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SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 7, 1997
REGENCY REALTY CORPORATION
(Exact name of registrant as specified in its charter)
Florida 1-12298 59-3191743
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (904)-356-7000
Not Applicable
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
General
On March 7, 1997, Regency Realty Corporation (the "Company") acquired,
through a limited partnership (the "Partnership") of which a Company subsidiary
is the sole general partner, substantially all the assets of Branch Properties,
L.P. ("Branch"), a privately held real estate firm based in Atlanta, Georgia,
pursuant to a Contribution Agreement and Plan of Reorganization dated as of
February 10, 1997. The assets acquired from Branch include 18 shopping centers
totalling approximately 1.9 million square feet of gross leasable area and 8
shopping centers containing approximately 700,000 sf that are currently being
developed or redeveloped. The properties are located in Georgia (1.8 million
square feet), Florida (323,995 square feet), Tennessee (202,477 square feet),
South Carolina (117,631 square feet), and North Carolina (42,864 square feet) .
The Partnership acquired (i) a 100% fee simple interest in 19 of these operating
properties and (ii) partnership interests (ranging from 30% to 55%) in
partnerships with outside investors that own the remaining seven properties.
Major anchor tenants in these properties, 17 of which are grocery-anchored,
include Publix, Kroger and Harris Teeter. [For additional information concerning
the acquired properties, see the property table included elsewhere herein.]
In addition, the Company acquired, through a non-qualified REIT subsidiary
("New Management Company"), Branch's third party development business, including
build-to-suit projects for the CVS drug store chain, and third party management
and leasing contracts for approximately 4 million square feet of shopping
centers owned by third party investors (collectively, the "Third Party
Management Business").
As a result of the transaction, the Company has acquired a significant
presence in the Atlanta market, acquiring 17 shopping centers in the Atlanta
metropolitan area with a total of 1.8 million square feet of GLA in addition to
the 422,000 square feet of GLA already owned by the Company in the area.
Management believes that many of the acquired properties are "in-fill"
properties located in or near affluent areas where additional development
opportunities for neighborhood and community shopping centers are limited. The
Company will consolidate its existing Atlanta operations with those it has
acquired from Branch. Most of Branch's existing employees have been offered
employment with the Partnership or New Management Company, with the exception of
the seven executive officers and/or shareholders of Branch's general partner
(the "Branch Principals"), who will assist with the transition but will not
become Partnership employees. J. Alexander Branch, III, the founder of Branch,
has been elected to fill a new seat on Regency's Board of Directors.
Consideration
The Partnership issued 3,373,801 units of limited partnership interest
(the "Units") and the Company issued 155,797 shares of Common Stock in exchange
for the assets acquired from Branch. Additional earn-out Units and shares may be
issued, as further described below, subject to the satisfaction of certain
performance conditions. The Units will be redeemable on a one-for-one basis in
exchange for shares of Common Stock, subject to approval of the transaction by
the Company's shareholders at the Company's 1997 annual meeting.
In determining the aggregate consideration for the assets acquired from
Branch, the Company considered such factors as the historical and expected cash
flow of the properties, nature of the tenancies and terms of the leases in
place, occupancy rates, opportunities for alternative and new tenancies, current
operating costs, physical condition and location, and the anticipated impact of
the acquisition on the Company's financial results. The Company took into
consideration capitalization rates at which it believes other shopping centers
have recently sold, but determined the purchase price based on the factors
described above. No separate independent appraisals were obtained for the
assets. The Company also took into consideration historical and anticipated
revenues from the Third Party Management Business, but based on the fact that
the third party management contracts it acquired from Branch are generally
terminable on relatively short notice, a significant portion of the
consideration for the Third Party Management Business will be paid in the form
of earn-out consideration, which is further described below.
Based on the above factors, the Company (i) arrived at an aggregate
consideration of $78,092,181 for Branch's net equity in the assets transferred
to the Company and (ii) divided that amount by $22-1/8 (the "Unit Price") in
order to arrive at the number of Units and shares of Common Stock issued in the
transaction (excluding earn-out Units and shares described below). The Unit
Price is based on the trading price of the Common Stock at the time Branch and
Regency agreed to negotiate further terms of the transaction. In addition, the
Partnership assumed indebtedness encumbering the assets in the aggregate
principal amount of approximately $111 million (net of minority interest).
Earn-Out Consideration and Adjustments
Additional Units and shares of Common Stock may be issued on the fifteenth
day after the first, second and third anniversaries of the closing (each an
"Earn-Out Closing"), based on the performance of certain of the Partnership's
properties (the "Property Earn-Out"), and additional shares of Common Stock may
be issued at the first and second Earn-Out Closings based on revenues from the
Third Party Business (the "Third Party Earn-Out"). The formula for the Property
Earn-Out provides for calculating any increases in deemed value ("Increased
Value") on a property-by-property basis, based on any increases in net operating
income for certain properties in the Partnership's portfolio as of February 15
of the year of calculation. The Increased Value will be divided by the Unit
Price to determine the number of additional Units and shares to be issued at the
Earn-Out Closings. The Property Earn-Out is limited to $15,974,188 at the first
Earn-Out Closing and $22,568,851 at all Earn-Out Closings (including the first
Earn-Out Closing).
The Third Party Earn-Out will be calculated as a percentage of total
revenues from the Third Party Management Business accrued during the preceding
calendar year (other than development fees for CVS projects). Revenues from the
Third Party Management Business will include (i) fees from property management
or leasing for new projects with third party clients acquired from Branch and
(ii) new engagements or clients brought to the Company by the Branch Principals.
There is no cap on the amount of the Third Party Earn-Out. Management
anticipates that the total Third Party Earn-Out will be approximately $750,000.
The number of earn-out Units and shares issued at the first Earn-Out
Closing may be adjusted upward or downward based on prorations of certain income
and expense items, as reflected on the audit of Branch's financial statements as
of and for the year ended December 31, 1996, and on the amount realized by New
Management Company from five separate third party transactions. If there is no
adjustment based on the audit of Branch's 1996 financial statements, the maximum
adjustment would be a downward adjustment of approximately $555,000, with the
number of Units/shares deducted at the first Earn-Out Closing computed by
dividing the dollar amount of the adjustment by the average closing price of the
Common Stock on the 10 trading days preceding the first Earn-Out Closing.
Other
J. Alexander Branch and three other Branch Principals, Warren R. Hall,
Richard H. Lee and Nicholas B. Telesca, have entered into non-compete agreements
with the Partnership and New Management Company prohibiting them from (i)
soliciting employees or clients of the Partnership, New Management Company or
any of their affiliates for three years after the closing, or (ii) engaging
directly or indirectly (and in the case of the executives other than Mr. Branch,
in conjunction with one or more of the others) for one year after the closing in
the business of managing or leasing grocery-anchored shopping centers of less
than 150,000 square feet or free-standing drug stores in Georgia ("Non-compete
Properties") owned by third parties. In addition, Mr. Branch is prohibited from
becoming an employee for one year after the closing of any person that is
engaged as a material part of its business in the direct or indirect
acquisition, ownership, operation or control of Non-compete Properties in
Georgia, and each of Mssrs. Hall, Lee and Telesca is prohibited from becoming an
employee of any such person if more than one of the others also is an employee
thereof (unless such employer agrees to the right of first refusal described
below). For one year after the closing, Mr. Branch is required to offer to the
Partnership opportunities to acquire Non-compete Properties on the same terms as
are made available to him whenever he has an opportunity to acquire, develop or
arrange for the sale of a Non-compete Property, and each of Messrs. Hall, Lee
and Telesca also is subject to the same right of first refusal in favor of the
Partnership with respect to any such opportunities that he wishes to take
directly or indirectly in conjunction with any of the others or with Mr. Branch.
Mr. Branch has agreed not to sell or otherwise dispose of Units that he
receives in the transaction (except to certain permitted transferees such as
family members) without the Company's prior written consent for one year after
the closing, including redemptions in exchange for shares of Common Stock.
During any three months during the following two-year period, Mr. Branch may not
make any such dispositions of Units in an amount greater than 12.5% of the total
number of Units and shares of Common Stock received by him in the transaction,
including earn-out amounts (plus any Units that he could have transferred, but
did not, in prior three-month periods).
Branch's major investor, Opportunity Capital Partners II Limited, a
Maryland limited partnership and an affiliate of ABKB/LaSalle Securities
Limited, has the right to nominate one person to the Company's Board of Director
so long as it retains the Units received by it at the closing (or the shares of
Common Stock for which such Units are redeemable).
Branch is in the process of liquidating, and Branch has distributed the
Units and Shares issued to it in the transaction to its equity owners. Shares of
Common Stock issued to such persons pursuant to the transaction, including upon
the redemption of Units, will have shelf registration rights beginning on the
first business day after the 420th day after the closing.
Capital Contribution from Security Capital
The Company has contributed approximately $26 million cash to the
Partnership to reduce outstanding debt encumbering the properties acquired from
Branch by $25.7 million and to pay initial transaction costs. Cash requirements
for the transaction have been provided by the sale on March 3, 1997 of 1,475,178
shares of Common Stock for an aggregate price of $26 million to Security Capital
Holdings, S.A., pursuant to Stock Purchase Agreement dated as of June 11, 1996,
as amended, which was described in the Company's definitive proxy statement for
a special meeting of shareholders held on September 10, 1996.
As described in such proxy statement, Security Capital has participation
rights entitling it to purchase additional equity in the Company, at the same
price as that offered to other purchasers, each time that the Company sells
additional shares of capital stock or options or other rights to acquire capital
stock, in order to preserve Security Capital's pro rata ownership of the
Company. In connection with the Units and shares of Common Stock issued in
exchange for Branch's assets on March 7, 1997 and the proposed issuance of
additional Units in two related transactions discussed below (see "Related
Transactions"), Security Capital had the right to acquire up to 3,771,622 shares
of Common Stock at a price of $22-1/8 per share. However, pursuant to Amendment
No. 1 to its Stockholders Agreement with the Company, Security Capital has
elected (i) to waive such rights with respect to all but 1,750,000 shares (or
such lesser number, not less than 850,000 shares, as will not result in the
Company ceasing to be a domestically controlled real estate investment trust),
(ii) to initially defer its rights with respect to the 1,750,000 shares to no
later than August 31, 1997, and (iii) to defer its rights with respect to any
such shares, not to exceed 1,050,000 shares, that remain unpurchased on August
31, 1997 to no later than the first Earn-Out Closing, in order to permit Unit
holders who are Non-U.S. Persons (as defined in the Company's Articles of
Incorporation) to redeem their Units for Common Stock. See "Preservation of
Domestically Controlled REIT Status" below. Security Capital's participation
rights (i) remain in effect, at $22-1/8 per share, with respect to Units and
shares issued at the Earn-Out Closings, and (ii) also remain in effect, at a
price equal to the then market price of the Common Stock, with respect to shares
issued upon the redemption of Units for Common Stock provided that Security
Capital did not exercise its participation rights at the time of issuance of
such Units.
Preservation of Domestically Controlled REIT Status
Approximately 39% of the outstanding Units are held by former Branch
partners who are Non-U.S. Persons (the "Foreign Partners"). Section 5.14 of the
Company's Articles of Incorporation restricts the direct or indirect acquisition
by Non-U.S. Persons of shares of the Company's capital stock if, as a result of
such acquisition, the Company would fail to qualify under the Internal Revenue
Code as a domestically controlled REIT, assuming that Security Capital and its
affiliates own 45% of the Company's Common Stock on a fully diluted basis.
Acquisitions of capital stock that violate this provision are deemed null and
void. The Company has agreed to submit for approval of its shareholders at its
1997 annual meeting an amendment to Section 5.14 of its Articles of
Incorporation that would enable Security Capital to waive the 45% presumption,
and Security Capital has agreed to waive the presumption, subject to the
adoption of the amendment by the Company's shareholders and to the satisfaction
of certain other conditions, in order to enable Foreign Partners to redeem their
Units for Common Stock. The waiver will be limited to the Foreign Investors and
generally will not be transferable. Under the proposed amendment, an acquisition
of Company stock is likely to continue to be an unsuitable investment for
Non-U.S. Persons except for the redemption of Units for Common Stock by Foreign
Partners entitled to the benefit of Security Capital's waiver.
Related Transactions
The Company also has committed to issue a total of 138,626 Units to two
investors who have provided funds for the development of one of the development
properties acquired from Branch and who had the right to become limited partners
of Branch upon the completion of the property. The additional Units are expected
to be issued in April 1997 and will not be redeemable for Common Stock until
March 1998. The Company also is negotiating with two other investors to issue
additional Units (estimated at approximately 100,000 Units) in exchange for
their interests in one of the property partnerships acquired from Branch.
Item 7. Financial Statements and Exhibits.
(a) and (b) Financial Statements and Pro Forma Financial
Information
It is not possible to provide audited financial statements for the
assets acquired from Branch Properties, L.P. as of and for the year ended
December 31, 1996 or pro forma condensed statements of operations for the
year ended December 31, 1996 at the time of filing of this report as they
were not complete; such statements and information will be filed as an
amendment to this Form 8-K within 60 days of the due date of this report.
(c) Exhibits
(2) Contribution Agreement and Plan of Reorganization dated as
of February 10, 1997, by and among Regency Realty
Corporation, The Regency Group, Inc., Branch Properties,
L.P. and Branch Realty, Inc.
(10) Material Contracts:
(a) Amended and Restated Agreement of Limited Partnership of
Regency Retail Partnership, L.P., dated as of March 7,
1997, by and among Regency Atlanta, Inc., as General
Partner, and the Limited Partners named therein.
(b) Registration Rights Agreement dated as of March 7, 1997,
by and among Regency Realty Corporation and the
Investors named therein.
(c) Business Development and Non-Competition Agreement
dated as of March 7, 1997, by and between Regency
Retail Partnership L.P. and J. Alexander Branch III.
(d) Lock-up letter agreement of J. Alexander Branch III
dated as of March 7, 1997.
(e) Consent Agreement dated as of February 10, 1997 by and
between Regency Realty Corporation and Opportunity
Capital Partners II Limited Partnership.
(f) Amendment No. 1 to Stockholders Agreement dated as of
February 10, 1997 by and among Regency Realty
Corporation, Security Capital U.S. Realty and Security
Capital Holdings S.A.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REGENCY REALTY CORPORATION
(registrant)
March 14, 1997 By: /s/ J. Christian Leavitt
---------------------------------------
J. Christian Leavitt
Vice President and Treasurer
CONTRIBUTION AGREEMENT
AND
PLAN OF REORGANIZATION
CONTRIBUTION AGREEMENT AND
PLAN OF REORGANIZATION
THIS CONTRIBUTION AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
is made as of the 10th day of February, 1997, by and among BRANCH PROPERTIES,
L.P., a Georgia limited partnership ("Branch"), BRANCH REALTY, INC., a Georgia
corporation and the general partner of Branch ("Branch Realty"), and REGENCY
REALTY CORPORATION, a Florida corporation ("Regency"), under the following
circumstances:
1. Branch owns directly, or through its interest in the
Subpartnerships, Properties, Acquisition Contracts, Management Contracts and
other assets used in its Third Party Management Business, and certain other
Assets (as such terms are hereinafter defined).
A. Branch has caused the formation of a Delaware limited partnership (the
"Partnership"), and Branch and Regency wish to amend and restate the partnership
agreement in the form of Exhibit A (the "Partnership Agreement") to provide for
Branch to be the limited partner and a wholly-owned subsidiary of Regency
("Newco") to be the sole general partner. Regency will cause Newco to make
certain cash contributions to the Partnership in exchange for its general
partner interest, and Branch will contribute the Assets to the Partnership in
exchange for Units (as hereinafter defined), all as provided for herein and in
the Partnership Agreement.
B. Branch will distribute the Units it so receives to its respective
partners, including Branch Realty. Branch Realty and Regency desire that Branch
Realty transfer to Newco the Units distributed to Branch Realty by Branch, in
exchange for shares of Common Stock, $0.01 par value, of Regency to be
contributed by Regency to Newco, in a transaction intended to qualify as a
"reorganization" under Section 368(a)(1)(C) of the Code. Branch Realty will then
liquidate and distribute such shares of Regency Common Stock to its
shareholders.
C. Thereafter, the Partnership will contribute the Management Contracts
and other assets contributed by Branch to the Partnership relating to Branch's
Third Party Management Business and Regency's Affiliate, The Regency Group Inc.
("TRG"), will contribute all the voting common stock it owns in Regency Realty
Group, Inc., a Florida corporation ("Old Management Company"), to Regency Realty
Group II, Inc. ("New Management Company") in exchange for stock in New
Management Company in a transaction intended to qualify as a nontaxable
transaction under Section 351 of the Code.
D. By separate agreements, in the form attached as Exhibits B, C and D,
respectively, (i) certain parties hereto and certain shareholders, directors and
executive officers of Regency have agreed to vote in favor of the transactions
contemplated by this Agreement at a meeting of Regency's shareholders to be held
in 1997, (ii) Regency's major shareholder, Security Capital Holdings, S.A., and
its affiliate, Security Capital U.S. Realty, have agreed to consent to the
transactions contemplated by this Agreement, subject to the satisfaction of
certain conditions described in Exhibit C relating, among other things, to
Non-U.S. Persons (as defined in the Partnership Agreement) who may become
Regency shareholders as a result of the
transactions contemplated by this Agreement, and (iii) Opportunity Capital
Partners II Limited Partnership ("OCP"), the special limited partner of Branch,
has consented to the transactions contemplated by this Agreement.
E. Subject to the provisions of Section 8.6 of the Partnership Agreement,
the Units may be redeemed for Shares or cash, at the option of Newco, as
provided in the Partnership Agreement; provided, however, with respect to any
redemption having a "Specified Redemption Date" (as defined in the Partnership
Agreement) on or before the 420th day after the First Closing (as hereinafter
defined), the Partnership shall be required to transfer Shares in connection
with such redemption. Under rules of the New York Stock Exchange, the Shares
issuable pursuant to the transactions contemplated by this Agreement, including
the Shares redeemed for Units, may not be listed for trading on such exchange
unless Regency's shareholders have approved such issuance because such Shares
will constitute more than 20% of the Common Stock outstanding before the First
Closing. The parties wish to proceed with the First Closing and to present the
transactions contemplated by this Agreement for approval by Regency's
shareholders at a meeting to be held after the First Closing.
F. If Regency's shareholders do not approve the transactions at such
meeting, the validity of the Units and Shares issued at the First Closing will
not be affected, and the Shares issued at the First Closing and Shares issued
upon redemption of Units will be listed for trading on the New York Stock
Exchange only to the extent they do not exceed the 20% threshold. In the event
Shares have been issued, but cannot be listed for trading because the
shareholders do not approve, then the holder of such Shares shall have a put
right as described in the Registration Rights Agreement (as hereinafter
defined). If such shareholder approval is not obtained, then the Units may be
redeemed for a cash payment as provided in the Partnership Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1: DEFINITIONS
1.1 Definitions. In addition to the terms defined in this Agreement, the
following terms shall have the meanings set forth herein:
1.1.1 "Acquisition Contracts" means the Contracts to acquire certain
real property and leases, personal property and intangible property relating to
such real property, to which Branch or any Subpartnership is a party, all as
more particularly described on Schedule .
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1.1.2 "Additional Units" means the Units to be issued to the Branch
partners at the Subsequent Closings pursuant to (i) Section (Property Earn-Out),
(ii) Section 2.3.3 (Third Party Earn-Out) and (iii) Section (Distribution).
1.1.3 "Acquisition Properties" means the real property and other
assets that are the subject of the Acquisition Contracts.
1.1.4 "Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under common control with
such Person.
1.1.5 "Articles of Incorporation" means the Amended and Restated
Articles of Incorporation of Regency, as filed with the Florida Department of
State, as further amended or restated from time to time.
1.1.6 "Assets" means (i) the Branch Properties, (ii) Branch's
interests in the Subpartnerships, (iii) the Acquisition Contracts (and any
assets acquired by Branch thereunder prior to the First Closing), (iv) Branch's
interests in the Disposition Properties and (v) the Other Assets.
1.1.7 "Assumed Liabilities" means the matters set forth on Schedule.
1.1.8 "Branch" means Branch Properties, L.P., a Georgia limited
partnership.
1.1.9 "Branch Affiliates" means Branch and Branch Realty.
1.1.10 "Branch Financial Statements" means (i) the balance sheets of
Branch and its predecessors as of December 31, 1995 and 1994, and the related
statements of income and cash flows for the years ended December 31, 1995, 1994
and 1993 (including the notes and schedules contained therein or annexed
thereto), which financial statements have been reported on, and are accompanied
by, the signed, unqualified opinions of Price Waterhouse LLP, independent
auditors for Branch and its predecessors for such years, (ii) an unaudited
balance sheet of Branch as of September 30, 1996, and the related unaudited
statements of income and cash flows for the nine months then ended (including
the notes and schedules contained therein or annexed thereto) and (iii) the
corresponding statements of Roswell Village, Ltd. as of and for the nine months
ended September 30, 1996, which have not been audited.
1.1.11 "Branch Headquarters" means the principal offices occupied by
Branch at Suite 1600, 400 Colony Square, 1201 Peachtree Street, Atlanta, Georgia
30361.
1.1.12 "Branch Limited Partners" means those Persons other than OCP
named as limited partners on Schedule .
1.1.13 "Branch Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership by and among Branch Realty, as the general
partner, OCP,
3
as the special limited partner, and the Branch Limited Partners dated December
19, 1995, as amended.
1.1.14 "Branch Principals" means J. Alexander Branch, III, Warren R.
Hall, Richard H. Lee, John F. Euart, Jr., John W. Lundeen, III and Stephen D.
Broome, each of whom is a shareholder of Branch Realty.
1.1.15 "Branch Properties" means those Properties that are owned by
Branch and not by a Subpartnership.
1.1.16 "Branch Realty" means Branch Realty, Inc., a Georgia
corporation.
1.1.17 "Business Day" means any day of the year other than Saturday,
Sunday or any other day on which banks located in New York, New York generally
are closed for business.
1.1.18 "Capital Expenditure Budget and Schedule" means,
collectively, the capital expenditure budget and schedule for each Property
(other than the Disposition Properties), copies of which are attached as
Schedule , which describes the capital expenditures that Branch and the
Subpartnerships have budgeted for each Property for the years ending December
31, 1996 and 1997, respectively.
1.1.19 "Claim" means all actions, causes of action, suits, debts,
dues, accounts, reckonings, bonds, bills, covenants, contracts, controversies,
promises, trespasses, damages, judgments, executions, penalties, fines, claims,
liabilities and demands whatsoever, in law or equity.
