name: Kenneth C. Whitney Title: Vice President APTCO GEN-PAR, L.L.C. By: /s/ DOUGLAS KRUPP ----------------- Name: Douglas Krupp Title: 4 LIMITED PARTNERS: WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP XI By: WH Advisors, L.L.C. XI, its general partner By: /s/ STEVEN FELDMAN ------------------ Name: Steve Feldman Title: Vice President STONE STREET REAL ESTATE FUND 1998 L.P. By: Stone Street Advantage Realty Corp., its general partner By: /s/ ALAN KAVA ------------- Name: Alan Kava Title: Vice President BRIDGE STREET REAL ESTATE FUND 1998 L.P. By: Stone Street Advantage Realty Corp., its general partner By: /s/ ALAN KAVA ------------- Name: Alan Kava Title: Vice President STONE STREET WXI/BRH CORP. By: /s/ ALAN KAVA ------------- Name: Alan Kava Title: Vice President BRE/BERKSHIRE LP L.L.C. By: /s/ KENNETH C. WHITNEY ---------------------- Name: Kenneth C. Whitney Title: Vice President APTCO HOLDINGS, L.L.C. By: /s/ DOUGLAS KRUPP ----------------- Name: Douglas Krupp Title: 5 GUARANTORS: THE BERKSHIRE COMPANIES LIMITED PARTNERSHIP By: /s/ DOUGLAS KRUPP ----------------- Name: Douglas Krupp Title: /s/ DOUGLAS KRUPP ----------------- DOUGLAS KRUPP BLACKSTONE REAL ESTATE ACQUISITIONS III L.L.C. By: /s/ KENNETH C. WHITNEY ---------------------- Name: Kenneth C. Whitney Title: Vice President WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP XI By: WH Advisors, L.L.C. XI, its general partner By: /s/ STEVEN FELDMAN ------------------ Name: Steven Feldman Title: Vice President EX-15 9 EXHIBIT 15 VOTING AGREEMENT This Agreement is made as of April 13, 1999 by and among Douglas S. Krupp ("Krupp"), Berkshire Realty Company, Inc., a Delaware corporation (the "Company") and BRI OP Limited Partnership, a Delaware limited partnership (the "Partnership"). WHEREAS, the Company, Berkshire Realty Holdings, L.P. ("Parent") and BRI Acquisition, LLC (the "Buyer") have entered into an Agreement and Plan of Merger dated as of the date hereof (the "Merger Agreement") providing for the merger of the Buyer with and into the Company as the surviving entity; and WHEREAS, the Partnership, Parent and BRI Acquisition Sub, LP have entered into an Agreement and Plan of Merger dated as of the date hereof (the "Partnership Merger Agreement") providing for the merger of BRI Acquisition Sub, LP with and into the Partnership, with the Partnership as the surviving entity; and WHEREAS, Krupp and persons or entities affiliated with Krupp (collectively, the "Krupp Entities") own shares of common stock, $.01 par value per share, of the Company ("Common Stock") and units of limited partnership interest in the Partnership ("OP Units"); and WHEREAS, in order to induce the Company and the Partnership to enter into the Merger Agreement and the Partnership Merger Agreement, respectively, Krupp is making the covenants set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Krupp agrees to cause each of the Krupp Entities (i) to vote the Common Stock they own (including any Common Stock issued after the date hereof) in favor of adoption of the Merger Agreement and approval of the transactions contemplated thereby and (ii) to vote the OP Units they own (including any OP Units issued after the date hereof) in favor of adoption of the Partnership Merger Agreement and approval of the transactions contemplated thereby. 2. Krupp agrees, on behalf of the Krupp Entities that own Common Stock or subsequently are issued Common Stock, that no such Krupp Entity shall demand appraisal rights pursuant to Section 262 of the Delaware General Corporation Law of the State of Delaware with respect to such shares of Common Stock in connection with the transactions contemplated by the Merger Agreement. 3. Krupp shall be relieved from his obligations hereunder if the Board of Directors of the Company withdraws its recommendation that stockholders of the Company vote to adopt the Merger Agreement and approve the transactions contemplated thereby or if the Board of Directors of the Company fails to confirm its recommendation with respect to the Merger Agreement within ten days of being requested to do so by the Buyer. 4. This Agreement constitutes the entire agreement among the parties hereto and supersedes any prior understandings, agreements or representations by or between the parties, written or oral, that may have related in any way to the subject matter hereof. 5. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware (without regard to any conflicts-of-law principles that would result in the application of the law of any other jurisdiction). 6. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by Krupp and the Company. 7. Krupp acknowledges and agrees that the Company would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, Krupp agrees that the Company shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter, in addition to any other remedy to which the Company may be entitled, at law or in equity. 8. This Agreement shall terminate upon the termination of the Merger Agreement, provided that Krupp shall remain liable for any breaches of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. /s/ Douglas S. Krupp -------------------- Douglas S. Krupp BERKSHIRE REALTY COMPANY, INC. By: /s/ David F. Marshall --------------------- Name: David F. Marshall Title: Chief Executive Officer BRI OP Limited Partnership By: Berkshire Apartments, Inc., its general partner By: /s/ David F. Marshall --------------------- Name: David F. Marshall Title: President and Chief Executive Officer EX-16 10 EXHIBIT 16 Joint Filing Agreement ---------------------- Each of the undersigned hereby acknowledges and agrees, in compliance with the provisions of Rule 13d-1(k)(1) promulgated under the Securities Exchange Act of 1934, as amended, that the Schedule 13D to which this Agreement is attached as an Exhibit (the "Schedule 13D"), and any amendments thereto, will be filed with the Securities and Exchange Commission jointly on behalf of the undersigned. This Agreement may be signed by the undersigned in separate counterparts. Dated: April 15, 1999 APTCO GEN-PAR, L.L.C. By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: Authorized Signatory APTCO HOLDINGS, L.L.C. By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: Authorized Signatory THE BERKSHIRE COMPANIES LIMITED PARTNERSHIP By: KGP-1, Inc., its General Partner By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: President KGP-1, INC. By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: President 2 KGP-2, INC. By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: President /s/ Douglas Krupp ----------------- Douglas Krupp * ----------------- George Krupp * By: /s/ Douglas Krupp ----------------- Name: Douglas Krupp Title: Attorney-in-fact -----END PRIVACY-ENHANCED MESSAGE-----