1.1.20 "Class B Units" means the units of partnership interests in
the Partnership to be held by the General Partner and certain other partners
(other than the Branch partners) as more fully described in the Partnership
Agreement.
1.1.21 "Closing" means generally the execution and delivery of those
documents, securities and/or funds necessary to effect the transactions
contemplated by this Agreement.
1.1.22 "Closing Date" means, (i) with respect to the First Closing,
three Business Days after the date on which the conditions set forth herein with
respect thereto shall be satisfied or duly waived, or if Branch and Regency
mutually agree on a different date, the date upon which they have mutually
agreed, and (ii) with respect to any Subsequent Closing, the date specified
therefor in Section .
1.1.23 "Code" means the Internal Revenue Code of 1986, as amended,
and any successor legislation thereto, including all of the rules and
regulations promulgated thereunder.
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1.1.24 "Common Stock" means the voting Common Stock, $0.01 par
value, of Regency.
1.1.25 "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq.
1.1.26 "Contracts" means the Acquisition Contracts, the Development
Contracts, the Management Contracts, the Repair Contracts, the Service
Contracts, the TI Contracts, purchase or sale agreements, leases and other
agreements which relate to the Disposition Properties and any other contract,
direct property management agreement, asset management agreement, development
agreement, partnership agreement, lease commitment, purchase order, or other
legally binding indenture, mortgage, note, license, deed of trust, commitment,
understanding, restriction or other agreement or instrument, other than the
Leases, to which Branch or any Subpartnership is a party or by which any of
their assets are bound.
1.1.27 "Contribution Value" has the meaning set forth in Section .
1.1.28 "CVS" means CVS Center, Inc.
1.1.29 "CVS Development Fees" means development fees from CVS
projects or any other compensation (such as profit on resale of a build-to-suit
project) for development services provided with respect to CVS projects.
1.1.30 "Development Budget and Schedule" has the meaning set forth
in Section
.
1.1.31 "Development Contracts" means all contracts listed on
Schedule for the development or redevelopment of the Development Properties.
1.1.32 "Development Properties" means the Properties listed on
Schedule each of which consists of Real Property which is in the process of
being developed or redeveloped; provided, however, upon the acquisition of any
Acquisition Property by Branch prior to the First Closing which is to be
renovated or redeveloped, such Acquisition Property also shall be deemed a
Development Property.
1.1.32A "Disposition Properties" means the properties listed on
Schedule which are under Contract for sale or are being held or developed for
resale; and the"Disposition Contracts" means the Contracts described on Schedule
relating to the disposition of certain Disposition Properties.
1.1.33 "Endorsements" means endorsements to the Title Insurance, to
the extent available under applicable law and at a reasonable cost, including,
without limitation, Comprehensive, Access, Survey, Separate Lot, Legal Lot,
Non-Imputation, Fairways, Contiguity, Zoning 3.1, and any other endorsement
owned by Branch or typically obtained by
5
customary practice in the area of the respective Property for transactions of
the type contemplated by this Agreement.
1.1.34 "Environmental Claim" means any Claim, investigation or
notice (written or oral) by any Person alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or fatalities, or penalties) arising out of, based on or resulting from (i) a
Hazardous Material Activity, or (ii) activities or conditions forming the basis
of any violation, or alleged violation of, or liability or alleged liability
under, any Environmental Law.
1.1.35 "Environmental Laws" means federal, state, local, provincial,
municipal and foreign laws, ordinances, principles of common law, rules,
by-laws, orders, governmental policies, statutes, regulations, agreements,
treaties, customary law, and international principles relating to the pollution
or protection of the environment or of flora or fauna or their habitat or of
human health and safety, or to the cleanup or restoration of the environment,
including, without limitation, any laws or regulations relating to (i)
generation, treatment, storage, disposal or transportation of Materials of
Environmental Concern, emissions or discharges or protection of the environment
from the same, (ii) exposure of Persons to, or Release or threat of Release of,
Materials of Environmental Concern, and (iii) noise.
1.1.36 "ERISA" mean the Employee Retirement Income Security Act of
1974, as amended, and any successor legislation thereto.
1.1.37 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.1.38 "Excluded Assets" means (i) the Management Contracts and
other assets relating to Branch's Third Party Management Business listed on
Schedule or described in the Lundeen Letter Agreement, (ii) the art work and
other personal property listed on Schedule that is located at Branch
headquarters and belongs to J. Alexander Branch or other officers of Branch,
(iii) the "Branch" name, which is covered by a non-exclusive license as provided
in Section , and any associated goodwill and (iv) any assets acquired by Branch
or any Subpartnership in violation of Section .
1.1.39 "Existing Mortgage Debt" means collectively the loans of
Branch and each Subpartnership described on Schedule and the loans obtained with
Regency's consent or in compliance with Section in connection with the purchase
and/or development of the Acquisition Properties.
1.1.40 "Final Closing Balance Sheet" means the audited balance sheet
of Branch as of December 31, 1996, which shall be reported on, and accompanied
by, the signed opinion of Price Waterhouse, LLP.
1.1.41 "First Closing" means the Closing at which, among other
things, the Assets will be contributed to the Partnership.
6
1.1.42 "Government Entity" means any court, arbitrator, department,
commission, board, bureau, agency, authority, instrumentality or other
governmental body, whether federal, state, municipal, foreign or other.
1.1.43 "Hazardous Material Activity" means any activity, event, or
occurrence at or prior to the First Closing involving any Materials of
Environmental Concern, including, without limitation, the manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation, handling
or corrective or response action to any Materials of Environmental Concern.
1.1.44 "Intangible Property" means all intangible property (except
as expressly excluded elsewhere herein) now or on the First Closing Date owned
by Branch or a Subpartnership and used in connection with the Real Property, the
Personal Property, Branch Headquarters or Branch's Third Party Management
Business, including, without limitation, all of their right, title and interest
in and to all: licenses; approvals; applications and permits issued or approved
by any Government Entity and relating to the use, operation, ownership,
occupancy and/or maintenance of the Real Property, the Personal Property, Branch
Headquarters or Branch's Third Party Management Business; the various Contracts
to be assigned to the Partnership hereunder, including, without limitation,
Management Contracts, Work Contracts and Service Contracts; utility
arrangements; claims against third parties; plans; drawings; specifications;
surveys; maps; engineering reports and other technical descriptions; books and
records; insurance proceeds and condemnation awards; the non-exclusive right to
use the Branch name in the United States for the period set forth in Section ,
but not any associated goodwill; and all other intangible rights used in
connection with or relating to the Real Property, the Personal Property, Branch
Headquarters or Branch's Third Party Management Business, including rights, if
any, to current and past names of the Real Property, but excluding intangible
rights used in connection with or relating to the Excluded Assets.
1.1.45 "IRS" means the Internal Revenue Service.
1.1.46 "Law" means any statute, law, ordinance, rule, regulation or
judicial decision of any Government Entity.
1.1.47 "Leases" means, as to each Property, all ground leases and
all leases within the Improvements (whether oral or written), including leases
which may be made by Branch or a Subpartnership after the date hereof and before
the First Closing as permitted by this Agreement.
1.1.48 "Liability" means any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured.
7
1.1.49 "Lien" means a lien (statutory or otherwise), security
interest, deed of trust, deed to secure debt, claim, charge, pledge, license,
equity, option, conditional sales contract, easement, assessment, levy,
covenant, condition, right of way, reservation, restriction, exception,
limitation, charge or encumbrance of any nature whatsoever.
1.1.50 "Litigation" means any action, suit, proceeding, arbitration,
investigation or inquiry, whether civil, criminal or investigative, by or before
any Government Entity.
1.1.51 "Loss and Expenses" means any and all damages, Claims, losses,
expenses, costs, interest, obligations, and Liabilities, including, without
limitation, all reasonable attorneys' fees and expenses in collecting a Claim
and enforcing rights in Collateral (as defined in Section 15.7.2(a)).
1.1.52 "Lundeen Letter Agreement" means that letter agreement among
Branch, Regency, and John W. Lundeen, III ("Lundeen") executed on or before the
date hereof and relating to (i) the properties and management agreements that
Lundeen will retain (which are part of the Excluded Assets), (ii) certain
employees of Branch to be hired by Lundeen, and (iii) certain agreements of
Lundeen regarding certain Management Contracts to be contributed to the
Partnership by Branch and other restrictions on Lundeen.
1.1.53 "Management Contracts" means all property management
agreements, asset management agreements and leasing agreements listed on
Schedule pursuant to which Branch currently provides leasing and/or management
services with respect to a real property owned by one or more third parties.
1.1.54 "Material Adverse Effect" means (i) with respect to Branch, a
material adverse effect on the Assets or the financial condition, results of
operations, business or prospects of Branch taken as a whole, (ii) with respect
to a Property, a material adverse effect on the financial condition, results of
operations, business or prospects of such Property, (iii) with respect to a
Subpartnership, a material adverse effect on such Subpartnership's assets or the
financial condition, results of operations, business or prospects of such
Subpartnership taken as a whole, (iv) with respect to Regency, a material
adverse effect on Regency's assets or the financial condition, results of
operations, business or prospects of Regency taken as a whole (including its
subsidiaries), and (v) with respect to the transactions contemplated by this
Agreement, a material adverse effect on the consummation thereof.
1.1.55 "Materials of Environmental Concern" means all chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum or any fraction
thereof, petroleum products and hazardous substances (as defined in Section
101(14) of CERCLA), or solid or hazardous wastes as now defined and regulated
under any Environmental Laws.
1.1.56 "New Management Company" means Regency Realty Group II, Inc.,
a Florida corporation.
8
1.1.57 "Old Management Company" means Regency Realty Group, Inc., a
Florida corporation.
1.1.58 "OCP" means Opportunity Capital Partners II Limited
Partnership, a Maryland limited partnership.
1.1.59 "Order" means any order, writ, injunction, judgment, plan or
decree of any Government Entity.
1.1.60 "Other Assets" means Branch's Third Party Management
Business, all utility deposits, all tenant deposits under the Leases, and all
other assets of Branch (whether owned or leased), including, without limitation,
all deposits under the Contracts which relate to the Acquisition or Disposition
Properties and accounts receivable, but excluding the Excluded Assets.
1.1.61 "Partnership" means Regency Retail Partnership, L.P., a
limited partnership formed under Delaware law.
1.1.62 "Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of the Partnership in the form attached as
Exhibit A.
1.1.63 "Permitted Exceptions" means:
(a) Liens (other than Liens imposed under ERISA or any
Environmental Law or in connection with any Environmental Claim) for Taxes or
other assessments or charges of Government Entities that are not yet delinquent;
(b) except as disclosed on the Rent Roll, rights of tenants,
as tenants only, under the Leases;
(c) those existing title matters affecting the Properties
and the Acquisition Properties described on Schedule ;
(d) those matters shown on the existing surveys of the
Properties (but not the surveys of the Acquisition Properties) described on
Schedule , and any changes since the date of such existing surveys reflected on
the updated Survey which are not objected to by Regency in accordance with
Section or for which Regency elects to close notwithstanding such matters in
accordance with Section ;
(e) easements, rights-of-way, covenants and restrictions which
are customary and typical for properties similar to the Properties and which do
not (i) interfere with the ordinary conduct of any Property or the business of
Branch or the Subpartnerships, as applicable, as a whole or (ii) detract from
the value or usefulness of the Properties to which they apply;
9
(f) the Existing Mortgage Debt; and
(g) any other matters not objected to by Regency in accordance
with Section or for which Regency elects to close notwithstanding such matters
in accordance with Section .
1.1.64 "Person" means an individual or a corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, other form of business or legal entity or Government Entity.
1.1.65 "Personal Property" means all tangible property owned or
leased by Branch or a Subpartnership now or on the First Closing Date and used
in conjunction with the operation, maintenance, ownership and/or occupancy or
development of the Real Property, Branch Headquarters or Branch's Third Party
Management Business (unless it constitutes an Excluded Asset), including without
limitation: furniture; furnishings; art work; sculptures; paintings; office
equipment and supplies; landscaping; plants; lawn equipment; and whether stored
on or off the Real Property, tools and supplies, maintenance equipment,
materials and supplies, shelving and partitions, and any construction and finish
materials and supplies not incorporated into the Improvements and held for
repairs and replacements thereto or development thereof, wherever located.
1.1.66 [Intentionally deleted.]
1.1.67 "Property" means, for each property described on Schedule ,
each Disposition Property which has not been sold prior to the First Closing,
and any Acquisition Property acquired by Branch pursuant to Section or hereof
prior to the First Closing, the Real Property, Leases, Personal Property and
Intangible Property related to it, and the "Properties" means all of the
Properties.
1.1.68 "Property Earn-Out Closing" means one of three Subsequent
Closings at which Units or Shares will be issued contingent on satisfying
performance criteria described in Section .
1.1.69 "REIT" means a real estate investment trust within the
meaning of Section 856 of the Code.
1.1.70 "Real Property" means, as to each Property, the real property
described or referred to on Schedule , together with all rights, privileges,
hereditaments and interests appurtenant thereto including, without limitation:
any water and mineral rights, development rights, air rights, easements, and any
and all rights of Branch or a Subpartnership in and to any streets, alleys,
passages and other rights of way; and all buildings, structures and other
improvements located on or affixed to such real property and all replacements
and additions thereto (collectively, the "Improvements").
10
1.1.71 "Recent Balance Sheet Date" means September 30, 1996.
1.1.72 "Redemption Rights" means the right to redeem Units for
Shares pursuant to the Partnership Agreement.
1.1.73 "Regency Exchange Act Reports" means the following documents
filed by Regency with the SEC since December 31, 1995 and prior to the First
Closing: (i) Regency's Form 10-K annual report, (ii) all quarterly reports on
Form 10-Q and periodic reports on Form 8-K, (iii) all definitive proxy
statements, (iv) all other reports required to be filed by Regency under the
Securities Exchange Act of 1934, and (v) all amendments or supplements to any of
the foregoing.
1.1.74 "Registration Rights Agreement" means the Registration Rights
Agreement in the form attached as Exhibit .
1.1.75 "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the indoor or outdoor environment, including, without limitation,
the abandonment or discarding of barrels, drums, containers, tanks, and other
receptacles containing or previously containing any Materials of Environmental
Concern at or prior to the First Closing Date.
1.1.76 "Rent Roll" means collectively the rent roll and summaries of
Leases (including all amendments to Leases) attached as Schedule , identifying
with particularity the space leased by each tenant, the term (including
extensions and termination rights), square footage and applicable rent, common
area maintenance, Tax and other reimbursements, security deposits, exclusivity
or expansion rights, and options to purchase or rights of first refusal.
1.1.77 "Reorganization" has the meaning set forth in Section .
1.1.78 "Reorganization Shares" means those Shares issued at any
Closing pursuant to the Reorganization.
1.1.79 "Repair Contracts" means all contracts listed on Schedule for
repairs, restoration, renovations or improvements (other than tenant
improvements) being performed on the Properties.
1.1.80 "SEC" means the Securities and Exchange Commission.
1.1.81 "Securities Act" means the Securities Act of 1933, as amended.
1.1.82 "Security Capital" means, collectively, Security Capital
Holdings, S.A., a Luxembourg corporation, and Security Capital U.S. Realty, a
Luxembourg corporation.
11
1.1.83 "Service Contracts" means, as to each Property, all
management, service, maintenance, utility, supply, equipment rental, and other
contracts listed on Schedule related to the operation of each Real Property or
the related Personal Property.
1.1.84 "Shares" means shares of Common Stock.
1.1.85 "Subpartnerships" means Branch/HOP Associates, L.P., a
Georgia limited partnership, Equiport Associates, L.P., a Georgia limited
partnership, Roswell Village, Ltd., a Georgia limited partnership, Old Fort
Associates, L.P., a Georgia limited partnership, and Fieldstone Associates,
L.P., a Georgia limited partnership.
1.1.86 "Subsequent Closing" means any Closing after the First Closing.
1.1.87 "Survey" means, collectively, a map of a stake survey of each
Property which shall comply with Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys, jointly established and adopted by ALTA and ACSM
in 1992, and includes items 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11 of Table "A"
thereof, which meets the accuracy standards (as adopted by ALTA and ACSM and in
effect on the date of the Survey) of an urban survey, which is dated not earlier
than 30 days prior to the First Closing, and which is certified to the
Partnership, Branch, Regency, lenders under the Existing Mortgage Debt and the
Title Company providing Title Insurance to the Partnership, and dated as of the
date the Survey was made. Notwithstanding the foregoing, the Survey shall, at a
minimum, show the following:
(a) the metes and bounds legal description of the Property;
(b) a certificate by the surveyor certifying to the
Partnership, Regency, Branch, lenders under the Existing Mortgage Debt and the
Title Company, in such form as may be reasonably acceptable to the Partnership,
dated as of a date not earlier than the date of execution of this Agreement (and
subsequently updated to within 90 days of the First Closing, if necessary);
(c) all physical matters on the ground, which may adversely
affect the Property or title thereof and the number of parking spaces located on
the Property;
(d) whether the Property is located in a "Special Flood Hazard
Area" as determined by review of a stated, identified, Flood Hazard Boundary Map
or Flood Hazard Rate Map published by the Federal Insurance Administration of
the United States Department of Housing and Urban Development;
(e) all easements of record affecting the Property with proper
notation of the book and page of each easement as recorded in the public
records;
(f) the lines of the public streets abutting the Property
and the widths and center lines of all such streets;
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(g) all encroachments and the extent thereof, if any, in
feet and inches on the Property or any portion thereof; and
(h) the number of square feet (to the nearest 1/100 of a
square foot) contained within the Property.
1.1.88 "Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not. The term "Tax" also
includes any amounts payable pursuant to any tax sharing agreement to which any
relevant entity is liable as a successor or pursuant to contract.
1.1.89 "Tenant Estoppels" has the meaning set forth in Section .
1.1.90 "Third Party Earn-Out Closing" means one of two Subsequent
Closings at which Units or Shares will be issued contingent on Third Party Fees.
1.1.91 "Third Party Fees" means all gross revenues accrued by the
Partnership, New Management Company, Old Management Company, Regency or any of
their Affiliates from fees, commissions and other compensation derived from (i)
the Third Party Management Business contributed to the Partnership hereunder,
(ii) Third Party Management Business procured by any Branch Principal or
Nicholas B. Telesca, (iii) Third Party Management Business with respect to any
of the third party properties (including any expansions) that are the subject of
the Management Contracts as of the date of the First Closing, and (iv) new Third
Party Management Business obtained after the First Closing that is not covered
above but (a) is with an existing party to a Management Contract or any of its
Affiliates, or (b) is with any of the Persons listed on Schedule or any of their
Affiliates, including without limitation those fees, commissions and other
compensation described on Schedule but excluding CVS Development Fees.
1.1.92 "Third Party Management Business" means Branch's business of
(i) managing and/or leasing properties owned by third parties, (ii) developing
properties for third parties, (iii) arranging for property acquisitions by third
parties, (iv) arranging financing for third parties, and (v) consulting and
business services performed for third parties, including without limitation,
money management, tax consulting and reporting, asset management, construction
management and other consulting services, all of Branch's build-to-suit work in
process for CVS, and the Management Contracts and the assets used by Branch in
its Third Party Management Business, but excluding any item that constitutes
part of the Excluded Assets.
13
1.1.93 "TI Budget and Schedule" means, collectively, the tenant
improvement budget and schedule for each Property (other than the Disposition
Properties and Merchant's Village), copies of which are attached as Schedule ,
which describes the tenant improvements that Branch and the Subpartnerships have
budgeted for the periods shown therein.
1.1.94 "TI Contracts" means all contracts listed on Schedule for
tenant improvements under the Leases.
1.1.95 "Title Company" means Chicago Title Insurance Company.
1.1.96 "Title Defect" means any exception in the Title Insurance
Commitment or any matter disclosed by the Survey, other than a Permitted
Exception.
1.1.97 "Title Insurance" means an ALTA Form B Owner's Policy of
Title Insurance (Revised 10-17-70 and 10-17-84), with extended coverage (i.e.,
with ALTA General Exceptions 1 through 5 deleted), for such amount as Regency
reasonably determines, insuring the Partnership as owner of good, marketable and
indefeasible fee simple title to the Properties, subject only to the Permitted
Exceptions, issued by the Title Company or another title insurer acceptable to
Regency.
1.1.98 "Title Insurance Commitment" means a binder whereby the Title
Company agrees to issue the Title Insurance to the Partnership.
1.1.99 "Transaction Documents" means the Partnership Agreement, the
Registration Rights Agreement and the various other agreements and documents
executed and delivered in connection with the transactions contemplated hereby.
1.1.100 "TRG" means The Regency Group, Inc., a Florida corporation.
1.1.101 "Units" means units of partnership interests (excluding
Class B Units) in the Partnership to be held by the Branch partners (excluding
Branch Realty) as more fully described in the Partnership Agreement.
1.1.102 "Value" has the meaning set forth in the Partnership
Agreement. Whenever the value is being determining for Units pledged pursuant to
Article , the Value of a Unit shall be determined by multiplying the Value of a
Share by the Unit Adjustment Factor (as defined in the Partnership Agreement).
1.1.103 "Work Contracts" means the TI Contracts, the Repair
Contracts and the Development Contracts.
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ARTICLE 2: FORMATION OF PARTNERSHIP
2.1 Contribution Values. The aggregate Contribution Value of all the
Assets is $78,092,181.
2.2 Capitalization of the Partnership.
(a) At the First Closing, in addition to the transactions described
in Section to be consummated at the First Closing with respect to amending and
restating the
Partnership Agreement and admitting Newco as the general partner of the
Partnership, (i) Regency shall cause Newco to contribute cash in return for
Class B Units representing Newco's general partner's interest as described in
Section hereof, which contribution shall be applied immediately following the
First Closing to prepay a portion of the Existing Mortgage Debt and to pay the
closing costs described in Section , and (ii) Branch shall contribute the Assets
to the Partnership, free and clear of all Liens, other than Permitted
Exceptions, in exchange for Units representing its limited partner's interest.
The number of Units to be issued to Branch in return for its contributions to
the Partnership is set forth on Schedule . Additionally, Branch shall be
entitled to Additional Units or Shares at Subsequent Closings, as provided in
Section and Section .
(b) At the First Closing, Branch shall distribute to its partners,
in the respective amounts set forth on Schedule , the Units that Branch receives
in exchange for its capital contributions to the Partnership. Branch also shall
distribute to its partners the right to receive their respective portions of the
Additional Units that Branch is entitled to receive at the Subsequent Closings,
in the amounts set forth on Schedule (the "Subsequent Closing Rights"). At the
First Closing, in lieu of issuing Units to Branch and then reissuing them to
Branch's partners pursuant to the steps outlined above, the Partnership shall
issue such Units directly to Branch's partners.
(c) Certain of Branch's partners receiving Units at the First
Closing may wish to exercise Redemption Rights (effective and with a Specified
Redemption Date no earlier than as of the First Redemption Date, as such terms
are defined in the Partnership Agreement) with respect to all or a portion of
their Units, including Additional Units issuable pursuant to Subsequent Closing
Rights. Any Original Limited Partner exercising Redemption Rights with respect
to any Units ("Initial Redemption Units") shall be deemed to have exercised
Redemption Rights with respect to that percentage of any Additional Units
issuable pursuant to such Person's Subsequent Closing Rights arrived at by
dividing (i) the number of Initial Redemption Units of such Person so redeemed
by (ii) the total number of Units issued to such Person at the First Closing
(the "Redemption Percentage"), and such Person shall receive from Regency the
Redemption Amount (as defined in the Partnership Agreement) in lieu of such
amount of Additional Units equal to the product of (x) the Redemption Percentage
multiplied by (y) the total number of Additional Units issuable to such Original
Limited Partner at any Subsequent Closing.
15
(d) Pursuant to Section 4.2 of the Partnership Agreement, Newco
shall have the right to cause the Partnership to acquire the interests in
certain assets and issue additional Units in the Partnership in exchange
therefor.
2.3 Subsequent Closings.
2.3.1 Defined Terms. The following definitions shall apply for
purposes of this Section .
(a) "Acquisition Cost" means the purchase price paid to
acquire a New Acquisition Property.
(b) "Annualized NOI" means the projected annualized net
operating income for each Designated Property determined as of each Calculation
Date in accordance with the following: the excess of (i) for the calendar month
immediately prior to the Calculation Date or the Achievement Date (the
"Measurement Month"), all rents, charges, reimbursements, revenues, one-twelfth
of the projected annual percentage rent, and other amounts payable pursuant to
executed leases for completed space within such Designated Property over (ii)
one-twelfth of the operating expenses for such Designated Property (such as
taxes, insurance, and maintenance and repair costs) for the prior calendar year,
assuming a management fee of 21(cent) per square foot of leasable space within
such Designated Property, but excluding (A) capital replacements and
improvements (including tenant improvements), (B) leasing commissions, (C)
depreciation, and (D) debt service, times twelve. The Annualized NOI shall be
computed on an accrual basis pursuant to GAAP, except that revenues attributable
to any lease in effect for any part of the Measurement Month shall be projected
for the remainder of the Measurement Month as if the lease were in effect for
the entire Measurement Month and included in clause (i) above. If a Designated
Property ever achieves an occupancy level equal to or greater than 90% at or
after the First Closing (the "Achievement Date"), then the Annualized NOI for
such Designated Property as of any Calculation Date after said Achievement Date
shall equal the greater of (1) the Annualized NOI calculated as of the
Achievement Date or (2) the Annualized NOI calculated as of such Calculation
Date. In the event a Regency Entity does not own all of a Designated Property
and owns a partial interest in such Designated Property as a partner,
shareholder or otherwise, then the Annualized NOI and applicable Base NOI, Base
Value, Acquisition Cost, Development Cost and Sales Price of such Designated
Property, as the case may be, shall be proportionately adjusted to reflect such
partial interest owned by the Regency Entity in such Designated Property. In the
event a Designated Property suffers or experiences casualty damage or a taking
by condemnation or conveyance in lieu thereof, then the Annualized NOI for such
Designated Property to be utilized on any Earn-Out Closing Date thereafter shall
equal the greater of (x) the Annualized NOI for such Designated Property
calculated immediately prior to such casualty or notice of such taking, as the
case may be, or (y) where such taking is partial, the Annualized NOI calculated
on the applicable Calculation Date.
16
(c) "Base NOI" means the base net operating income attributed
to each Existing Property and set forth on Schedule .
(d) "Base Value" means the base value attributed to each
Existing Property set forth on Schedule .
(e) "Calculation Date" means any one of February 15, 1998,
February 15, 1999, and February 15, 2000; collectively, the "Calculation Dates."
(f) "Designated Property" means any Existing Property, New
Acquisition Property, and New Development Property; collectively, the
"Designated Properties."
(g) "Development Cost" means the out of pocket costs and
expenses incurred after the First Closing in connection with the acquisition,
construction and development of a New Development Property or the redevelopment
of a New Acquisition Property.
(h) "Earn-Out Closing Date" means any one of the First
Earn-Out Closing Date, Second Earn-Out Closing Date, and Third Earn-Out Closing
Date; collectively, the "Earn-Out Closing Dates."
(i) "Existing Property" means any one of certain existing
properties contributed by Branch to the Partnership at the First Closing and
described on Schedule ; collectively, the "Existing Properties."
(j) "First Earn-Out Closing Date" means the fifteenth (15th)
day after the first anniversary of the First Closing, provided that such First
Earn-Out Closing Date shall not be held on or before February 15, 1998.
(k) "New Acquisition Property" means any Property described in
Schedule and any property acquired by a Regency Entity after the First Closing
within the Territory; collectively, the "New Acquisition Properties."
(l) "New Development Property" means any Property described in
Schedule and any property acquired and developed by a Regency Entity after the
First Closing within the Territory; collectively, the "New Development
Properties" but shall exclude any property developed pursuant to an agreement
for resale to a third party.
(m) "Regency Entity" means any one of the Partnership, the
General Partner, Regency Realty Corporation or any of their Affiliates excluding
Security Capital or any of its Affiliates other than Regency or any of its
subsidiaries.
(n) "Sales Price" means the actual gross sales price paid in
connection with the sale of a Designated Property.
17
(o) "Second Earn-Out Closing Date" means the first anniversary
of the First Earn-Out Closing Date, provided that the Second Earn-Out Closing
Date shall not be held on or before February 15, 1999.
(p) "Territory" means Alabama, Georgia, Tennessee, North
Carolina, South Carolina, and Virginia.
(q) "Third Earn-Out Closing Date" means the second (2nd)
anniversary of the First Earn-Out Closing Date, provided that the Third Earn-Out
Closing Date shall not be held on or before February 15, 2000.
2.3.2 Property Earn-Out. The Branch partners shall have the right to
receive Additional Units or Shares (if a Branch partner has previously exercised
the Redemption Right with respect to Additional Units issuable pursuant to the
Subsequent Closing Right of such Branch partner) (rounded to the nearest whole
Additional Unit or Share for each Branch partner) and the Branch Principals
shall have the right to receive additional Reorganization Shares (rounded to the
nearest whole Share for each Branch Principal) in the event that the performance
criteria set forth below are satisfied. Any Shares to be issued (in lieu of
Additional Units) as provided below shall be adjusted by the Unit Adjustment
Factor described in the Partnership Agreement to properly adjust for stock
splits and similar actions.
(a) The Annualized NOI of each Existing Property shall be
determined as of each Calculation Date, and the product of (i) the excess, if
any, of (x) such Annualized NOI on such Calculation Date less (y) the Base NOI
for such Existing Property multiplied by (ii) 20.4, shall equal the "Increased
Value" for such Existing Property as of such Calculation Date.
(b) The Annualized NOI of each New Acquisition Property shall
be determined as of each Calculation Date, and the product of (i) such
Annualized NOI multiplied by (ii) 20.4 shall equal the "Designated Value" for
such New Acquisition Property as of such Calculation Date. The excess, if any,
of (x) the Designated Value of such New Acquisition Property less (y) the
Acquisition Cost and any Development Cost of such New Acquisition Property is
herein referred to as the "Increased Value" of such New Acquisition Property as
of such Calculation Date.
(c) The Annualized NOI of each New Development Property shall
be determined as of each Calculation Date, and the product of (i) such
Annualized NOI multiplied by (ii) 20.4 shall equal the "Designated Value" of
such New Development Property as of such Calculation Date. The excess, if any,
of (x) the Designated Value of such New Development Property less (y) the
Development Cost of such New Development Property is herein referred to as the
"Increased Value" of such New Development Property as of such Calculation Date.
(d) As of each Earn-Out Closing Date, the Increased Value
of each Designated Property shall be determined as of the immediately preceding
Calculation Date. For
18
each Designated Property, the "Highest Increased Value" of such Designated
Property as of a Calculation Date shall equal the greater of (i) the Increased
Value calculated as of such Calculation Date or (ii) the highest Increased Value
calculated as of any previous Calculation Date. The "Aggregate Increased Value"
of all Designated Properties as of any Earn-Out Closing Date shall equal the sum
of the Highest Increased Value of all Designated Properties determined as of the
previous Calculation Date. The Aggregate Increased Value shall not be decreased
by reason of any Designated Property not achieving an Increased Value, and no
Designated Property shall have an Increased Value that is less than zero.
(e) On the First Earn-Out Closing Date, Additional Units and
Shares shall be issued to the Branch partners, in the respective percentages set
forth on Schedule , equal to the quotient obtained by dividing (i) the Aggregate
Increased Value as of the previous Calculation Date by (ii) 22 1/8; provided,
however, the maximum Additional Units and Shares issued on the First Earn-Out
Closing Date shall not exceed 721,997 Additional Units and Shares ($15,974,188
divided by 22 1/8).
(f) On the Second Earn-Out Closing Date, Additional Units and
Shares shall be issued to the Branch partners, in the respective percentages set
forth on Schedule , equal to the excess, if any, of (x) the quotient obtained by
dividing (i) the Aggregate Increased Value as of the previous Calculation Date
by (ii) 22 1/8 less (y) the number of Additional Units and Shares issued on the
First Earn-Out Closing Date; provided, however, the maximum Additional Units and
Shares to be issued on all Earn-Out Closing Dates pursuant to this Section
shall not exceed 1,020,061 ($22,568,851 divided by 22 1/8).
(g) On the Third Earn-Out Closing Date, Additional Units and
Shares shall be issued to the Branch partners, in the respective percentages set
forth on Schedule , equal to the excess, if any of (x) the quotient obtained by
dividing (i) the Aggregate Increased Value as of the previous Calculation Date
by (ii) 22 1/8 less (y) the aggregate amount of Additional Units and Shares
issued on the First Earn-Out Closing Date and Second Earn-Out Closing Date;
provided, however, the maximum Additional Units and Shares to be issued on all
Earn-Out Closing Dates pursuant to this Section shall not exceed 1,020,061
($22,568,851 divided by 22 1/8).
(h) The following provisions shall control in the event of a
sale of a Designated Property. If an Existing Property is sold on or before a
Calculation Date, then the Increased Value, if any, of such Existing Property
shall equal, after such a sale, the greater of (i) the highest Increased Value
for such Existing Property as of any prior Calculation Date or the Achievement
Date, as the case may be, or (ii) the excess, if any, of (x) the Sales Price
less (y) the Base Value of such Existing Property. If a New Acquisition Property
is sold on or before a Calculation Date, then the Increased Value, if any, of
such New Acquisition Property shall equal, after such a sale, the greater of (i)
the highest Increased Value for such New Acquisition Property as of any prior
Calculation Date or the Achievement Date, as the case may be, or (ii) the
excess, if any, of (x) the Sales Price less (y) the Acquisition Cost and any
Development Cost of such New Acquisition Property. If a New Development Property
is sold
19
on or before a Calculation Date, then the Increased Value, if any, of such New
Development Property shall equal, after such a sale, the greater of (i) the
highest Increased Value for such New Development Property as of any prior
Calculation Date or the Achievement Date, as the case may be, or (ii) the
excess, if any, of (x) the Sales Price less (y) the Development Cost of such New
Development Property.
(i) If there is a change in control of the Partnership, the
General Partner or Regency as a result of a merger, consolidation, combination,
sale or other transaction so that the current officers and management of such
entities no longer operate such entities or there is a change in a majority of
the directors of any such entity within the twelve (12) months following any
such transaction, then the Branch partners' rights hereunder shall fully vest
and the Branch partners shall have the right to receive, prior to the closing of
such transaction causing such change of control, Additional Units and Shares
equal to the excess of (i) 1,020,061 ($22,568,851 divided by 22 1/8) less (ii)
the aggregate amount of Additional Units and Shares previously issued on all
prior Earn-Out Closing Dates pursuant to this Section (with such Additional
Units and Shares to be allocated in accordance with the respective percentages
set forth on Schedule ).
2.3.3 Third Party Earn-Out Amounts. A Third Party Earn-Out Closing
shall take place simultaneously with the Property Earn-Out Closings that take
place on the First Earn- Out Closing Date and the Second Earn-Out Closing Date,
at which time the Partnership shall issue Additional Shares to the Branch
Principals as part of the Reorganization, in the respective percentages set
forth on Schedule , in an amount at each of the two Third Party Earn-Out
Closings arrived at by dividing (i) $22-1/8 into (ii) an amount equal to 9.4
percent of the Third Party Fees accrued by the Partnership, New Management
Company, Old Management Company, Regency or any of their Affiliates during the
calendar year immediately preceding the date of the applicable Third Party
Earn-Out Closing, including in the case of the first Third Party Earn-Out
Closing, Third Party Fees accrued during 1997 and prior to the First Closing.
Any Shares to be issued (in lieu of Additional Units) pursuant to this Section
shall be adjusted by the Unit Adjustment Factor (as defined in the Partnership
Agreement) to properly adjust for stock splits and similar actions.
2.4 Assumption by Partnership of Liabilities. At the First Closing, the
Partnership shall assume the Assumed Liabilities. Except for the Assumed
Liabilities, the Partnership shall not assume or become subject at any Closing
to any Liabilities of Branch or any Subpartnership.
ARTICLE 3: REORGANIZATION
3.1 Reorganization. Regency and Branch Realty agree that at the First
Closing, immediately following the issuance of Units to Branch and the
distribution thereof to Branch's partners, Branch Realty shall transfer the
Units received by it pursuant to such distribution, which are itemized on
Schedule (the "Realty Units"), to Newco in exchange for the same number of
Shares, which Regency shall contribute to Newco for such purpose. Branch Realty
20
shall also transfer to Newco its rights to receive Additional Units under this
Agreement. Regency agrees to contribute such Reorganization Shares to Newco and
to cause Newco to transfer such Reorganization Shares to Branch Realty in
exchange for (i) the Realty Units and (ii) Branch Realty's right to receive
Additional Units at Subsequent Closings. Branch Realty will liquidate
immediately following the First Closing and distribute such Reorganization
Shares to the Branch Principals, together with the right to receive additional
Reorganization Shares at each Subsequent Closing (based on the number of
Additional Units that Branch Realty would receive at such Subsequent Closings
had it not liquidated, multiplied by the Unit Adjustment Factor), to be divided
among the Branch Principals in the respective percentages set forth on Schedule
(based on their respective interests in Branch Realty immediately prior to its
liquidation). The transactions between Branch Realty and Newco described in this
Section (the "Reorganization") are intended to qualify as a reorganization under
Section 368(a)(1)(C) of the Code.
ARTICLE 4: NEW MANAGEMENT COMPANY
4.1 New Management Company. Newco shall cause the Partnership to
contribute the Third Party Management Business received by it from Branch to New
Management Company in exchange for 100 shares of preferred stock of New
Management Company and 25 shares of voting common stock of New Management
Company, (ii) Newco may cause the Partnership to contribute to New Management
Company the Disposition Properties and certain Acquisition Contracts for
properties which may be sold, and in such event Newco shall have the right to
direct that the Transaction Documents convey such Disposition Properties and
Acquisition Contracts to the New Management Company (rather than to the
Partnership and then to the New Management Company) and (iii) TRG shall
contribute to New Management Company all shares of the voting common stock of
Old Management Company beneficially owned by TRG in exchange for 475 shares of
voting common stock of New Management Company. New Management Company's board of
directors shall be the same as Old Management Company's board of directors.
ARTICLE 5: COVENANTS
5.1 Implementing Agreement. Subject to the terms and conditions hereof,
each party hereto shall use its reasonable best efforts to take all action
required of it to fulfill its obligations under the terms of this Agreement, to
cause the conditions to Closing to be satisfied and to facilitate the
consummation of the transactions contemplated hereby and thereby.
Notwithstanding anything contained in this Agreement to the contrary, any action
to be taken hereunder by Branch with respect to a Subpartnership is subject to
Branch's fiduciary duty to its partners in such Subpartnership and the
restrictions, limitations or other provisions contained in the partnership
agreement or any other agreement relating to such Subpartnership.
21
5.2 Preservation of Business. From the date of this Agreement until the
First Closing Date, Branch shall cause the Properties and its Third Party
Management Business to be operated only in the ordinary and usual course of
business and consistent with past practice, shall not sell or list for sale any
of the Properties (other than those Disposition Properties listed on Schedule )
or any of its interests in the Subpartnerships, shall use its reasonable best
efforts to preserve the good will and advantageous relationships of Branch and
the Subpartnerships with tenants, customers, suppliers, independent contractors,
employees and other Persons material to the operation of the Properties and
Branch's Third Party Management Business, shall perform its, and cause the
Subpartnerships to perform their, material obligations under the Leases and
other material agreements affecting the Properties, shall perform Branch's
material obligations under the Management Contracts and shall not take or permit
any action or omission which would cause any of its representations or
warranties contained herein to become inaccurate in any material respect or any
of the covenants made by it to be breached in any material respect. Without
limiting the foregoing, Branch will not cause or permit any default to occur
under the Existing Mortgage Debt or cause or permit any increase in the
outstanding aggregate principal balance thereof from the date hereof until the
First Closing, except to fund expenditures made in conformity with the
Development Budget and Schedule and the TI Budget and Schedule and except to
fund the closing of the Acquisition Properties in accordance with Section .
Branch shall continue to maintain all insurance policies referred to in Section
in full force and effect up to and including the First Closing Date. From the
date of this Agreement until the First Closing Date, Regency shall cause its
properties and the third party management business of the Old Management Company
to be operated only in the ordinary and usual course of business and consistent
with past practice, shall use its reasonable best efforts to preserve the good
will and advantageous relationships of Regency and its subsidiaries with
tenants, customers, suppliers, independent contractors, employees and other
Persons material to the operation of Regency's properties and the third party
management business of Old Management Company, shall perform its, and cause its
subsidiaries to perform their, material obligations under the leases and other
material agreements affecting their respective properties, shall cause Old
Management Company to perform its material obligations and shall not take or
permit any action or omission which would cause any of Regency's representations
or warranties contained herein to become inaccurate in any material respect or
any of the covenants made by it to be breached in any material respect.
5.3 Consents and Approvals. Each party shall use its reasonable best
efforts to obtain all consents, approvals, certificates and other documents
required in connection with the performance by it of this Agreement and the
consummation of the transactions contemplated hereby and thereby, including the
consents listed on Schedules and (b), and shall make all filings, applications,
statements and reports to all Government Entities and other Persons which are
required to be made prior to the First Closing Date by or on behalf of such
party or any of their Affiliates pursuant to any applicable Law or contract in
connection with this Agreement and the transactions contemplated hereby.
5.4 Meeting of Regency's Shareholders. Regency shall submit (a) the
transactions contemplated by this Agreement (including the issuance of Shares in
the Reorganization and the
22
issuance of Shares upon the exercise of Redemption Rights) (as required by Rule
312.03(c) of the New York Stock Exchange Listed Company Manual as a condition to
the listing on such exchange of all Shares issuable pursuant to the transactions
contemplated hereby) and (b) a proposed amendment to its Articles of
Incorporation in the form attached as Exhibit (relating to domestic ownership)
to a vote of Regency's shareholders at an annual or special meeting of
shareholders in 1997 regardless of whether or not the First Closing shall have
occurred by the date of the meeting, and Regency's Board of Directors shall
recommend that Regency's shareholders vote in favor of such matters. Regency
shall hold such meeting within 120 days after the date this Agreement is
executed, provided, however, that the parties agree to extend such time period
to accommodate any delays reasonably resulting from the SEC's review of the
proxy materials to be distributed in connection with such meeting. Regency shall
use reasonable best efforts to obtain signed Voting Agreements in the form of
Exhibit B from those executive officers, directors and shareholders listed
therein. If such Voting Agreements are obtained, there will be sufficient votes
under all Voting Agreements to obtain the required shareholder approvals
described in (a) and (b) above. Regency agrees not to issue any Shares prior to
the record date for the meeting of shareholders called to approve the
transactions contemplated by this Agreement to any Persons other than (i) a
party to a Voting Agreement (including Security Capital), (ii) a Person who
grants Regency an irrevocable proxy agreeing to voting in favor of the
transactions contemplated by this Agreement or otherwise enters into a binding
agreement to vote such Person's Shares in favor thereof, (iii) Persons who
acquire Shares pursuant to Regency's existing dividend reinvestment plan, 401(k)
and profit sharing plan, AIM Plan, Long-Term Omnibus Plan or anniversary stock
grant plan, or (iv) the sellers of the two Publix shopping centers referred to
on Schedule .
5.5 Purchase of Acquisition Properties. Branch shall use reasonable best
efforts to close on each Acquisition Property in accordance with the timetable
set forth on Schedule . Branch will make available copies of all material
correspondence or other documentation with respect to any Acquisition Property
promptly upon receipt by Branch, and will confer with Regency in all material
decisions with respect to the due diligence, documentation and closing of any
Acquisition Property. The parties have cooperated in forming the Partnership,
with Branch serving as the general partner and a Branch Affiliate serving as the
limited partner, and the Partnership shall take title to the Acquisition
Properties that are closed prior to the First Closing. At the First Closing,
Newco shall be admitted as general partner, the initial general partner shall
withdraw as general partner, the initial limited partner shall withdraw as
limited partner, the partnership agreement shall be amended and restated in the
form attached as Exhibit A and the Partnership shall assume the Acquisition
Contracts for Acquisition Properties that have not closed prior thereto.
5.6 Additional Acquisitions. From the date hereof until the First Closing,
except as provided in Section and subject to Branch's fiduciary duties and to
its obligations under the Branch Partnership Agreement and the partnership
agreement of each Subpartnership, Branch shall not, and shall not allow any
Subpartnership to, enter into a binding contract for the acquisition of, nor
acquire, any real property or a material amount of other assets, whether by
purchase of assets or stock, merger, consolidation or other business combination
without
23
Regency's prior written consent if such assets will be part of the Assets
transferred to the Partnership at the First Closing. If Branch identifies any
potential acquisitions, it shall consult with Regency prior to the end of the
applicable inspection period and Regency shall advise Branch promptly (and prior
to the end of the applicable inspection period) whether or not it believes that
such acquisition opportunity may be suitable for transfer to the Partnership
hereunder. The parties shall cooperate in pursuing any acquisition opportunities
agreed on by both parties and if Branch enters into a binding contract, with
Regency's consent, for an acquisition, the parties shall enter into mutually
agreed amendments to this Agreement and to the Partnership Agreement taking into
appropriate account the additional Assets to be so acquired by the Partnership
pursuant to this Agreement. If Regency does not so consent to such a contract
with a Subpartnership, prior to the First Closing, Branch shall cause any
Subpartnership that is a party to any such contract to transfer the contract to
a third party and obtain a full release of the Subpartnership from any
obligation thereunder, and Branch shall not transfer to Regency any such new
contract to which Branch is a party if Regency has not consented to such
contract.
5.7 Distributions. From the date of this Agreement, Branch shall not pay
any distributions to its partners other than the regularly scheduled quarterly
cash distribution from the operations of Branch for the fourth quarter of 1996
in the amount of $1,399,579 as described in Section hereof. Branch also agrees
not to cause any Subpartnership to make any distribution to its partners from
the date of this Agreement until the First Closing other than its normal
quarterly cash distributions consistent with past practice. Regency agrees not
to make the record date for its dividend payable in the second quarter of 1997
on or before the First Closing Date, provided that all of Branch's income and
expense items for the period beginning on January 1, 1997 inure to the benefit
of the Partnership, subject to the provisions of Section
hereof.
5.8 Continuation of Employees. The Branch Affiliates agree to use
reasonable best efforts to persuade those Branch employees designated by Regency
in writing to Branch to accept employment with the Partnership or New Management
Company immediately following the First Closing, and Regency agrees to cause the
Partnership or New Management Company to hire such employees immediately
following the First Closing provided that such employee does not engage in
malfeasance prior to the First Closing. Certain of such employees who accept
employment with the Partnership or New Management Company following the First
Closing may be hired on the understanding that their services will be required
only for a transition period, and Regency agrees that any severance compensation
for such employees shall be an expense of the Partnership or New Management
Company, as applicable. Regency shall cause Newco to make capital contributions
to the Partnership for the purpose of funding severance compensation to Branch
employees who accept employment with the Partnership and later are terminated,
all as further described in Schedule , and also shall cause the Partnership to
assume those accrued employee benefits such as accrued vacation time and the
bonus compensation listed in Schedule , but only to the extent specifically set
forth thereon. Branch shall be responsible for all severance compensation, if
any, for those Branch employees whose employment is terminated by Branch prior
to the First Closing, except as provided above and
24
in Schedule . Nothing herein is intended to make any employee hired by the
Partnership or New Management Company other than an employee at will.
5.9 Regency Disclosure Document. Branch and Regency agree to cooperate in
preparing and distributing to each partner of Branch as promptly as practicable
following the execution of this Agreement, a disclosure document prepared by
Regency and Branch for use by the Branch partners in determining (i) whether to
consent to the transactions contemplated by this Agreement, and (ii) for such
Persons receiving Units at the First Closing rather than Reorganization Shares,
whether to redeem their Units (and the right to receive Additional Units) for
Shares (and the right to receive additional Shares in lieu of Additional Units)
pursuant to the exercise of their Redemption Rights. Branch agrees to supply
information for the disclosure document concerning Branch, Branch Realty, the
Properties, the Subpartnerships, the solicitation of consents from the Branch
partners for the transactions contemplated by this Agreement and the allocation
among Branch's partners of the consideration to be received in exchange for the
Assets, and Regency agrees to supply information concerning Regency or the
securities being offered by Regency or the Partnership to the Branch partners
pursuant to the transactions contemplated by this Agreement. The information
provided by Branch for inclusion in the disclosure document is referred to
hereinafter as the "Branch Information" and the information provided by Regency
for inclusion in the disclosure document is referred to hereinafter as the
"Regency Information." Branch and Regency each shall advise the other if it
becomes aware of any additional information that should be included in the
Branch Information or the Regency Information, respectively, for inclusion in
the disclosure document or a supplement thereto. Branch covenants that the
Branch Information shall not, and Regency covenants that the Regency Information
shall not, contain any untrue statement of material fact or omit to state any
material fact required to be stated or necessary to make the Branch Information
or the Regency Information, respectively, that is included in the disclosure
document, in light of the circumstances under which it was made, not misleading.
Regency acknowledges that Branch is not offering securities as an issuer in
connection with the transactions contemplated by this Agreement, and nothing
herein is intended to make Branch liable as an issuer, and that Branch is not
making any representation or determination as to the adequacy of such disclosure
document with respect to the issuance of, or the legality of the issuance of,
any securities in connection with the transactions contemplated herein. Branch
acknowledges that nothing herein is intended to impose on Regency, or relieve
Branch Realty of, any liability with respect to Branch Realty's fiduciary duties
in connection with obtaining consents to or amending the Branch Partnership
Agreement in order to consummate the transactions contemplated by this
Agreement.
5.10 Exclusivity. Unless and until this Agreement is terminated pursuant
to its terms, Branch shall not, directly or indirectly, through any officer,
director, partner, agent or otherwise, initiate, solicit or knowingly encourage
(including by way of furnishing non-public information or assistance), or take
any other action to facilitate knowingly, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, or enter into or maintain or continue discussions or
negotiate with any Person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or
25
endorse any Competing Transaction, or authorize or knowingly permit any of the
officers, directors, partners or employees of such party or any of its
Affiliates or any investment banker, financial advisor, attorney, accountant or
other representative retained by such party or any of such party's Affiliates to
take any such action, and Branch shall notify Regency orally (within one
business day) and in writing (as promptly as practicable) of all of the relevant
details relating to all inquiries and proposals which Branch or any such
officer, director, employee, partner, investment banker, financial advisor,
attorney, accountant or other representative may receive relating to any of such
matters. A "Competing Transaction" means the sale by Branch of any equity
interest in Branch (other than the sale of additional limited partnership
interests to OCP in connection with additional capital required to be
contributed by OCP to Branch pursuant to the Branch Partnership Agreement) or
the sale or other transfer by Branch of its assets or business, in whole or in
part, whether through direct sale, merger, consolidation, asset sale, exchange,
recapitalization, other business combination, liquidation, or other action out
of the ordinary course of business. Unless and until this Agreement is
terminated pursuant to its terms, Regency shall not, directly or indirectly,
through any officer, director, agent or otherwise, negotiate, undertake or
consummate a business combination, whether through a direct purchase, merger,
consolidation, asset purchase, exchange, recapitalization, other business
combination, or other action out of the ordinary course of business, which would
prevent or hinder Regency from consummating the transactions contemplated by
this Agreement or which have a material adverse effect on Regency.
5.11 New Contracts. Without Regency's prior written consent in each
instance (which shall not be unreasonably withheld), Branch will not, and will
not allow any Subpartnership to, enter into, or grant concessions regarding, any
Contract that will be an obligation affecting the Properties or binding on the
Partnership or any Subpartnership after the Closing except Contracts entered
into in the ordinary course of business that are terminable without cause or any
termination fee on 30 days' notice.
5.12 Leasing Arrangements. As to any Lease in excess of 5,000 square feet
of usable space in any Property, Branch will not, and will not allow any
Subpartnership to, amend, terminate, grant material concessions regarding, or
enter into any Lease unless Regency has given its written consent, which consent
shall not be unreasonably withheld or delayed. As to Leases for 5,000 square
feet or less of usable space, Branch will not, and will not allow any
Subpartnership to, amend, terminate, grant concessions regarding, or enter into
any new Lease without the prior written consent of Regency if such action would
require approval by OCP under the Branch Partnership Agreement. Branch shall
provide Regency with all material information related to each request for
consent, including without limitation, lease form, lease terms, leasing
commissions, tenant improvement obligations and other lease procurement costs,
description of tenant's business, and tenant's financial statements or a Dunn &
Bradstreet credit report (to the extent available).
5.13 Obligation to Supplement Information. From time to time prior to the
First Closing, the Branch Affiliates, on the one hand, and Regency on the other
will promptly disclose in writing to the other party any matter hereafter
arising or discovered which, if existing,
26
occurring or known at the date of this Agreement would have been required to be
disclosed by any party or which would render inaccurate any representation or
warranty by any party. Additionally, the Branch Affiliates agree to provide
Regency with prompt written notice of any matter hereafter arising or discovered
with respect to a Property which could have a material adverse effect on the
condition, operations or prospects of such Property, and Regency agrees to
provide the Branch Affiliates with prompt written notice of any matter hereafter
arising or discovered which could have a material adverse effect on the
condition, operations or prospects of Regency. No information provided to a
party pursuant to this Section shall be deemed to cure any breach of any
representation, warranty or covenant made in this Agreement.
5.14 Access to Information; Environmental Audits. At all times before the
First Closing, Branch shall provide Regency and its Affiliates, their respective
agents, employees, consultants, and representatives, with continuing and
reasonable access to all files, books, records and other materials in Branch's
possession or control relating to the Properties, Branch's Third Party
Management Business and the business and operations of Branch and the right to
examine, inspect and make copies of such materials as appropriate (including for
the purpose of reviewing or preparing audited financial statements required to
be filed by Regency with the SEC). During such period, Branch shall also provide
for such parties to have reasonable physical access to the Properties for the
purpose of conducting surveys, architectural, engineering, geotechnical and
environmental inspections and tests (including sampling and invasive testing for
the presence of Materials of Environmental Concern performed in connection with
Phase I and Phase II environmental audits), feasibility studies and any other
inspections, studies or tests reasonably required by them, provided, however,
that Regency shall obtain Branch's prior approval (which shall not be
unreasonably withheld) for any invasive testing. With reasonable advance notice
to Branch, Regency may conduct a "walk-through" of tenant spaces upon
appropriate notice to tenants and subject to the rights of tenants. In the
course of its investigations, Regency may make inquiries to third parties,
including, without limitation, contractors, property managers, parties to Work
Contracts, lenders, tenants and Government Entities. Regency shall keep the
Properties free of any liens claimed by Regency's contractors or consultants in
connection with such entry and will indemnify, defend and hold Branch harmless
from all Claims and Liabilities caused by Regency, its contractors or
consultants that are asserted against or incurred by Branch as a result of such
entry and investigation. Any liability or loss related to a condition of any
Property discovered or disclosed by Regency or any consultant or contractor of
Regency in connection with such investigation is not a liability that is covered
by this indemnity. At all times before the First Closing, Regency shall provide
the Branch Affiliates and OCP, their respective agents, employees, consultants,
and representatives, with continuing and reasonable access to all files, books,
records and other materials in Regency's possession or control relating to the
business and operations of Regency and the right to examine, inspect and make
copies of such materials as appropriate. No investigation made by a party shall
limit, qualify or modify any representations, warranties, covenants or
indemnities made by another party hereunder, irrespective of the knowledge and
information obtained as a result of any such investigation, but if a party
discovers as a result of any investigation made by it prior to the First Closing
that any representation or warranty made
27
herein by the other party is materially inaccurate, it shall promptly notify and
advise the other party.
5.15 Monthly Updates of Rent Rolls and Operating Statements. Branch will
promptly provide Regency with monthly updates of the Rent Roll and operating
statements for the Properties.
5.16 Tenant Estoppels. Branch shall endeavor to secure and deliver to
Regency estoppel certificates in a form reasonably acceptable to Regency from
all tenants under all Leases (collectively, the "Tenant Estoppels"), dated no
earlier than 30 days before the First Closing Date. Regency and Branch will
consult and cooperate with each other as to the timing of solicitation of Tenant
Estoppels with the goal of obtaining the Tenant Estoppels at least three days
before the First Closing Date.
5.17 Service Contracts. The Partnership will assume the obligations
arising from and after the First Closing Date under those Service Contracts that
are not in material default as of the First Closing Date and which Branch and
Regency have agreed will not be terminated. Branch shall terminate at the First
Closing all Service Contracts that Branch has agreed will not be so assumed, but
Regency shall reimburse Branch for any termination fees imposed as a result of
such termination, excluding any fees or damages imposed solely as a result of a
Branch default other than by reason of such termination.
5.18 Work Contracts. Ten days before the First Closing, the Branch
Affiliates shall notify Regency in a written progress report as to those Work
Contracts that will not be completed by the First Closing.
5.19 Title Matters.
5.19.1 Title Insurance; Survey. Regency shall order the Title
Insurance Commitments from the Title Company and each Survey from a reputable
surveyor familiar with the Property (Branch agreeing to furnish to Regency
copies of any existing surveys and title information in its possession promptly
after execution of this Agreement) and shall use reasonable best efforts to
obtain such items as promptly as practicable following the execution of this
Agreement. Regency will have ten (10) days from receipt of the later to be
received of the Title Insurance Commitment (including legible copies of all
recorded exceptions noted therein) and Survey to notify Branch in writing of any
Title Defects, encroachments or other matters not acceptable to Regency which
are not Permitted Exceptions by this Agreement. Any Title Defect or other
objection disclosed by the Title Insurance Commitment or the Survey which is not
timely specified in Regency's written notice to Branch of Title Defects shall be
deemed a Permitted Exception. Branch shall notify Regency in writing within ten
(10) days of Regency's notice if Branch intends to cure any Title Defect or
other objection. If Branch elects to cure, Branch shall use diligent efforts to
cure the Title Defects and/or objections by the First Closing Date (as it may be
extended), which may include insuring over or bonding off such Title Defects
and/or objections at Branch's expense. If Branch elects not to cure or if such
Title
28
Defects and/or objections are not cured and if in either case they have a
Material Adverse Effect on the applicable Property, Regency shall have the sole
remedy, in lieu of any other remedies, to (i) refuse to purchase all of the
Properties and terminate this Agreement; or (ii) waive such Title Defects and/or
objections and close the purchase of the Properties and other transactions
hereunder subject to them.
5.19.2 Later Title Exceptions. In the event that Branch becomes
aware that an exception to title has been filed of record subsequent to the date
of the Title Commitment and prior to the First Closing Date (a "Later
Exception"), Branch shall send written notice of such Later Exception to
Regency. Regency shall have the right to postpone the First Closing Date for a
period up to thirty (30) days in order to give Branch sufficient time to
satisfy, release, cure or remove such lien or exception. Upon Branch's cure,
removal, insurance over or bonding off of any such Later Exception, at Branch's
expense, the First Closing Date shall be scheduled upon ten (10) days prior
written notice to Branch but in no event earlier than the First Closing Date
notwithstanding such Later Exception. If Branch is unable, within said
thirty-day period, or elects not to cure, remove, bond off or otherwise dispose
of any Later Exception that has a Material Adverse Effect on the applicable
Property, Regency may in its sole discretion and as its sole remedy in lieu of
any other remedies, either (a) refuse to purchase all of the Properties and
terminate this Agreement; or (b) waive such objection to the Later Exception and
proceed with the First Closing Date. At the First Closing, the Title Company
will issue the Title Insurance.
5.20 Damage. The Branch Affiliates shall promptly give Regency written
notice of any damage to the Properties, describing such damage whether such
damage is covered by insurance and the estimated cost of repairing such damage.
If such damage is not material (i) Branch shall, to the extent possible, begin
repairs prior to the First Closing, (ii) at the First Closing the Partnership
shall receive all insurance proceeds not applied to the repair of any such
Properties prior to the First Closing (including rent loss insurance applicable
to any period from and after the First Closing) due to Branch for the damage,
together with an assignment of any unsettled insurance claim, and (iii) the
Partnership shall assume the responsibility for the repair after the First
Closing. The Partnership shall be entitled to any excess of the proceeds of
Branch's insurance over and above the actual cost of repair and restoration. If
such damage is material, Regency may elect by notice to Branch given within 20
Business Days after Regency is notified of such damage (and the First Closing
shall be extended, if necessary, to give Regency such 20 Business Day period to
respond to such notice) to proceed in the same manner as in the case of damage
that is not material or to terminate this Agreement. Damage as to any one or
multiple occurrences is material if the aggregate cost to repair all such damage
(plus the cost of rent abatement after the First Closing resulting from the
damage to the extent not reimbursable by insurance) exceeds $5,000,000 or if the
damage entitles tenants whose Leases cover, in the aggregate, in excess of
100,000 rentable square feet of the Improvements to terminate their Leases.
5.21 Condemnation. Branch will give Regency prompt written notice of the
institution or threat of any exercise of the power of eminent domain on any of
the Properties. By notice
29
to Branch given within 20 Business Days after Regency receives notice of
proceedings in eminent domain that are contemplated, threatened or instituted by
any Government Entity having the power of eminent domain with respect to the
Properties and which would have a Material Adverse Effect on the Property in
question, Regency may terminate this Agreement or proceed under this Agreement.
If Regency elects to proceed under this Agreement, Branch shall assign to the
Partnership at the First Closing its entire right, title and interest in and to
any condemnation award, and the Partnership shall have the sole right during the
pendency of this Agreement to negotiate and otherwise deal with the condemning
authority in respect of such matter. If necessary, the First Closing shall be
extended to give Regency the full 20 Business Day period to make such election.
5.22 Peartree Agreement. Regency and Branch agree to enter into an
agreement in substantially the form set forth in Exhibit prior to the First
Closing and to use their reasonable best efforts to obtain the execution of the
Peartree investors thereto prior to the First Closing.
ARTICLE 6: REPRESENTATIONS, WARRANTIES AND FURTHER
COVENANTS OF BRANCH
Branch hereby represents, warrants and covenants to Regency and the
Partnership as of the date of this Agreement and the First Closing as follows.
All representations that are made "to Branch's knowledge" means to the actual
knowledge of the individuals listed on Schedule
attached hereto without any duty or obligation to inquire as to such matters.
Branch represents that such individuals are the appropriate individuals who, in
the course of their duties, would normally be aware of material issues and facts
affecting the Properties, the other Assets, the Subpartnerships and Branch. All
representations and warranties with respect to the Rent Roll are made as of
January 20, 1997.
6.1 As to Branch and the Subpartnerships.
6.1.1 Due Incorporation, etc. Branch and each Subpartnership are
duly organized, validly existing and in good standing under the Laws of their
respective jurisdiction of organization, with all requisite power and authority
to own, lease, operate and sell their assets and to carry on their businesses as
they are now being conducted. Branch and each Subpartnership are in good
standing as a foreign entity authorized to do business in each jurisdiction
where they engage in business, except to the extent such violation or failure
does not cause or is not reasonably expected to cause a Material Adverse Effect.
Neither Branch (except for its interests in the Subpartnerships) nor any
Subpartnership (except for the interest of Branch/HOP Associates, L.P. in
Roswell Village, Ltd.) holds any interest in any security issued by any other
Person. The states in which each Subpartnership is qualified to do business are
listed on Schedule . The parties understand that certain Subpartnerships may
terminate for tax purposes, pursuant to the applicable tax laws, upon the
transfer of Branch's interest therein to the Partnership at the First Closing.
30
6.1.2 Due Authorization; Consents; No Violations.
(a) Branch has full power and authority (subject to receipt of
the consents referred to in Section ) to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by Branch of this Agreement have been, and the Transaction Documents
to be executed and delivered by it pursuant to this Agreement shall be, duly and
validly approved by Branch, and no other proceeding on the part of Branch is
necessary to authorize this Agreement and the transactions contemplated hereby,
other than obtaining the consents set forth on Schedule . This Agreement has
been duly and validly executed and delivered by Branch and, assuming due
authorization (including the receipt of the consents set forth on Schedule (b)),
execution and delivery of this Agreement by Regency, TRG and Branch Realty, this
Agreement constitutes, and the Transaction Documents to be executed and
delivered by Branch pursuant to this Agreement when executed will constitute,
valid and binding obligations of Branch enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization, or similar laws or court
decisions from time to time in effect that affect creditors' rights generally
and by legal and equitable limitations on the availability of specific remedies.
(b) Except for obtaining the consents set forth on Schedule ,
no consents, waivers, exemptions or approvals of, or filings or registrations by
Branch with, any Government Entity or any other Person not a party to this
Agreement are necessary in connection with the execution, delivery and
performance by Branch of this Agreement or the consummation of the transactions
contemplated hereby except to the extent the failure to obtain the same does not
cause or is not reasonably expected to cause a Material Adverse Effect on Branch
or the transactions contemplated by this Agreement.
(c) Upon obtaining those consents set forth on Schedule and
(assuming receipt of such consents) except to the extent same does not cause or
is not reasonably expected to cause a Material Adverse Effect, the execution,
delivery and performance by Branch of this Agreement and the Transaction
Documents to be executed, delivered and performed by Branch pursuant hereto, and
the consummation of the transactions contemplated hereby and thereby, do not and
will not (i) violate any Order applicable to or binding on Branch, any of the
Assets, or any Subpartnership or its assets; (ii) violate any Law; (iii) violate
or conflict with, result in a breach of, constitute a default (or an event which
with the passage of time or the giving of notice, or both, would constitute a
default) under, permit cancellation of, or result in the creation of any Lien
upon any of the Assets or any of the assets of any Subpartnership under, any
Contract to which Branch or any Subpartnership is a party or by which Branch,
any of the Assets, or any Subpartnership or its assets, are bound; (iv) permit
the acceleration of the maturity of any indebtedness of Branch or any
Subpartnership, or any indebtedness secured by the Assets or any
Subpartnership's assets; or (v) violate or conflict with any provision of the
Branch Partnership Agreement or any of the respective limited partnership
agreements of the Subpartnerships.
31
6.1.3 Branch Financial Statements.
(a) Schedule contains true, complete and accurate copies of
the Branch Financial Statements. The Branch Financial Statements have been
prepared in accordance with GAAP and on that basis present fairly the
consolidated financial position and assets and Liabilities of the entities
included therein (including the Subpartnerships) as going concerns, and the
results of the operations of such entities and changes in their financial
position for the periods covered thereby and as of the dates thereof. The Branch
Financial Statements are in accordance with the books and records of the
entities included therein (including the Subpartnerships), do not reflect any
transactions which are not bona fide transactions and do not contain any untrue
statements of a material fact or omit to state any material fact necessary to
make the statements contained therein, in light of the circumstances in which
they were made, not misleading. The Branch Financial Statements make full and
adequate disclosure of, and provision for all material Liabilities of the
entities included therein (including the Subpartnerships) as of the dates
thereof. Except as set forth in the balance sheets included in the Branch
Financial Statements, there are no Liabilities (including "off-balance sheet"
Liabilities, except for annuity lease commissions), whether due or to become
due, which have had or are reasonably likely to have a Material Adverse Effect
on Branch or any Subpartnership.
(b) Since the Recent Balance Sheet Date, neither Branch nor
any Subpartnership has made any distribution, dividend, or similar payment to
any of their partners or Affiliates other than normal distributions consistent
with past practice.
6.1.4 No Adverse Change. Except as listed on Schedule and except for
the Closing contemplated hereby, since the Recent Balance Sheet Date, there has
not been (i) any change in Branch or any Subpartnership which would cause or
reasonably be expected to result in a Material Adverse Effect on Branch or the
Subpartnership, (ii) any material loss, damage or destruction to any of the
Assets or any assets of any Subpartnership (whether or not covered by insurance)
or any other event or condition which has had or could have a Material Adverse
Effect on Branch or the Subpartnership, (iii) any one indebtedness in excess of
$10,000 or total indebtedness in excess of $50,000 incurred by Branch relating
to, or taking as security any interest whatsoever in the Assets, (iv) any one
indebtedness in excess of $10,000 or total indebtedness in excess of $50,000
incurred by any Subpartnership, (v) any Contract or other transaction entered
into by Branch or any Subpartnership relating to, or otherwise affecting in any
way, their respective businesses or the operation thereof, other than in the
ordinary course of business, (vi) any sale, lease or other transfer or
disposition of the Assets or of any assets of any Subpartnership, or any
cancellation of any debts or claim of Branch or any Subpartnership, except in
the ordinary course of business, and (vii) any changes in the accounting
systems, policies or practices of Branch or any Subpartnership. Since the Recent
Balance Sheet Date, Branch's and each Subpartnership's business has been
conducted in all material respects only in the ordinary course and consistent
with past practices.
32
6.1.5 Title to Assets. Branch has good and marketable title to all
of the Assets other than the Real Properties (title to which is as set forth in
Section ), free and clear of any Lien, other than the Permitted Exceptions and
the Assumed Liabilities. At the First Closing, Branch will convey (to the extent
not already acquired by the Partnership pursuant to Section ) the Assets to the
Partnership by deeds, bills of sale, certificates of title and instruments of
assignment and transfer effective to vest in the Partnership, and the
Partnership shall have good and marketable title, free and clear of all Liens,
except the Permitted Exceptions and the Assumed Liabilities.
6.1.6 Condition and Sufficiency of Assets. To Branch's knowledge,
all tangible assets constituting the Assets or the tangible assets owned by any
Subpartnership have been well maintained during the period of Branch's ownership
thereof (including ownership through a Subpartnership), and are in good
operating condition and repair (with the exception of normal wear and tear), and
are free from defects other than such minor defects as do not interfere with the
continued use thereof in the conduct of normal operations or materially
adversely affect the resale value thereof.
6.1.7 Leased Real Property. Schedule lists all leases pursuant to
which Branch or any Subpartnership holds any real property used in connection
with their respective businesses. Branch has delivered to Regency true and
complete copies of all such leases, together with copies of all reports of any
engineers, environmental consultants or other consultants which, to Branch's
knowledge, are in Branch's possession relating to any property subject to such a
lease, if any.
6.1.8 Leased Personal Property. Schedule lists all leases pursuant
to which Branch or any Subpartnership holds equipment, vehicles, furniture or
any other item of personal property used in connection with their respective
businesses. All of the personal property leased by Branch or any Subpartnership
under such leases is presently utilized by Branch or such Subpartnership in the
ordinary course of its business. Branch has made available to Regency true and
complete copies of all such leases.
6.1.9 Intellectual Property. Except for the "Branch" name, there are
no trade names, trademarks, service marks or copyrights (or any registrations
with any Government Entity of, or applications for registration pending with
respect to, any of the foregoing) owned or licensed by Branch or any
Subpartnership that are material to the conduct of Branch's or any
Subpartnership's business.
6.1.10 Existing Mortgage Debt. There are no defaults (and no Branch
Affiliate has received any notice of a default asserted by any lender that has
not been cured) under the Existing Mortgage Debt, or facts or circumstances
which with the passage of time or the giving of notice, or both, would result in
such a default, except to the extent such a default does not cause and is not
reasonably expected to cause a Material Adverse Effect on Branch or the
transactions contemplated by this Agreement. The aggregate principal balance
outstanding under the Existing Mortgage Debt as of December 31, 1996 is set
forth on Schedule .
33
6.1.11 Contracts. Except as set forth on Schedule , and except for the
Branch Partnership Agreement and the Leases described on the Rent Roll,
Schedules (Acquisition Contracts), (Development Contracts), (Existing Mortgage
Debt), (Management Contracts), (Repair Contracts), (Service Contracts), (TI
Contracts), (Disposition Contracts), (Leased Real Property), (Leased Personal
Property), (Insurance Policies), (Leasing Commissions) and (Subpartnership
Agreements) include all of the Contracts of the following types (i) to which
Branch is a party or is bound and which the Partnership is assuming, (ii) to
which any of the Assets are subject or are bound, (iii) to which any
Subpartnership is a party or is bound, or (iv) to which any of the assets of any
Subpartnership are subject or are bound:
(a) all property management agreements, asset management
agreements, and development agreements;
(b) all partnership agreements;
(c) any Contract of any kind with any partner of Branch or
of any Subpartnership or any Affiliate of such partner;
(d) any Contract with a dealer, broker, leasing agency,
advertising agency or other Person engaged in sales, or promotional activities;
(e) any Contract of any nature which involves an unperformed
commitment in excess of, or services having a value in excess of, $10,000;
(f) any Contract pursuant to which Branch or any
Subpartnership has made or will make loans or advances, or has or will have
incurred debts or become a guarantor, indemnitor or surety or pledged their
credit on or otherwise become contingently or secondarily liable with respect to
any undertaking or obligation of any other Person (except for the negotiation or
collection of negotiable instruments in transactions in the ordinary course of
business);
(g) any indentures, credit agreements, loan agreements, notes,
letters of credit, mortgages, security agreements, leases of real property or
personal property, deeds of trust or other agreements for financing;
(h) any Contract involving a partnership, joint venture or
other cooperative undertaking;
(i) any Contract involving any restrictions relating to Branch
or a Subpartnership with respect to the geographical area of operations or scope
or type of business of Branch or a Subpartnership;
34
(j) any power of attorney or agency agreement or arrangement
with any Person pursuant to which such Person is granted the authority to act
for or on behalf of Branch or any Subpartnership;
(k) any Contract under which the requirements for perfor-
mance extend beyond 60 days from the date of this Agreement; and
(l) all other Contracts relating to Branch's or any
Subpartnership's business not made in the ordinary course of business which are
to be performed at or after the date of this Agreement.
Branch has made available to Regency true and complete copies of the Branch
Partnership Agreement and each Contract listed on Schedules (Acquisition
Contracts), (Development Contracts), (Existing Mortgage Debt), (Management
Contracts),
(Repair Contracts), (Service Contracts), (TI Contracts), (Disposition
Contracts), (Leased Real Property), (Leased Personal Property), (Insurance
Policies), (Leasing Commissions) and (Subpartnership Agreements) and a written
description of each oral arrangement so listed. All such Contracts are duly
authorized and enforceable in accordance with their terms by Branch or the
relevant Branch Affiliate, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization, similar laws or
court decisions from time to time in effect that affect creditors' rights
generally and by legal and equitable limitations on the availability of specific
remedies, and except to the extent such unenforceability does not cause or is
not reasonably expected to cause a Material Adverse Effect. Schedule sets forth
each Service Contract that imposes a termination fee on Branch or any
Subpartnership for the termination thereof prior to its stated term, together
with the amount of the required termination payment and the other party thereto,
and also lists any Service Contract for the provision of services to any
Property as to which Branch or any Subpartnership receives a mark-up or rebills
tenants in its own name.
6.1.12 Management Contracts. Except as disclosed on Schedule and as
described in the Lundeen Letter Agreement, to Branch's knowledge, no other party
to a Management Contract has rights of set-off or counterclaim against Branch
under such Management Contract, and Branch is not in default thereunder nor is
Branch aware of any facts or circumstances which, with notice or passage of
time, or both, would constitute a default by Branch under any Management
Contract, except to the extent such default does not cause and is not reasonably
expected to cause a Material Adverse Effect on Branch. Except as set forth on
Schedule and as described in the Lundeen Letter Agreement, Branch has not
received notice of termination of any Management Contract from any other party
thereto, nor is Branch aware that any other party presently intends to
terminate, or contemplates terminating a Management Contract.
6.1.13 Permits. Branch and each Subpartnership hold all of the
permits, certificates, franchises, rights, variances, interim permits,
approvals, authorizations or consents, whether federal, state, local or foreign,
currently necessary for the lawful operation of Branch's
35
or any Subpartnership's business, except for those the absence of which would
not cause and would not be reasonably expected to cause a Material Adverse
Effect on Branch or the Subpartnership.
6.1.14 Insurance Policies. Schedule is a list of all casualty,
liability, business interruption and other insurance policies insuring against
loss of the assets held by Branch and each Subpartnership. All such insurance
policies are in full force and effect.
6.1.15 Tax Matters.
(a) No Branch Tax is Payable by the Partnership. There are no
material unpaid Taxes arising from the operation of Branch's or any
Subpartnership's business (or as a result of Branch or any Subpartnership
succeeding to the Liabilities of any other Person by operation of law pursuant
to a purchase of assets or stock, merger, consolidation or similar transaction)
during any period prior to the First Closing Date for which the Partnership will
become liable or which will become a Lien against any of the Assets following
the First Closing other than Taxes which are not yet delinquent that are accrued
on the Branch Financial Statements.
(b) Tax Audits. Except as set forth on Schedule , neither
Branch nor any Subpartnership has received from the IRS or from the Tax
authorities of any state, county, local or other jurisdiction (i) any notice of
underpayment of Taxes or other deficiency which has not been paid, (ii) any
objection to any Tax return or report filed by Branch or any Subpartnership, nor
(iii) any notice of audit with respect to any Tax, nor is Branch or any
Subpartnership currently the subject of any such audit. There are no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any Tax return or report filed by either Branch or any Subpartnership.
(c) Foreign Person. Branch is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Code, and Branch will furnish to the
Partnership, if requested by the Partnership, an affidavit in form satisfactory
to the Partnership confirming the same.
(d) Leases. To Branch's knowledge, all of the services
provided by Branch (or any other Person acting as lessor or landlord for any of
the Assets) to the tenants of the Properties (including the real properties
owned by the Subpartnerships, the Development Properties and the Acquisition
Properties) under their respective Leases are customary in that geographic area
and are not primarily for the convenience of the tenant. To Branch's knowledge,
no formula for determining percentage rents under any lease with a tenant of a
Property (including any real property owned by the Subpartnerships, the
Development Properties and the Acquisition Properties) has the effect of basing
such rent on the income (as opposed to revenues) or profits of any Person. To
Branch's knowledge, any rent payable by tenants of the Properties (including the
real properties owned by the Subpartnerships, the Development Properties and the
Acquisition Properties) attributable to personal property does not exceed 15%
36
of the total rent under the relevant Lease attributable to both real and
personal property (determined in accordance with Section 856(d)(1)(C) of the
Code).
(e) Partnership Status. Each Subpartnership is qualified,
and since the date of its formation has been qualified, to be treated as a
partnership for federal income tax purposes.
(f) Other. Except as set forth on Schedule , since January 1,
1989, no Subpartnership has (i) applied for any Tax ruling, or (ii) entered into
a closing agreement with any Taxing authority.
6.1.16 Distribution and Payments. Assuming that OCP and a majority
in interest of the Branch Limited Partners consent in writing to the
transactions contemplated by this Agreement, the allocation of the consideration
to be received in exchange for the Assets among all of Branch's partners as
described in Article 2 of this Agreement (including Schedule 2.2) or set forth
elsewhere in the Transaction Documents will not violate (or when any such
Transaction Document is executed will not violate) the Branch Partnership
Agreement, and neither Regency nor the Partnership shall have any Liability as
to any such matters. Except as set forth on Schedule , no other Person holds any
options, warrants, securities or other rights entitling, or which if exercised
would entitle, them to receive Units.
6.1.17 Employee Benefit Plans.
(a) Disclosure. Schedule identifies each employee benefit
plan, fund, program, contract, policy or arrangement covering or benefitting
employees of Branch, including, but not limited to, all "employee benefit
plans," as defined in Section 3(3) of ERISA, and specifically including each
retirement, pension, profit sharing, stock bonus, savings, thrift, bonus,
medical, health, hospitalization, welfare, life insurance, disability, accident
insurance, group insurance, sick pay, holiday and vacation programs, executive
or deferred compensation plans or contracts, stock purchase, stock option or
stock appreciation rights plans or arrangements, employment and consulting
contracts, and severance agreements or plans (collectively, the "Employee
Benefit Plans"). With respect to each of the Employee Benefit Plans:
(1) No such plan has been terminated so as to subject,
directly or indirectly, the Partnership or the Assets to any Liability or the
imposition of any Lien;
(2) No condition or event currently exists or currently
is expected to occur that could subject, directly or indirectly, the Partnership
or the Assets to any Liability or the imposition of any Lien;
(3) If any such plan were terminated, neither the
Partnership nor the Assets would be subject, directly or indirectly, to any
Liability or the imposition of any Lien;
37
(4) No such plan is a "multiemployer plan" or "defined
benefit plan" (as defined in Section 4001 of ERISA), and neither Branch nor
any member of Branch's controlled group (as defined in Section 4001(a)(14)
of ERISA) has ever contributed nor been obligated to contribute to any such
plan; and
(5) There have been no "prohibited transactions" within the
meaning of Section 406 or 407 of ERISA or Section 4975 of the Code for which a
statutory or administrative exemption does not exist, and the consummation of
the transactions contemplated by this Agreement will not result in any
prohibited transaction.
(b) Successor Liability. No condition or event could subject,
directly or indirectly, the Assets to any Liability or the imposition of any
Lien under ERISA as a result of Branch succeeding to the Liabilities of any
other Person by operation of law pursuant to a purchase of assets or stock,
merger, consolidation or similar transaction prior to the First Closing Date.
6.1.18 Other Employee Matters. Branch has and currently is
conducting its business in full compliance with all Laws relating to employment
and employment practices, terms and conditions of employment, wages and hours
and nondiscrimination in employment, except to the extent failure to do so does
not cause or is not reasonably expected to cause a Material Adverse Effect. No
Subpartnership other than Roswell Village, Ltd., has ever employed any Person,
and to Branch's knowledge, Roswell Village, Ltd. has never employed any Person.
6.1.19 No Defaults or Violations. Except as disclosed on Schedule
and except to the extent any default or non-compliance does not cause or is not
reasonably expected to cause a Material Adverse Effect as to Branch or a
Subpartnership: (a) neither Branch nor any Subpartnership has materially
breached any provision of, nor are they in material default under the terms of,
any Contract to which they are a party or under which they have any rights or by
which they are bound or which relates to their respective businesses, the Assets
or the assets of any Subpartnership and, to Branch's knowledge, no other party
to any such Contract has breached such Contract or is in default thereunder (nor
has Branch or any Subpartnership waived any such default) in any material
respect, and no event has occurred and no condition or state of facts exists
which with the passage of time or the giving of notice, or both, would
constitute such a default or breach by Branch or any Subpartnership, or to
Branch's knowledge, by any such other party, or give right to an automatic
termination or the right of discretionary termination thereof; (b) Branch has
complied in all material respects with its obligations, and has not breached any
of its duties, under the respective limited partnership agreements of the
Subpartnerships; (c) to Branch's knowledge, each of the Assets and each
Subpartnership is in material compliance with, and no material violation exists
under, any Law or Order applicable in any way to Branch, any of the Assets or
any Subpartnership; and (d) no notice from any Government Entity has been
received by Branch or any Subpartnership claiming any violation of any Law
(including any building, zoning or other ordinance) or Order, or requiring any
work, construction or expenditure.
38
6.1.20 Litigation. Except for those matters described in Schedule
which, to Branch's knowledge, do not have a Material Adverse Effect on Branch, a
Subpartnership or the transactions contemplated by this Agreement, there is no
Litigation pending or, to Branch's knowledge, threatened against any of the
properties or businesses of Branch or any Subpartnership. Except as disclosed on
Schedule , neither Branch, any of the Assets, any Subpartnership nor any assets
of any Subpartnership are subject to any Order which has had or could have a
Material Adverse Effect on Branch, a Subpartnership or the transactions
contemplated by this Agreement.
6.1.21 Brokers. Neither Regency, the Partnership nor any Affiliate
of either has or shall have any Liability or otherwise suffer or incur any loss
as a result of or in connection with any brokerage or finder's fee or other
commission of any Person retained by Branch in connection with the transactions
contemplated by this Agreement or for any other transaction involving the
Properties, except for the leasing commissions described on Schedule .
6.1.22 Insolvency. There has not been filed by nor has Branch or any
Subpartnership received notice of a petition in bankruptcy or any other
insolvency proceeding, or for the reorganization or appointment of a receiver or
trustee, nor has Branch or any Subpartnership made an assignment for the benefit
of creditors, nor filed a petition for arrangement, nor entered into an
arrangement with creditors, nor admitted in writing its inability to pay debts
as they become due.
6.1.23 Branch Closing Agreements. Branch has not made any claim
against any Transferor Entity (as defined in the Branch Partnership Agreement)
for a breach by a Transferor Entity of a representation, warranty or covenant
made by it in any Closing Agreement (as defined in the Branch Partnership
Agreement) and to Branch's knowledge, there is no basis for any such claim.
6.1.24 As to the Subpartnerships Only. Schedule contains a true,
complete and accurate list of the respective limited partnership agreements
(including, without limitation, the execution date of each original agreement
and each amendment thereto) for the Subpartnerships. Branch has made available
to Regency true and complete copies of all such limited partnership agreements,
together with any and all amendments thereto. Each equity owner of the
respective Subpartnerships is set forth on Schedule , and, to Branch's
knowledge, no other Person holds, or has held (other than the interest of Noro
in Roswell Village, Ltd. acquired by Branch/HOP Associates, L.P., and the
interests acquired by Branch as part of its formation) any type of equity
interest, including, without limitation, options, warrants, and securities, or
other rights in the Subpartnerships. Except for the Properties described on
Schedule and for the properties described on Schedule , no Subpartnership has
ever owned, or is a party to an outstanding contract for the purchase of, real
property. Except as disclosed on Schedule , no Subpartnership has succeeded to
the Liabilities of any other Person by operation of Law pursuant to a purchase
of assets or stock, merger, consolidation or similar transaction.
39
6.2 As to the Properties.
6.2.1 Title. Except for the "Hastings Property" and a portion of
Briarcliff Village that are ground leasehold interests held by Branch as a
tenant, Branch or a Subpartnership owns all right, title, and interest to each
Property, in fee simple, free and clear of all Liens and encroachments, and free
and clear of all tenancies and adverse or other rights of possession, subject
only to the Permitted Exceptions. To Branch's knowledge, each Property
constitutes a separate and legally subdivided parcel and a separate tax parcel.
6.2.2 Purchase Agreement. No Branch Property or any Subpartnership's
interest in any Property is subject to any outstanding agreements of sale,
options or other rights of third parties to acquire any interest therein, except
for the Disposition Properties, the Permitted Exceptions and this Agreement.
Neither Branch, nor any Subpartnership has any outstanding options, contracts or
rights of first refusal to purchase any real or personal property except for the
Acquisition Contracts and except as described on Schedule .
6.2.3 Compliance with Laws; Zoning. To Branch's knowledge, each
Property, and all present uses and operations thereof, complies with all
applicable zoning (except for the proposed expansion of Sandy Springs Village,
which is subject to rezoning), land-use, building, fire, health, labor, safety,
subdivision and other Laws (including the Americans with Disabilities Act), all
Orders, and all deed or other title covenants and restrictions applicable
thereto, except to the extent the failure to do so does not cause and is not
reasonably expected to cause a Material Adverse Effect on such Property. Neither
Branch nor any Subpartnership has made any application or agreement with any
Government Entity or other Person with respect to any variance or exception from
zoning, building or other Laws that has not been disclosed to Regency in
writing. To Branch's knowledge, the use of each Property is consistent with any
land use designation for such Property under any comprehensive plan or plans
applicable thereto, and any concurrency requirements have been satisfied.
6.2.4 Accuracy of Documents and Information. Branch has delivered or
made available to Regency true and complete copies of all engineering reports,
inspection reports, maintenance plans and other documents relating to each
Property which, to Branch's knowledge, are in the possession or control of
Branch or any Subpartnership. The documents and information delivered to the
Partnership at the First Closing will be all of the documents and information
required or relevant, to Branch's knowledge, to the condition and operation of
each Property in any material respect, will be true and correct copies or
originals, and will be in full force and effect, without default by Branch or
any Subpartnership, as applicable, or, to Branch's knowledge, by any other party
thereto, and without any right of set-off, except as disclosed on Schedule and
except to the extent such default, set-off, or other fact or circumstance does
not cause and is not reasonably expected to cause a Material Adverse Effect on
the applicable Property.
6.2.5 Fees; Assessments; Condemnation. Except as disclosed on the
Development Budget and Schedule, there are no outstanding and unpaid impact fees
or other
40
charges in connection with any development of or otherwise related to any
Property or, any part thereof; there are not pending or, to Branch's knowledge,
threatened any special assessments or obligations for roads and other
improvements with respect to any Property or any part thereof; and, except for
road widenings described on Schedule which do not or are not expected to have a
Material Adverse Effect on such Property, there is not pending or to Branch's
knowledge, threatened any condemnation, expropriation, requisition (temporary or
permanent) or similar proceeding with respect to any Property or any part
thereof (including access thereto or any easement benefiting the Property).
6.2.6 Physical Condition. To Branch's knowledge, there are no
violations of any applicable Laws, Orders or insurance underwriting guidelines
relating to safety, structural, mechanical, or other physical systems or
portions of any Property, except to the extent such violation does not cause and
is not reasonably expected to cause a Material Adverse Effect on the applicable
Property. To Branch's knowledge, there are no soil or subsurface conditions
located on any Property which would materially impair the useability of any
Property for continuation of the current use or the contemplated redevelopment.
6.2.7 Utilities; Access. To Branch's knowledge, all water, sewer,
gas, electric, telephone, and storm water and drainage facilities and all other
utilities required by Law and in the normal operation of each Property are
available and (except as shown on the Survey or the Title Insurance Commitment)
are installed across public property or valid easements to the property lines of
such Property, are all connected with valid permits, and are adequate to service
such Property for their current use and to permit full compliance with all
requirements of Law, except to the extent such failure does not cause and is not
reasonably expected to cause a Material Adverse Effect on the applicable
Property. All permits and connection fees which are currently due and payable
are fully paid or accrued, and there are no such amounts which are deferred or
payable under future installments. To Branch's knowledge, all points of access,
both pedestrian and vehicular, to and from public roads currently used at each
Property are adequate for the current use and operation of such Property in
Branch's reasonable judgment and in accordance with all Laws, except to the
extent such failure does not cause and is not reasonably expected to cause a
Material Adverse Effect on such Property, and to Branch's knowledge, there is no
existing fact or condition which would currently result, or with the passage of
time or the giving of notice, or both, would result, in the termination of such
utility services or of such access.
6.2.8 Permits. Except with regard to environmental matters which are
addressed exclusively by Sections and below, to Branch's knowledge, all
licenses, building, and other permits, certificates of use and occupancy,
easements, and rights-of-way, including proof of dedication, have been obtained
as required by all Government Entities having jurisdiction over any Property in
connection with any construction, renovations, expansions, or other improvements
at such Property and in connection with the present use and operation of such
Property, except to the extent such failure does not cause and is not reasonably
expected to cause a Material Adverse Effect on the applicable Property.
41
6.2.9 No Default. Neither Branch nor any Subpartnership, if
applicable, is in default with respect to any of its Contracts or Liabilities
pertaining to any Property (including, without limitation, all Leases, Service
Contracts, the Existing Mortgage Debt or other instruments related thereto), nor
are there any facts or circumstances which with the passage of time or the
giving of notice, or both, would constitute or result in any such default,
except to the extent such default does not cause and is not reasonably expected
to cause a Material Adverse Effect on the applicable Property; and neither this
Agreement, nor anything provided to be done hereunder, including, without
limitation, the transfer, assignment, and sale of the Properties, violates or
shall violate any written or oral Contract to which Branch or such
Subpartnership is a party on the date hereof or which affects any Property or
any part thereof on the date hereof, except to the extent such violation does
not cause and is not reasonably expected to cause a Material Adverse Effect on
the applicable Property.
6.2.10 Use of Property. Branch has not misrepresented any fact which
would prevent the Partnership from operating each Property after the First
Closing in the manner in which such Property is currently being used and
operated in all material respects.
6.2.11 Contract Payments. At the time of the First Closing, any and
all improvements to each Property and any services provided by any Person and
related to such Property (the nonpayment of which could result in the imposition
of a Lien upon such Property) will have been fully paid for, except for the
Assumed Liabilities.
6.2.12 Environmental Matters-Properties. The Properties have been
the subject of Environmental Assessments by environmental consultants to Branch,
its predecessors or Regency, which consultants prepared reports concerning the
environmental condition of the Property. A list of such Environmental Assessment
Reports obtained by Branch or its predecessors is attached as Schedule (the
Environmental Assessment Reports described on Schedule and any reports, studies,
tests, and analysis obtained by Regency as of the date hereof are herein
collectively referred to as the "Environmental Assessments"), which disclose
that tenants and former occupants of some of the Properties have stored and used
Materials of Environmental Concern on the Property, and soil and groundwater
contamination has been discovered at some Properties. The parties acknowledge
that neither Branch nor any Subpartnership possesses any expertise with regard
to Materials of Environmental Concern, and accordingly, the following
representations and warranties are based exclusively on the Environmental
Reports.
(a) Except for those matters set forth in the Environmental
Assessments, to Branch's knowledge, neither Branch nor any Subpartnership or any
Property are presently in ongoing violation of any applicable Environmental Law
which could subject the owner or operator to any fine or require any remedial
action;
(b) Except for those matters set forth in the Environmental
Assessments, to Branch's knowledge, neither Branch nor any Subpartnership have
stored or used any Materials of Environmental Concern at any Property;
42
(c) To Branch's knowledge, neither Branch nor any
Subpartnership have received any notice, complaint, warning letter or notice of
violation from any Government Authority or any other person that Branch or any
Subpartnership is in violation of any Environmental Law or environmental permit
or that they are responsible (or potentially responsible) for the assessment or
remediation of any release of any Material of Environmental Concern at, on or
beneath any Property;
(d) To Branch's knowledge, neither Branch nor any
Subpartnership are the subject of any actual or threatened federal, state, local
or private litigation involving a claim of liability or a demand for damages
arising out of violation of any Environmental Law or from the release or
threatened release of any Material of Environmental Concern at or beneath any
Property;
(e) To Branch's knowledge, Branch and the Subpartnerships have
timely filed all reports required by any applicable Environmental Law and have
generated and maintained all data, documentation, and records required under any
Environmental Law;
(f) Except for those matters set forth in the Environmental
Assessments and on Schedule , Branch has no knowledge of any release or
threatened release of a Material of Environmental Concern, the presence of any
current or former drycleaning facility, the presence of any current or former
storage tanks, the presence of any asbestos containing material, or the presence
of any condition or circumstance which could subject the owner or operator of
any Property to liability or claims under the Environmental Laws or any private
cause of action arising out of an environmental condition;
(g) Branch has no knowledge of any existing or imminent
restriction on the ownership, occupancy, use, or transferability of any Property
arising out of any known environmental condition or violation of any
Environmental Law;
(h) Except as set forth in the Environmental Assessments and
on Schedule , to Branch's knowledge, there are no environmental conditions
present at any Property which pose a risk to the environment or the health or
safety of any Person;
6.2.13 Environmental Matters - Previously Owned Properties. With
respect to each property previously, but not currently, owned by any
Subpartnership ("Previously Owned Property"), Branch makes the representations
and warranties set forth in Section as if such representations and warranties
were made as of the last day that such Previously Owned Property was owned by
any Subpartnership (and in the case of Roswell Village, Ltd., such
representations and warranties cover only the period during which Branch/HOP
Associates, L.P. was the general partner thereof).
6.2.14 Structural Defects. Other than as disclosed in the physical
reports listed on Schedule and the Capital Expenditure Budget and Schedule, to
Branch's knowledge, no Property contains any defects in structural, mechanical,
or physical portions
43
(including roofs) at, on, or of such Property, except to the extent any such
defect does not cause and is not reasonably expected to cause a Material Adverse
Effect on the applicable Property.
6.2.15 No Obligations. There are no outstanding Contracts or
Liabilities incurred by Branch relating to any Property which will be assumed by
the Partnership or incurred by any Subpartnership, except for (i) the Leases,
(ii) the Permitted Exceptions, (iii) the Service Contracts, (iv) the Work
Contracts, (v) the Existing Mortgage Debt, (vi) the Acquisition Contracts, (vii)
the Assumed Liabilities, and (viii) this Agreement.
6.2.16 Rent Roll. The Rent Roll is true and correct in all material
respects.
6.2.17 Leases. Branch has made available to Regency true, correct
and complete copies of all Leases, including all modifications, renewals and
extensions, together with any guaranties and any other agreements relating to
the tenancy evidenced by any Lease. There are no inducements, concessions,
consideration or side agreements in favor of any tenant not expressly stated in
the Leases.
6.2.18 Non-Certificate Leases. With respect to the Leases for which
the Partnership has not received completed estoppel certificates by the First
Closing (the "Non-Certificate Leases"), except to the extent (i) described on
the Rent Roll, (ii) described on the respective form of estoppel certificate
sent to, but not received from, the tenants under the Non-Certificate Leases
(true and correct copies of such forms of estoppel certificates having been
delivered to Regency) and (iii) any failure to be true and correct does not
cause and is not reasonably expected to cause a Material Adverse Effect on the
applicable Property: (A) the tenants under the Non-Certificate Leases presently
occupy and are open for business in their premises; (B) there are no material
rents or other charges which have been prepaid for more than the current month,
no security deposits, no tenant rights to interest on security deposits, and no
additional free rent period under the Non-Certificate Leases; (C) the
Non-Certificate Leases do not include, and the tenants thereunder do not have,
exclusive use rights; (D) to Branch's knowledge, the tenants have no rights of
set-off or counterclaim against the landlord under the Non-Certificate Leases,
and neither Branch nor any Subpartnership, as applicable, has received any
notice of any claim with respect thereto; (E) the landlord is not in default
under the Non-Certificate Leases and is not aware of any facts or circumstances
which with the passage of time or the giving of notice, or both, would
constitute a default by the landlord under the Non-Certificate Leases; and (F)
except as set forth on Schedule , to Branch's knowledge, the tenants under the
Non-Certificate Leases are not in default thereunder and no facts or
circumstances exist which with the passage of time or the giving of notice, or
both, would constitute a default by the tenants under the Non-Certificate
Leases, and the landlord has not received any notice of any claim with respect
thereto.
6.2.19 Development Properties. Schedule contains the budget and
development or redevelopment schedule therefor prepared by or for Branch or the
Subpartnerships, as applicable, for each of the Development Properties
(collectively, the
44
"Development Budget and Schedule"). Except as set forth on Schedule , to
Branch's knowledge, each Development Property is zoned for the lawful
development and/or redevelopment thereon (except for the proposed expansion of
Sandy Springs Village, which is subject to rezoning), and Branch or the
Subpartnerships, as applicable, have obtained all permits, licenses, consents
and authorizations required for the current stage of development or
redevelopment thereon, the absence of which would have a Material Adverse Effect
on the applicable Property. Except as set forth on Schedule , to Branch's
knowledge, there are no material impediments to or constraints on the
development or redevelopment of any Development Property, in all material
respects within the time frame and for the cost set forth in the Development
Budget and Schedule applicable thereto. In the case of each Development
Property, the development or redevelopment of which has commenced, to Branch's
knowledge, the costs and expenses incurred in connection with such Development
Property and the progress thereof are consistent and in compliance in all
material respects with all aspects of the Development Budget and Schedule
applicable thereto. To Branch's knowledge, Branch has made available to Regency
all feasibility studies, soil tests, due diligence reports and other studies,
test or reports performed by or for Branch or the Subpartnerships, as
applicable, or otherwise in the possession of Branch, which relate to the
Development Properties.
6.2.20 Budgets and Projections. To Branch's knowledge, all budgets
and projections, including, without limitation, the Capital Expenditure Budget
and Schedule and the TI Budget and Schedule for each Property represent Branch's
best estimate of capital expenditures anticipated to be made in each year
covered by such budget.
6.2.21 Work Contracts. To Branch's knowledge, the Work Contracts are
in full force and effect, no party is in default thereunder or under any
construction loans applicable thereto, nor are there any facts or circumstances
which with the passage of time or the giving of notice, or both, would result in
any such default, the absence of which would not have a Material Adverse Effect
on the applicable Property. The progress and remaining expenditures under the
Work Contracts are consistent with the Development Budget and Schedule, the TI
Budget and Schedule and the other budgets and projections referred to in
Sections and , except to the extent such failure does not cause and is not
reasonably expected to cause a Material Adverse Effect on the applicable
Property. To Branch's knowledge, any remaining work under the Work Contracts to
be performed after the First Closing will not exceed the amounts budgeted
therefor on the foregoing schedules, except to the extent such failure does not
cause and is not reasonably expected to cause a Material Adverse Effect on the
applicable Property. To Branch's knowledge, the work remaining under the Work
Contracts will be sufficient to complete the respective projects to which they
relate, without change orders, so as to comply with existing development
obligations of Branch or any Subpartnership (including, without limitation,
obligations under any letters of intent to lease), obligations for tenant
improvements under Leases or for repairs or other necessary work, except to the
extent such failure does not cause and is not reasonably expected to cause a
Material Adverse Effect on the applicable Property.
45
6.2.22 Acquisition Properties. To Branch's knowledge, each
Acquisition Contract is enforceable by Branch and neither Branch, nor, to
Branch's knowledge, any other party thereto, is in default under any Acquisition
Contract, the absence of which would not have a Material Adverse Effect on the
applicable Property. Without limiting the foregoing, except for matters revealed
in the environmental reports, copies of which have been provided to Regency or
as otherwise disclosed to Regency in writing, Branch has no knowledge that the
contract seller is in breach of any representations and warranties made by it in
any Acquisition Contract. The Acquisition Contracts are assignable to the
Partnership regardless of whether the general partner of the Partnership at the
time of the assignment is an Affiliate of Branch or of Regency.
6.3 Accredited Investor Status. Except as set forth on Schedule , to
Branch's knowledge based upon investor questionnaires received at the time of
Branch's formation, all Branch's partners were at such time "accredited
investors" as defined by the SEC, and nothing has come to Branch's attention
since that time to indicate any of such Persons no longer is an "accredited
investor." The representation and warranty in this Section shall not survive the
First Closing.
6.4 Accuracy of Statements. To Branch's knowledge, neither this Agreement
nor any document, instrument, schedule, exhibit, statement, list, certificate or
other information furnished or to be furnished by or on behalf of Branch to
Regency or the Partnership in connection with this Agreement or any of the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.
6.5 Limit on Representations. Except for the express representations and
warranties of Branch set forth in this Agreement, the Partnership and Regency
acknowledge and agree that the Assets are being contributed to the Partnership
"as is, where is, and with all faults" without any other representation or
warranty by Branch or any other individual or entity, and neither Branch nor any
other individual or entity has made any other express or implied representation
or warranty with respect to the Assets whatsoever, and except for the
representations and warranties expressly set forth in this Agreement, the
Partnership and Regency acknowledge that the Partnership accepts the Assets
without relying upon any other such representation or warranty whatsoever by
Branch or any other person or entity, and based solely upon the Partnership's
own inspections, investigations, and analysis of the Assets.
6.6 Limitation on Remedies. The representations and warranties set forth
in this Article shall be true and correct in all material respects on and as of
the date of the First Closing with the same force and effect as if made at that
time; provided, however, in the event that any of such representations and
warranties is proved to have been false on or before the First Closing as a
result of any change of circumstances or knowledge obtained by Branch and such
misrepresentation has a Material Adverse Effect and is disclosed to Regency in
writing, then Regency's sole and exclusive remedies hereunder shall be to (i)
terminate this Agreement
46
pursuant to Article (including Section , if applicable), or (ii) waive such
misrepresentation and close with no liability to Branch for such
misrepresentation.
ARTICLE 7: REPRESENTATIONS, WARRANTIES AND
FURTHER COVENANTS OF BRANCH REALTY
Branch Realty hereby represents, warrants and covenants to Regency and the
Partnership as of the date of this Agreement and the First Closing as follows.
7.1 Due Organization. Branch Realty is duly organized, validly existing
and in good standing under the Laws of the State of Georgia, with all requisite
power and authority to own, lease, operate and sell its assets and to carry on
its businesses as it is now being conducted. Branch Realty is in good standing
as a foreign entity authorized to do business in each jurisdiction where it
engages in business, except to the extent such violation or failure does not
cause or is not reasonably expected to have a material adverse effect on Branch
Realty's assets or the financial condition, results of operations, business or
prospects of Branch Realty taken as a whole.
7.2 Due Authorization; Consents; No Violations.
7.2.1 Branch Realty has full power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by Branch Realty of this Agreement have been, and the
Transaction Documents to be executed and delivered by it pursuant to this
Agreement shall be, duly and validly approved by Branch Realty, and no other
proceeding on the part of Branch Realty is necessary to authorize this Agreement
and the transactions contemplated hereby, other than obtaining the consents set
forth on Schedule 6.1.2(b). This Agreement has been duly and validly executed
and delivered by Branch Realty and, assuming due authorization (including the
receipt of the consents set forth on Schedule 6.1.2(b) and Schedule 8.2(b)),
execution and delivery of this Agreement by Regency, TRG and Branch, this
Agreement constitutes, and the Transaction Documents to be executed and
delivered by Branch Realty pursuant to this Agreement when executed will
constitute, valid and binding obligations of Branch Realty enforceable in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization,
similar laws or court decisions from time to time in effect that affect
creditors' rights generally and by legal and equitable limitations on the
availability of specific remedies.
7.2.2 Except as set forth on Schedule , no consents, waivers,
exemptions or approvals of, or filings or registrations by Branch Realty with,
any Government Entity or any other Person not a party to this Agreement are
necessary in connection with the execution, delivery and performance by Branch
Realty of this Agreement or the consummation of the transactions contemplated
hereby, except to the extent the failure to obtain the same does not cause or is
not expected to cause a Material Adverse Effect on Branch or the transactions
contemplated by this Agreement.
47
7.2.3 Upon obtaining those consents set forth on Schedule , and
(assuming receipt of such consents) except to the extent same does not cause or
is nonreasonably expected to cause a Material Adverse Effect, the execution,
delivery and performance by Branch Realty of this Agreement and the Transaction
Documents to be executed, delivered and performed by Branch Realty pursuant
hereto, and the consummation of the transactions contemplated hereby and
thereby, do not and will not (i) violate any Order applicable to or binding on
Branch Realty or its assets; (ii) violate any Law; (iii) violate or conflict
with, result in a breach of, constitute a default (or an event which with the
passage of time or the giving of notice, or both, would constitute a default)
under, permit cancellation of, or result in the creation of any Lien upon any of
Branch Realty's assets under, any contract to which Branch Realty is a party or
by which Branch Realty or any of its assets are bound; (iv) permit the
acceleration of the maturity of any indebtedness of Branch Realty, or any
indebtedness secured by any of Branch Realty's assets; or (v) violate or
conflict with any provision of Branch Realty's articles of incorporation or
bylaws.
7.3 Shareholders. The Branch Principals are the only equity security
holders of Branch Realty, and no other Person holds any options, warrants,
securities or other rights to subscribe for or purchase equity in Branch Realty.
7.4 Tax Matters. Branch Realty is not the result of a merger, consolidation
or reorganization with any other entity. Branch Realty currently has no current
or accumulated "earnings and profits" as that term is defined under the Code.
7.5 Limitation on Remedies. The representations and warranties set forth
in this Article shall be true and correct in all material respects on and as of
the date of the First Closing with the same force and effect as if made at that
time; provided, however, in the event that any of such representations and
warranties is proved to be false on or before the First Closing as a result of
any change of circumstances or knowledge obtained by Branch Realty and such
misrepresentation has a Material Adverse Effect and is disclosed to Regency in
writing, then Regency's sole and exclusive remedies hereunder shall be to (i)
terminate this Agreement pursuant to Article (including Section , if
applicable), or (ii) waive such misrepresentation and close with no liability to
Branch Realty for such misrepresentation.
ARTICLE 8: REPRESENTATIONS, WARRANTIES AND
FURTHER COVENANTS OF REGENCY
Regency hereby represents, warrants and covenants to Branch as of the date
of this Agreement and the First Closing as follows. All representations that are
made "to Regency's knowledge" means to the actual knowledge of the individuals
listed on Schedule attached hereto without any duty or obligation to inquire as
to such matters. Regency represents that such individuals are the appropriate
individuals who, in the course of their duties, would normally be aware of
material issues and facts affecting Regency.
48
8.1 Due Incorporation, etc.
(a) Regency is duly organized, validly existing and in good
standing under the Laws of the State of Florida, with all requisite power and
authority to own, lease, operate and sell its assets and to carry on its
businesses as it is now being conducted. Regency is in good standing as a
foreign entity authorized to do business in each jurisdiction where it engages
in business, except to the extent such violation or failure does not cause or is
not reasonably expected to cause a Material Adverse Effect.
(b) Regency owns all of the outstanding capital stock of its
subsidiaries listed on Exhibit 21 of Regency's Form 10-K annual report filed
with the SEC for the fiscal year ended December 31, 1995, except that Regency
owns 100% of the outstanding preferred stock and 5% of the outstanding common
stock of Regency Realty Group, Inc. Except as set forth on Schedule (b) and
except for its interests in its subsidiaries, Regency does not hold any interest
in any security issued by any other Person.
8.2 Due Authorization; Consents; No Violations.
(a) Regency has full power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by Regency of this Agreement have been, and the
Transaction Documents to be executed and delivered by it pursuant to this
Agreement shall be, duly and validly approved by Regency, and no other
proceeding on the part of Regency is necessary to authorize this Agreement and
the transactions contemplated hereby (other than (i) obtaining the approval of
Regency's shareholders referred to in Section , which is required under the
rules of the New York Stock Exchange in order for certain Shares issuable
pursuant to the transactions contemplated by this Agreement to be listed on such
exchange, (ii) amending Regency's Articles of Incorporation in the form attached
as Exhibit and (iii) obtaining the consents set forth on Schedule (b)). This
Agreement has been duly and validly executed and delivered by Regency and,
assuming due authorization (including the consummation of the matters described
in the foregoing sentence), execution and delivery of this Agreement by TRG,
Branch and Branch Realty, this Agreement constitutes, and the Transaction
Documents to be executed and delivered by Regency pursuant to this Agreement
when executed will constitute, valid and binding obligations of Regency
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization, similar laws or court decisions from time to time in effect that
affect creditors' rights generally and by legal and equitable limitations on the
availability of specific remedies.
(b) Except as set forth on Schedule (b) and except for an
application to list the Shares issuable pursuant to the transactions
contemplated by this Agreement on the New York Stock Exchange (which such
exchange will not accept until the time of the meeting of the Regency
shareholders referred to in Section ), no consents, waivers, exemptions or
approvals of, or filings or registrations by Regency with, any Government Entity
or any other Person not a party to this Agreement are necessary in connection
with the execution, delivery
49
and performance by Regency of this Agreement or the consummation of the
transactions contemplated hereby, except to the extent the failure to obtain the
same does not cause or is not expected to cause a Material Adverse Effect on
Regency or the transactions contemplated by this Agreement.
(c) Upon obtaining those consents set forth on Schedule (b)
and (assuming receipt of such consents) except to the extent same does not cause
or is not reasonably expected to cause a Material Adverse Effect, the execution,
delivery and performance by Regency of this Agreement and the Transaction
Documents to be executed, delivered and performed by Regency pursuant hereto,
and the consummation of the transactions contemplated hereby and thereby, do not
and will not (i) violate any Order applicable to or binding on Regency or its
assets; (ii) violate any Law; (iii) violate or conflict with, result in a breach
of, constitute a default (or an event which with the passage of time or the
giving of notice, or both, would constitute a default) under, permit
cancellation of, accelerate the performance required by, or result in the
creation of any Lien upon any of Regency's assets under, any contract or other
arrangement of any kind or character to which Regency is a party or by which
Regency or any of its assets are bound; (iv) permit the acceleration of the
maturity of any indebtedness of Regency, or any indebtedness secured by any of
Regency's assets; or (v) violate or conflict with any provision of the Articles
of Incorporation or Regency's bylaws.
8.3 Capitalization.
8.3.1 The authorized capital stock of Regency consists of (i)
25,000,000 shares of Common Stock, (ii) 10,000,000 shares of Special Common
Stock, $0.01 par value, and (iii) 10,000,000 shares of preferred stock, $0.01
par value. As of December 31, 1996, there were 10,614,905 shares of Common Stock
issued and outstanding, and 2,500,000 shares of Class B Non-voting Common Stock,
par value $0.01 issued and outstanding.
8.3.2 No shares of Regency's stock are entitled to preemptive
rights. Except as disclosed in the Regency Exchange Act Reports, in the Articles
of Incorporation relating to the Class B Non-voting Common Stock, in this
Agreement, in the Partnership Agreement or on Schedule , there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of Regency or any of its
subsidiaries, or contracts or other arrangements by which Regency or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of Regency or any of its subsidiaries. Regency has furnished to Branch true and
correct copies of the Articles of Incorporation and Regency's Bylaws, as in
effect on the date hereof.
8.3.3 Except as set forth on Schedule , Regency has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
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8.3.4 Except for the form of agreements attached as Exhibit B or
listed on Schedule , Regency has no knowledge of any voting agreements, voting
trusts, stockholders' agreement, proxies or other agreements or understandings
that are currently in effect or that are currently contemplated with respect to
the voting of any capital stock of Regency.
8.3.5 All of the outstanding securities of the Company were issued
in compliance with all applicable federal and state securities laws.
8.4 Valid Issuance of Shares. The Reorganization Shares which are being
issued hereunder, when issued and delivered in accordance with the terms hereof
for the consideration expressed herein, will be duly and validly issued, fully
paid and nonassessable and, based upon the representations of Branch in this
Agreement, will be issued in compliance with all applicable federal and state
securities laws. The Shares issuable upon the exercise of the Redemption Rights
will be duly and validly reserved for such issuance and will be duly and validly
issued, fully paid and nonassessable, and will be issued in compliance with all
applicable federal and state securities laws, assuming that (i) the Amendment to
the Articles of Incorporation in the form attached as Exhibit 5.4 is adopted by
Regency's shareholders, (ii) Security Capital signs the Consent and Waiver
Agreement in the form constituting part of Exhibit C, (iii) the percentage
obtained by dividing (x) the number of Shares issued at the same time to Persons
who are Non-U.S. Persons (as defined in the Partnership Agreement) pursuant to
the exercise of Redemption Rights by (y) the number of Shares issued to all
Persons pursuant to the simultaneous exercise of Redemption Rights is equal to
or less than fifty percent (50%) and (iv) no more than an aggregate of 100,000
Shares/Units will be issued at the Third Party Earn-Out Closings and as
Adjustment Units (as defined in Section )
8.5 Regency Exchange Act Reports.
8.5.1 Since November 5, 1993, Regency has timely filed all Regency
Exchange Act Reports. As of their respective dates, (i) the Regency Exchange Act
Reports complied in all material respects with the requirements of the Exchange
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the Regency Exchange Act Reports, and (ii) no Regency Exchange Act Report
contained any untrue statement of material fact or omitted a material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
8.5.2 The financial statements of Regency included in the Regency
Exchange Act Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and on that basis
present fairly in all material respects the consolidated financial position and
assets and Liabilities of the entities
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included therein (including the Subsidiaries) as going concerns, and the results
of the operations of such entities and changes in their financial position for
the periods covered thereby and as of the dates thereof. Such financial
statements are in accordance with the books and records of the entities included
therein (including the Subsidiaries), do not reflect any transactions which are
not bona fide transactions and do not contain any untrue statements of a
material fact or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading. Such financial statements make full and adequate
disclosure of, and provision for all material Liabilities of the entities
included therein (including Regency's subsidiaries) as of the dates thereof.
Except as set forth in the balance sheets included in the Regency Exchange Act
Reports, there are no Liabilities (including "off-balance sheet" Liabilities),
whether due or to become due, which have had or are reasonably likely to have a
Material Adverse Effect.
8.6 Permits. Regency holds all licenses, certificates, permits,
franchises, rights, variances, interim permits, approvals, authorizations or
consents, whether federal, state, local or foreign, which are currently
necessary for the lawful operation of Regency's business, except for those the
absence of which would not cause and would not be reasonably expected to cause a
Material Adverse Effect on Regency.
8.7 No Adverse Change. Since the Recent Balance Sheet Date, there has not
been (i) any change in Regency which would cause or reasonably be expected to
result in a Material Adverse Effect on Regency, (ii) any material loss, damage
or destruction to any of Regency's assets (whether or not covered by insurance)
or any other event or condition which has had or could have a Material Adverse
Effect on Regency, (iii) any contract or other transaction entered into by
Regency relating to, or otherwise affecting in any way, its business or the
operation thereof, other than in the ordinary course of business, (iv) any sale,
lease or other transfer or disposition of any of Regency's assets, or any
cancellation of any debts or claim of Regency, except in the ordinary course of
business, and (v) any changes in the accounting systems, policies or practices
of Regency. Since the Recent Balance Sheet Date, Regency's business has been
conducted in all material respects only in the ordinary course and consistent
with past practices.
8.8 No Defaults or Violations. Except to the extent any default or
non-compliance does not cause or is not reasonably expected to cause a Material
Adverse Effect as to Regency: (a) Regency has not materially breached any
provision of, nor is it in material default under the terms of, any lease,
contract or commitment to which it is a party or under which it has any rights
or by which it is bound or which relates to its business or its assets and, to
Regency's knowledge, no other party to any such lease, contract, or other
commitment has breached such lease, contract or commitment or is in default
thereunder (nor has Regency waived any such default) in any material respect,
and no event has occurred and no condition or state of facts exists which with
the passage of time or the giving of notice, or both, would constitute such a
default or breach by Regency, or to Regency's knowledge, by any such other
party, or give right to an automatic termination or the right of discretionary
termination thereof; (b) Regency is in material compliance with, and no
Liability or material violation exists under, any Law or Order
52
applicable in any way to Regency; and (c) no notice from any Government Entity
has been received by Regency claiming any violation of any Law (including any
building, zone or other ordinance) or Order, or requiring any work, construction
or expenditure.
8.9 Litigation. Except for certain matters which, to Regency's knowledge,
do not have a Material Adverse Effect on Regency or the transactions
contemplated by this Agreement, there is no Litigation pending or, to Regency's
knowledge, threatened against any of the properties or businesses of Regency or
relating to its assets or the transactions contemplated by this Agreement.
Except as disclosed on Schedule , neither Regency nor any of its assets are
subject to any Order which has had or could have a Material Adverse Effect on
Regency.
8.10 Title to Properties; Leasehold Interests. Regency has good and
marketable title to each of the properties and assets owned by it. Certain real
and personal property used by Regency in the conduct of its business is held
under lease, and, to Regency's knowledge, there is no pending or threatened
Claim by any lessor of any such property to terminate any such lease. None of
the properties owned or leased by Regency is subject to any Liens which could
reasonably be expected to materially and adversely affect the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of Regency. Each lease or agreement to
which Regency is a party under which it is the lessee of any property, real or
personal, is a valid and subsisting agreement without any material default of
Regency thereunder and, to the best of Regency's knowledge, without any material
default thereunder of any other party thereto. No event has occurred and is
continuing which, with due notice or lapse of time or both, would constitute a
default or event of default by Regency under any such lease or agreement or, to
the best of Regency's knowledge, by any party thereto, except for such defaults
that would not individually or in the aggregate have a Material Adverse Effect
on Regency. Regency's possession of such property has not been disturbed and, to
the best of Regency's knowledge, no claim has been asserted against it adverse
to its rights in such leasehold interests.
8.11 Environmental Matters. For purposes of this Section , the term
"Regency" means Regency and its Affiliates, and the term "Regency Property"
means a property owned or leased by Regency or its Affiliates and any property
in which Regency or its Affiliates has an interest. The parties acknowledge that
Regency does not possess any expertise with regard to Materials of Environmental
Concern and, accordingly, the following representations and warranties are based
exclusively on reports prepared by environmental consultants to Regency.
(a) Except for those matters described in Schedule with respect to
Bolton Plaza, Regency is and each Regency Property is not presently in violation
of any applicable Environmental Law;
(b) Regency has not stored or used any Materials of Environmental
Concern at any Regency Property;
53
(c) Regency has not received any notice, complaint, warning letter
or notice of violation from any Government Authority or any other person that
Regency is in violation of any Environmental Law or environmental permit or that
they are responsible (or potentially responsible) for the assessment or
remediation of any release of any Material of Environmental Concern at, on or
beneath any Property;
(d) Regency is not the subject of any actual or threatened federal,
state, local or private litigation involving a claim of liability or a demand
for damages arising out of violation of any Environmental Law or from the
release or threatened release of any Material of Environmental Concern;
(e) Except for those matters described in Schedule with respect to
Bolton Plaza, Regency has timely filed all reports required by any applicable
Environmental Law and has generated and maintained all data, documentation, and
records required under any Environmental Law;
(f) Except for those matters described in Schedule , which, to
Regency's knowledge, do not have a Material Adverse Effect on Regency, Regency
is not aware of any release or threatened release of a Material of Environmental
Concern, the presence of any current or former drycleaning facility, the
presence of any current or former storage tanks, the presence of any asbestos
containing material, or the presence of any condition or circumstance which
could subject the owner or operator of any Regency Property to liability or
claims under the Environmental Laws or any private cause of action arising out
of an environmental condition;
(g) No Regency Property is subject to, and Regency has no knowledge
of any imminent restriction on the ownership, occupancy, use, or transferability
of any Regency Property; or
(h) To Regency's knowledge, there are no conditions or circumstances
at any Regency Property which pose a risk to the environment or the health or
safety of any Person.
8.12 Taxes. Regency has filed all federal, state, local and other Tax
returns and reports (except for foreign returns and reports the failure to file
which has not and is not reasonably expected to cause a Material Adverse
Effect), and any other material returns and reports with any Government Entity,
required to be filed by it. Regency has paid or caused to be paid all Taxes that
are due and payable, except those which are being contested by it in good faith
by appropriate proceedings and in respect of which adequate reserves are being
maintained on its books in accordance with GAAP consistently applied. Regency
does not have any material Liabilities for Taxes other than those incurred in
the ordinary course of business and in respect of which adequate reserves are
being maintained by it in accordance with GAAP consistently applied. Federal and
state income Tax returns for Regency have not been audited by the IRS or any
state authority. No deficiency assessment with respect to or proposed adjustment
of Regency's federal, state, local or other Tax returns is pending or, to the
best of
54
Regency's knowledge, threatened. There is no Tax Lien, whether imposed by any
federal, state, local or other tax authority outstanding against the assets,
properties or business of Regency. There are no applicable Taxes, fees or other
governmental charges payable by Regency in connection with the execution and
delivery of this Agreement.
8.13 REIT Status. Regency qualifies as a REIT under the Code and to
Regency's knowledge, is a "domestically-controlled" REIT within the meaning of
Code Section 897(h)(4)(B). Newco will be a "qualified REIT subsidiary" within
the meaning of Code Section 856(i).
8.14 Employees: ERISA. Regency has good relationships with its employees
and has not had and does not expect any substantial labor problems. Regency does
not have any knowledge as to any intentions of any key employee or any group of
employees to leave the employ of Regency. Other than as disclosed in the Regency
Exchange Act Reports and materials provided to Branch, Regency has not
established, sponsored, maintained, made any contributions to or been obligated
by law to establish, maintain, sponsor or make any contributions to any
"employee pension benefit plan" or "employee welfare benefit plan" (as such
terms are defined in ERISA), including, without limitation, any "multi-employer
plan." Regency has complied in all material respects with all applicable Laws
relating to the employment of labor, including provisions relating to wages,
hours, equal opportunity, collective bargaining and the payment of Social
Security and other Taxes, and with ERISA.
8.15 Accuracy of Statements. To Regency's knowledge, neither this
Agreement nor any document, instrument, schedule, exhibit, statement, list,
certificate or other information furnished or to be furnished by or on behalf of
Regency to Branch in connection with this Agreement or any of the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading.
8.16 Limitation on Remedies. The representations and warranties set forth
in this Article shall be true and correct in all material respects on and as of
the date of the First Closing with the same force and effect as if made at that
time; provided, however, in the event that any of such representations and
warranties is proved to be false on or before the First Closing as a result of
any change of circumstances or knowledge obtained by Regency and such
misrepresentation has a Material Adverse Effect and is disclosed to Branch in
writing, then Branch's sole and exclusive remedies hereunder shall be to (i)
terminate this Agreement pursuant to Article (including Section , if
applicable), or (ii) waive such misrepresentation and close with no liability to
Regency for such misrepresentation.
8.17 Continuity of Business Enterprise; Tax Treatment of Reorganization.
Regency and Newco have no plan or intention of disposing of the Units acquired
from Branch Realty by Newco. Regency agrees to treat the acquisition of the
assets of Branch Realty by Newco in
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exchange for Shares and the right to receive additional Shares as a tax-free
reorganization under Code Section 368(a)(i)(C).
ARTICLE 9: REPRESENTATIONS AND WARRANTIES OF TRG
TRG hereby represents and warrants to Branch as of the date of this
Agreement as follows. From and after the First Closing, each such representation
and warranty shall also be deemed made as of the First Closing Date, unless
specifically waived in writing by Branch at the First Closing.
9.1 Due Incorporation, etc. TRG is duly organized, validly existing and in
good standing under the Laws of the State of Florida, with all requisite power
and authority to own, lease, operate and sell its assets and to carry on its
businesses as it is now being conducted. TRG is in good standing as a foreign
entity authorized to do business in each jurisdiction where it engages in
business, except to the extent such violation or failure does not cause or is
not reasonably expected to have a material adverse effect on TRG's assets or the
financial condition, results of operations, business or prospects of TRG taken
as a whole.
9.2 Due Authorization; Consents; No Violations.
(a) TRG has full power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by TRG of this Agreement have been, and the Transaction
Documents to be executed and delivered by it pursuant to this Agreement shall
be, duly and validly approved by TRG, and no other proceeding on the part of TRG
is necessary to authorize this Agreement and the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by TRG
and, assuming due authorization, execution and delivery of this Agreement by
Regency, Branch and Branch Realty, this Agreement constitutes, and the
Transaction Documents to be executed and delivered by TRG pursuant to this
Agreement when executed will constitute, valid and binding obligations of TRG
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization, similar laws or court decisions from time to time in effect that
affect creditors' rights generally and by legal and equitable limitations on the
availability of specific remedies.
(b) No consents, waivers, exemptions or approvals of, or filings or
registrations by TRG with, any Government Entity or any other Person not a party
to this Agreement are necessary in connection with the execution, delivery and
performance by TRG of this Agreement or the consummation of the transactions
contemplated hereby, except to the extent the failure to obtain the same does
not cause or is not expected to cause a material adverse effect on TRG's assets
or the financial condition, results of operations, business or prospects of TRG
taken as a whole or on the transactions contemplated by this Agreement.
56
(c) The execution, delivery and performance by TRG of this Agreement
and the Transaction Documents to be executed, delivered and performed by TRG
pursuant hereto, and the consummation of the transactions contemplated hereby
and thereby, do not and will not (i) violate any Order applicable to or binding
on TRG or its assets; (ii) violate any Law; (iii) violate or conflict with,
result in a breach of, constitute a default (or an event which with the passage
of time or the giving of notice, or both, would constitute a default) under,
permit cancellation of, accelerate the performance required by, or result in the
creation of any Lien upon any of TRG's assets under, any contract or other
arrangement of any kind or character to which TRG is a party or by which TRG or
any of its assets are bound; (iv) permit the acceleration of the maturity of any
indebtedness of TRG, or any indebtedness secured by any of TRG's assets; or (v)
violate or conflict with any provision of the TRG's articles of incorporation or
bylaws.
9.3 Limitation on Remedies. The representations and warranties set forth
in this Article shall be true and correct in all material respects on and as of
the date of the First Closing with the same force and effect as if made at that
time; provided, however, in the event that any of such representations and
warranties is proved to be false on or before the First Closing as a result of
any change of circumstances or knowledge obtained by TRG and such
misrepresentation has a Material Adverse Effect and is disclosed to TRG in
writing, then Branch's sole and exclusive remedies hereunder shall be to (i)
terminate this Agreement pursuant to Article (including Section , if
applicable), or (ii) waive such misrepresentation and close with no liability to
TRG for such misrepresentation.
ARTICLE 10: CONDITIONS PRECEDENT TO OBLIGATIONS OF REGENCY
10.1 Conditions for the First Closing. The obligation of Regency to
consummate the First Closing is subject to the fulfillment, at or prior to the
First Closing, of each of the following conditions precedent, and the failure to
satisfy any such condition precedent shall excuse and discharge all obligations
of Regency to carry out the provisions of this Agreement unless such failure is
waived in writing by Regency:
10.1.1 Representations and Warranties. The representations and
warranties made by Branch in Article and Branch Realty in Article , and the
statements and information contained in any certificate, instrument, schedule,
document or exhibit delivered by or on behalf of either Branch or Branch Realty
in connection with the First Closing pursuant to this Agreement, shall be true,
correct and complete in all material respects on and as of the date hereof, and
shall be true, correct and complete in all material respects on and as of the
First Closing Date with the same effect as though such representations and
warranties were made on and as of the First Closing Date, provided, however,
that if any representation and warranty is already qualified in any respect by
materiality or as to Material Adverse Effect, the materiality qualification
immediately before this proviso shall not apply. The Branch Affiliates shall
have delivered to Regency at the First Closing certificates in form and
substance reasonably satisfactory to Regency dated as of the First Closing Date
to such effect.
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10.1.2 Compliance with Covenants and Agreements. The covenants,
obligations and agreements of the Branch Affiliates to be performed and complied
with on or before the First Closing Date shall have been duly performed and
complied with in all respects.
10.1.3 No Material Adverse Change. Since the date of execution of
this Agreement, there shall not have been any change, circumstance or event in
the Assets, business or prospects of Branch which has had or would reasonably be
expected to have a Material Adverse Effect on Branch or on the transactions
contemplated by this Agreement (except such as may have arisen by reason of any
matter approved by Regency pursuant to Sections (Acquisition Properties),
(Additional Acquisitions), (New Contracts) or (Leasing Arrangements)).
10.1.4 No Injunction. There shall not be in effect any Order which enjoins
or prohibits consummation of the transactions contemplated hereby.
10.1.5 OCP Funding. OCP shall have made an aggregate of $40 million
in capital contributions to Branch since becoming the special limited partner
thereof, the portion of which made after the date of this Agreement shall have
been applied either (i) toward the purchase price of Acquisition Properties at
the closing(s) of Acquisition Contracts or (ii) to reduce the Existing Mortgage
Debt.
10.1.6 Acquisition Contracts. Each Acquisition Contract has closed
and good, marketable and indefeasible fee simple title to the Acquisition
Properties has been conveyed to the Partnership, subject only to the Permitted
Exceptions, or, with respect to any Acquisition Contract that has not so closed,
the seller is not in default thereunder and neither Branch nor Regency has
reason to believe that (i) any seller is in material breach of any
representations, warranties or covenants in an Acquisition Contract or (ii) may
default in its obligations thereunder.
10.1.7 Title. The Title Company shall have delivered to the
Partnership the Title Insurance Commitment marked down to constitute the
effective Title Insurance and the Endorsements (with such coinsurance or
reinsurance as Regency may reasonably require) as of the date and time of the
First Closing.
10.1.8 Lender Estoppels. Estoppel letters shall have been received
from each lender under the Existing Mortgage Debt (other than State Mutual) in
form and substance reasonably acceptable to Regency.
10.1.9 Tenant Estoppels. Tenant Estoppels shall have been received
from 90% of the tenants under the Leases for premises larger than 7,500 square
feet and 80% of all other tenants, without any material exceptions, covenants or
changes to the forms accepted by Regency pursuant to Section .
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10.1.10 Delivery of Documents. All of the documents and agreements
required to be delivered and performed pursuant to Section have been so
delivered and performed.
10.1.11 Regency Consents. Regency shall have obtained the consents set
forth on Schedule (b) and Branch and the Subpartnerships shall have obtained the
respective consents set forth on Schedule .
10.1.12 Gottlieb Consulting Agreement. Mark Gottlieb shall have
entered into a consulting agreement with the Partnership or New Management
Company in form and substance reasonably satisfactory to Regency.
ARTICLE 11: CONDITIONS PRECEDENT TO OBLIGATIONS
OF BRANCH AFFILIATES
11.1 Conditions for the First Closing. The obligation of the Branch
Affiliates to consummate the First Closing is subject to the fulfillment, at or
prior to the First Closing, of each of the following conditions precedent, and
the failure to satisfy any such condition precedent shall excuse and discharge
all obligations of the Branch Affiliates to carry out the provisions of this
Agreement unless such failure is waived in writing by the Branch Affiliates:
11.1.1 Representations and Warranties. The representations and
warranties made by Regency in Article and by TRG in Article and the statements
and information contained in any certificate, instrument, schedule, document or
exhibit delivered by or on behalf of Regency in connection with the First
Closing pursuant to this Agreement, shall be true, correct and complete in all
material respects on and as of the date hereof, and shall be true, correct and
complete in all material respects as of the First Closing Date with the same
effect as though such representations and warranties were made on and as of the
First Closing Date provided, however, that if any representation and warranty is
already qualified in any respect by materiality or as to Material Adverse
Effect, the materiality qualification immediately before this proviso shall not
apply. Regency shall have delivered to the Branch Affiliates at the First
Closing certificates in form and substance reasonably satisfactory to the Branch
Affiliates dated as of the First Closing Date to such effect.
11.1.2 Compliance with Covenants and Agreements. The covenants,
obligations and agreements of Regency to be performed and complied with on or
before the First Closing Date shall have been duly performed and complied with
in all respects.
11.1.3 No Material Adverse Change. Since the date of this Agreement,
there shall not have been any change, circumstance or event in the business or
prospects of Regency which would reasonably be expected to have a Material
Adverse Effect on Regency or a material adverse effect on the transactions
contemplated by this Agreement.
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11.1.4 No Injunction. There shall not be in effect any Order which enjoins
or prohibits consummation of the transactions contemplated hereby.
11.1.5 Delivery of Documents. All of the documents and agreements
required to be delivered and performed pursuant to Section have been so
delivered and performed.
11.1.6 Branch Consents. Branch and the Subpartnerships shall have
obtained the respective consents set forth on Schedule , and Regency shall have
obtained the consents set forth on Schedule (b); provided, however, (i) the
consent of any lender to Branch shall not be required if Regency causes the
Partnership to pay off the loan from such lender at the First Closing; and/or
(ii) if all of the consents described in Part B of Schedule
and all the consents of lenders to Branch are not obtained by the First Closing
and Regency closes the transactions hereunder, then Branch shall be required to
close the transactions hereunder and Regency and the Partnership shall indemnify
Branch against and hold Branch harmless from any Liability incurred or suffered
by Branch after the First Closing and resulting from the failure to obtain any
such consents.
11.1.7 Voting Agreements. Regency shall have obtained agreements
from the Persons (and/or from such other Persons as Regency may determine) whose
names appear in the signature blocks of the form of the Voting Agreements
attached as Exhibit B, whereby such Persons have agreed to vote in favor of the
transactions contemplated by this Agreement at the meeting of Regency's
shareholders described in Section , and Regency shall have provided Branch with
evidence reasonably satisfactory to Branch demonstrating that such agreements
represent a number of votes sufficient for the shareholders to approve and
authorize the transactions contemplated by this Agreement at such meeting (and
Regency shall represent in writing at the First Closing that such agreements
represent a number of votes sufficient for the shareholders to authorize and
approve such transactions).
ARTICLE 12: CLOSINGS
12.1 Closing. The Closing shall take place at a time and place mutually
agreed upon by the parties as soon as practicable following the satisfaction or
waiver of all conditions precedent to the First Closing, but the parties will
use all reasonable efforts to close on or before February 14, 1997. A
pre-closing conference shall commence at least three Business Days before the
First Closing Date, during which all deliveries (other than any delivery of
cash) shall be made into an escrow with the Title Company, or, at the option of
the parties, such deliveries may be made in such other manner as the parties may
determine. All deliveries made during the pre-closing period shall be deemed
deliveries made at the First Closing. Upon completion of the deliveries
hereunder and satisfaction of the other conditions to the First Closing herein
set forth, the parties shall direct the Title Company to make such deliveries
and disbursements according to the terms of this Agreement and under a joint
escrow instruction letter reasonably acceptable to Branch and Regency and their
respective counsel. Funds shall be delivered
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through the Title Company's closing escrow account at a bank satisfactory to
Regency and Branch. All Subsequent Closings shall take place on the dates
specified in Section , at such time and location as the parties mutually agree
to.
12.2 Contribution to the Partnership.
12.2.1 Deliveries by Branch. At the First Closing, in addition to
any other documents or agreements required under any other provision of this
Agreement, Branch shall make the following deliveries and performance in
connection with the formation of the Partnership:
(a) Certificates. The certificates required pursuant to Section .
(b) Partnership Agreement. The Partnership Agreement, executed by
or on behalf of Branch, OCP and the other Branch partners;
(c) Transfer Documents. The deeds, assignments and other transfer
documents which are listed on Schedule transferring title to the Assets free of
any claims, except for the Permitted Exceptions.
(d) Registration Rights Agreements. The Registration Rights
Agreement, executed by Branch for the benefit of the Branch partners;
(e) Non-Compete Agreements. A Non-Compete Agreement, in the
form attached as Exhibit -1, executed by J. Alexander Branch III, and in the
form attached as Exhibit -2, executed by Warren R. Hall, Richard H. Lee and
Nicholas B. Telesca;
(f) Legal Opinion. An opinion of King & Spalding as to due
organization, due authorization, consents, violations (to such firm's knowl-
edge), litigation (to such firm's knowledge), and such other matters as counsel
to Regency may reasonably request prior to the First Closing;
(g) Existing Mortgage Documents. The documents evidencing
the assumption of the Existing Mortgage Debt executed by Branch and all
deliveries of Branch required thereunder;
(h) Notice to Tenants. A notice of conveyance to each
tenant in form satisfactory to the parties hereto;
(i) State Law Disclosures. Such disclosures and reports as
are required by applicable state and local Law in connection with the conveyance
of real property;
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(j) FIRPTA. A Foreign Investment in Real Property Tax Act
affidavit executed by Branch. If Branch fails to provide the necessary affidavit
and/or documentation of exemption on the First Closing Date, Regency may proceed
in accordance with the withholding provisions as provided in such Act;
(k) Affidavits. Owner's affidavits to the extent reasonably
and customarily required by the Title Company to issue the Title Policy to the
Partnership and to close this transaction in accordance with the terms hereof,
and any other documents which are reasonably and customarily required by the
Title Company to provide the Endorsements and to issue the Title Policy subject
only to the Permitted Exceptions.
(l) Permits and Approvals. To the extent in Branch's
possession or control, the material licenses, permits, approvals, zoning
exceptions and approvals, consents and Orders of Government Entities relating to
the ownership, operation and use of the Properties, including, without
limitation, certificates of occupancy for the Properties, and assignments
thereof to the Partnership, to the extent they are assignable;
(m) Terminations. Terminations, effective no later than the
First Closing, of those Service Agreements which Regency and Branch have agreed
that the Partnership shall not assume;
(n) Lien Waivers. Affidavits or other evidence reasonably
satisfactory to Regency that no Person has a right now or in the future to file
any liens against the Properties for brokerage commissions or fees in connection
with the Leases or the transactions set forth herein except for such commissions
shown on Schedule ;
(o) Authority. Evidence of the existence, organization and
authority of Branch and Branch Realty and of the authority of the Persons
executing documents on behalf of Branch and Branch Realty reasonably satisfac-
tory to the Title Company and Regency;
(p) Possession. Possession of the Properties, subject only
to the applicable Permitted Exceptions;
(q) Books and Records. Delivery to the offices of the
Partnership of the original Leases and Contracts (or copies if the originals
cannot be located) and to the extent now or subsequently coming Branch's
possession or control: copies or originals (including information stored
electronically) of all books and records of account; contracts; copies of
correspondence with tenants and suppliers; receipts for deposits; unpaid bills
and other papers or documents which pertain to the Properties or the Third Party
Management Business contributed to the Partnership; all advertising materials,
booklets, keys and other items, if any, used in the operation of the Properties
or the Third Party Management Business contributed to the Partnership; all books
and records of each Subpartnership (including Tax records); and, if in Branch's
possession or control, the original "as-built" plans and specifications and all
other available plans and specifications. The Branch Affiliates shall cooperate
with the Partnership
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after the First Closing to provide to the Partnership any such information
stored electronically and to answer questions of the Partnership from time to
time regarding pre-Closing matters (e.g., in connection with the preparation of
Tax returns or financial statements);
(r) Additional Documents. Any additional documents that
Regency may reasonably require for the proper consummation of the transactions
contemplated by this Agreement.
12.2.2 Deliveries by Regency. At the First Closing, Regency shall
make the following deliveries and performance:
(a) Certificates. The certificates required by Sections .
(b) Partnership Agreement. The Partnership Agreement,
executed by Regency and Newco, together with any filings with any Government
Entity required to be made by or on behalf of the Partnership;
(c) Partnership Ratification. The Partnership's written
ratification of this Agreement and agreement to perform the obligations of the
Partnership that are to be performed after the First Closing.
(d) Initial Capital Contribution. An initial cash capital
contribution to the Partnership sufficient to pay: (1) a portion (expected to be
approximately $20 million as of the date of this Agreement) of the Existing
Mortgage Debt specified by Regency; (2) the closing costs and adjustments
payable by the Partnership for the Properties at the First Closing; and (3)
other Partnership obligations related to the Closing (the sum of (1), (2) and
(3) being, the "Regency Capital Contribution" in exchange for a general partner
interest and Class B Units equal to the quotient obtained by dividing the amount
of the Regency Capital Contribution by $22-1/8. Regency shall not be obligated
to deposit the Regency Capital Contribution into the escrow until the closing
statements have been executed and all deliveries by or on behalf of Branch have
been made into escrow;
(e) Units. Issuance by the Partnership to the Branch partners
of that number of limited partner Units of the Partnership equal to the quotient
obtained by dividing the Contribution Value by $22-1/8.
(f) Application of Capital Contribution. Application by the
Partnership of the Regency Capital Contribution in accordance with this
Agreement;
(g) Assumption Agreements. Execution by the Partnership of
those transfer documents listed on Schedule that require execution by the
Partnership and any other documents as Branch may reasonably require to evidence
the Partnership's assumption of the Assumed Liabilities;
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(h) Registration Rights Agreement. The Registration Rights
Agreement, executed by Regency;
(i) Authority. Evidence of existence, organization and
authority of Regency, TRG and the Partnership and the authority of the Person
executing documents on behalf of each of Regency, TRG and the Partnership
reasonably satisfactory to Branch;
(j) Legal Opinion. An opinion of Foley & Lardner, counsel for
Regency, as to due organization; due authorization (subject to (i) the approval
of Regency's shareholders referred to in Section , (ii) an amendment of
Regency's Articles of Incorporation in the form attached as Exhibit , and (iii)
receipt of the consents set forth on Schedule (b)); enforceability of Redemption
Rights (as described in the Partnership Agreement) and the valid issuance of
Shares upon redemption, subject to the assumptions in Section ; enforceability
of the Registration Rights Agreement; due organization and existence of the
Partnership; violations (to such firm's knowledge); litigation (to such firm's
knowledge), enforceability; the qualification of Regency as a REIT under the
Code; and such other matters as counsel to Branch may reasonably request prior
to the First Closing;
(k) Existing Mortgage Debt. The documents evidencing the
assumption of the Existing Mortgage Debt, executed by the Partnership, and all
deliveries of the Partnership required thereunder;
(l) State Law Disclosures. Such disclosures and reports as
are required by applicable state and local Law in connection with the conveyance
of real property;
(m) Election to Board. Certified Board resolutions creating an
additional seat on Regency's Board of Directors and electing J. Alexander Branch
III to fill the vacancy, effective immediately following the First Closing, and
an Indemnity Agreement executed by Regency, in the standard form entered into
between Regency and its directors;
(n) Voting Agreements. Any Voting Agreements in the form
attached as Exhibit B signed by any director, executive officer or shareholder
of Regency.
(o) Additional Documents. Any additional documents that the
Branch Affiliates or the holders of the Existing Mortgage Debt may reasonably
require for the proper consummation of the transactions contemplated by this
Agreement.
12.3 The Reorganization.
12.3.1 Deliveries by Branch Realty. At the First Closing,
immediately following the formation of the Partnership, Branch Realty shall make
the following deliveries and performance:
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(a) Distribution of Realty Units. Appropriate instruments of
assignment evidencing the distribution by Branch of the Realty Units to Branch
Realty;
(b) Assignment of Realty Units. Appropriate instruments of
assignment from Branch Realty transferring its Realty Units and its right to
receive additional Units at Subsequent Closings to Newco;
(c) Assignment of Reorganization Shares. Duly endorsed stock
powers and other appropriate conveyancing documents executed by Branch Realty
transferring the Reorganization Shares and Branch Realty's rights to receive
additional Shares hereunder received by it from Newco to the Branch Principals
that are its sole shareholders;
(d) Lock-Up Agreements. A Lock-Up Agreement executed by J.
Alexander Branch III in the form of Exhibit .
(e) Registration Rights Agreement. The Registration Rights
Agreement, executed by Branch and each Branch Principal;
(f) Additional Documents. Any additional documents that
Regency may reasonably require for the proper consummation of the transactions
contemplated by this Agreement.
12.3.2 Deliveries by Regency in Connection with the Reorganization.
At the First Closing, immediately following the formation of the Partnership,
Regency shall make the following deliveries and performance:
(a) Reorganization Shares. Certificates for the Reorganiza-
tion Shares, issued to each Branch Principal for the respective number of shares
set forth on Schedule ;
(b) Registration Rights Agreements. The Registration Rights
Agreement, executed by Regency;
(c) Additional Documents. Any additional documents that the
Branch Principals may reasonably require for the proper consummation of the
transactions contemplated by this Agreement.
12.4 Closing Statements/Escrow Fees. Branch and Regency shall deposit with
the Title Company executed closing statements consistent with this Agreement.
ARTICLE 13: PRORATIONS AND ADJUSTMENTS
13.1 Adjustments. Branch and Regency have agreed to make certain
financial adjustments as of December 31, 1996. It is the intent of the parties
that all items of income,
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loss, cash and economic benefits and detriments from the Assets transferred to
the Partnership at the First Closing shall inure to the Partnership from January
1, 1997 for purposes of this Article 13(provided that the income, loss, cash and
economic benefits and detriments from the Third Party Management Business shall
inure to the New Management Company from January 1, 1997 for purposes of this
Article 13), subject to consummation of the First Closing and except as
expressly otherwise provided herein. As provided in Section hereof, Branch has
continued to operate the Assets in the ordinary and usual course of business and
consistent with past practices. The funds in the operating account of Branch as
of the First Closing shall be applied, at the direction of Regency, to reduce
the Existing Mortgage Debt. Prior to the First Closing, Branch shall withdraw
from the operating account (or draw down the Wachovia Line as hereinafter
defined) to fund $1,399,579 representing the distribution payable to the Branch
partners with respect to the 1996 fourth quarter operations of Branch, and such
amount shall be deposited in a separate account of Branch to be retained by
Branch after the First Closing. Branch shall not make any withdrawals or
payments not in such ordinary and usual course of business. Branch and Regency
have also agreed to the financial adjustments set forth below in this Article .
13.2 Proration Credit. Schedule 13 reflects certain adjustments and
Designated Credits and Designated Liabilities as of December 31, 1996. The
amount by which (i) the Designated Credits exceed (ii) the Designated
Liabilities is herein called the "Proration Credit."
13.3 Line of Credit. Branch has a $3,000,000 line of credit with Wachovia
Bank of Georgia, N.A. to fund the operations of Branch (the "Wachovia Line").
The principal balance of the Wachovia Line as of December 31, 1996 was $741,000.
Regency has agreed to credit to Branch an amount (the "Wachovia Line Credit")
equal to the excess of (i) $3,000,000 less (ii) the sum of (x) $741,000 (the
balance of the Wachovia Line as of December 31, 1996) plus (y) the amount, if
any, drawn by Branch under the Wachovia Line to fund the fourth quarter 1996
distribution to the Branch partners. Regency shall assume the Wachovia Line at
the First Closing as part of the Assumed Liabilities, and there shall be no
further adjustment regardless of the balance of the Wachovia Line as of the
First Closing.
13.4 Assumed Obligations. Schedule describes certain assumed obligations
in the fixed, agreed amount of $1,060,103 (the "Assumed Obligations"), which
shall not be subject to audit pursuant to Section . Regency shall pay the
Assumed Obligations as they come due.
13.5 Pipeline Transactions. The Disposition Properties known as (i)
Crabapple CVS, which is being developed by Branch and is under contract to be
sold to Stephan Nil or an affiliate, (ii) Jiles Road CVS, which is being
developed by Branch and is under contract to be sold to Peter Karreth or an
affiliate, and (iii) Oglethorpe Crossing, which is being developed by Branch and
is under contract to be sold to Hermann-Hinrich Reemtsma, and the Acquisition
Contracts and Other Contracts relating to (a) the purchase of the shopping
center known as Mathews Corner, which is being developed by another developer,
and the proposed subsequent placement and/or sale of Mathews Corner to an
investor group, and (b) the purchase of a shopping center known as North Point,
which is being developed by another developer, and the
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proposed subsequent placement and/or sale of North Point to an investor group,
are herein collectively referred to as the "Pipeline Transactions". The
following provisions shall apply to the financial adjustment applicable to the
Pipeline Transactions.
13.5.1 The term "Pipeline Cost" means, with respect to a Pipeline
Transaction, the sum of (i) the out-of-pocket costs and expenses incurred
in connection with the acquisition, construction and development of a
Pipeline Transaction (but excluding any amounts paid to the General
Partner, New Management Company, Regency or any Affiliate) plus any
earnest money, loan or other deposits which are not refunded, reimbursed
or credited plus (ii) an amount equal to forty percent (40%) of any
taxable gain incurred by the Partnership (or New Management Company, if
New Management Company is the owner of such Pipeline Transaction) upon the
sale or other disposition of such Pipeline Transaction.
13.5.2 The term "Net Pipeline Proceeds" means, with respect to a
Pipeline Transaction, the proceeds realized by the Partnership (or New
Management Company, if New Management Company is the owner of such
Pipeline Transaction) upon the sale or other disposition of such Pipeline
Transaction, after deducting any out-of-pocket closing costs, brokerage
commissions and fees paid to third parties (but not to the General
Partner, New Management Company, Regency or any Affiliate).
13.5.3 The term "Pipeline Credit" means, with respect to any
Pipeline Transaction, the excess, if any, of (i) the Net Pipeline Proceeds
realized from such Pipeline Transaction less (ii) the Pipeline Cost of
such Pipeline Transaction. The Pipeline Credit for any Pipeline
Transaction shall not be less than zero except as set forth below with
respect to the Mathews Corner Deduction.
13.5.4 At the First Closing, the Partnership shall contribute and
assign to New Management Company the right to acquire the Assets relating
to the Pipeline Transactions, and the Transaction Documents shall convey,
assign and transfer the Pipeline Transactions to the New Management
Company. After the First Closing, Regency shall cause New Management
Company to diligently and in good faith pursue the acquisition,
development, leasing, and sale of the Pipeline Transactions (i) in
compliance with the requirements of the applicable Contracts relating
thereto, (ii) in a manner reasonably calculated to effect a sale or other
disposition of the Pipeline Transactions on or before the first
anniversary of the First Closing, and (iii) in a manner reasonably
calculated to maximize the Pipeline Credit relating thereto.
13.5.5 Upon the sale or other disposition of a Pipeline Transaction
on or before the first anniversary of the First Closing, the parties shall
calculate the Pipeline Credit, if any, applicable thereto, and if a
Pipeline Transaction is not sold or otherwise disposed of on or before the
first anniversary of the First Closing, then no Pipeline Credit shall be
attributable to such Pipeline Transaction. The aggregate Pipeline Credits
for all Pipeline Transactions which are sold or otherwise disposed of
prior to the first
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anniversary of the First Closing is herein referred to as the "Aggregate
Pipeline Credit"; provided, however, the Aggregate Pipeline Credit shall
not be less than zero. If a Pipeline Transaction incurs Pipeline Cost in
excess of Net Pipeline Proceeds, such Pipeline Transaction shall have a
Pipeline Credit equal to zero, and there shall be no reduction in the
computation of the Aggregate Pipeline Credit resulting therefrom. If (a)
Mathews Corner is not sold to or placed with an investment group, (b)
Mathews Corner is not acquired by the Partnership, New Management Company,
Regency or any Affiliate thereof, (c) all or any portion of the purchase
contract earnest money and/or the permanent loan deposit (in the aggregate
amount of $444,750) are forfeited and (d) the Partnership or New
Management Company refunds to Minerva Real Estate or its affiliate
$110,000 previously advanced to pay a portion of such earnest money and
loan deposits, then an amount equal to the lesser of (x) $554,750 or (y)
the actual amount of such earnest money and loan deposits forfeited and
advance refunded is herein referred to as the "Mathews Corner Deduction".
In the event the Mathews Corner Deduction exceeds the Aggregate Pipeline
Credit, then the "Aggregate Pipeline Deduction" shall equal the excess of
(1) the Mathews Corner Deduction less (2) the Aggregate Pipeline Credit.
If the Mathews Corner Deduction does not exceed the Aggregate Pipeline
Credit, then the Aggregate Pipeline Deduction shall be zero.
13.6 Final Adjustment Amount. At the First Closing, Branch and Regency
shall calculate the Proration Credit and the Wachovia Line Credit, and such
calculations shall be reviewed and, if necessary, adjusted after the First
Closing on the basis of the Final Closing Balance Sheet. Promptly after the
first anniversary of the First Closing, the parties shall calculate the
Aggregate Pipeline Deduction, if any. The sum of (i) the Proration Credit, plus
(ii) the Wachovia Line Credit, less (ii) the Assumed Obligations, less (iv) the
Aggregate Pipeline Deduction, if any, is herein referred to as the "Net Credit."
The difference obtained by subtracting (x) $3,843,269 from (y) the Net Credit is
herein referred to as the "Adjustment Amount". The Adjustment Amount may be a
positive or negative number.
13.7 Additional Adjustment Units. If the Adjustment Amount is a positive
number, on the First Earn-Out Closing Date Additional Units shall be issued to
the Branch partners (to be allocated in the manner described in Schedule ) equal
to the quotient obtained by dividing (i) the positive Adjustment Amount by (ii)
the Value of a Share as of the First Earn-Out Closing Date multiplied by the
Unit Adjustment Factor (the "Adjustment Units"). If a Branch partner has
previously exercised a Redemption Right in the Partnership Agreement with
respect to Units owned by such Branch partner, then the Redemption Right shall
apply to the Redemption Percentage of such Adjustment Units corresponding
thereto (as described in Section 8.6(d) of the Partnership Agreement), and
Regency shall issue to such Branch partner a number of Shares equal to (x) the
Adjustment Units issuable to such Branch partner multiplied by (y) the Unit
Adjustment Factor multiplied by (z) such aggregate Redemption Percentage for all
Redemption Rights previously exercised by such Branch partner. No Adjustment
Units shall be issued to the Branch Principals with respect to the
Reorganization, and Regency shall issue to the Branch Principals (to be divided
among the Branch Principals pro rata in proportion to the relative percentages
set forth on Schedule ) as part of the Reorganization, a number of additional
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Shares equal to the product of (x) the Adjustment Units otherwise allocable to
the Branch Principals for such Reorganization multiplied by (y) the Unit
Adjustment Factor.
13.8 Reduction in Units. If the Adjustment Amount is a negative number,
the number of Additional Units and Shares issuable to the Branch partners on the
First Earn-Out Closing Date pursuant to Section shall be reduced (with such
reduction to be allocated among the Original Limited Partners in the manner
described in Schedule as if such reduced number of Additional Units were so
issued) by an amount equal to the quotient obtained by dividing (i) the negative
Adjustment Amount by (ii) the Value of a Share as of the First Earn-Out Closing
Date multiplied by the Unit Adjustment Factor.
13.9 Exclusion Option. Notwithstanding anything contained in this
Agreement to the contrary, Regency shall have the right and option (the
"Option") to exclude from the Assets the "Option Properties" described below,
and to receive in lieu thereof as an additional Asset the proceeds from the sale
thereof by Branch to the New Branch Entity (as defined below), subject to the
following terms and conditions:
13.9.1 The term "Option Properties" means (i) the Disposition
Property known as Crabapple CVS, which is being developed by Branch and is
under contract to be sold to Steven Nil or an affiliate, (ii) the
Disposition Property known as Jiles Road CVS, which is being developed by
Branch and is under contract to be sold to Peter Karreth or an affiliate,
(iii) the Disposition Property known as Oglethorpe Crossing, which is
being developed by Branch and is under contract to be sold to
Hermann-Hinrich Reemstma, (iv) the Acquisition Contract and other
Contracts relating to the purchase of the shopping center known as Mathews
Corner, which is being developed by another developer, and the proposed
subsequent placement and/or sale of Mathews Corner to an investor group,
(v) the Acquisition Contract and other Contracts relating to the purchase
of the shopping center known as North Point, which is being developed by
another developer, and the proposed subsequent placement and/or sale of
North Point to an investor group, and (vi) the Property known as Hastings
which is leased by Branch.
13.9.2 The Option must be exercised, if at all, by Regency
delivering notice to Branch on or before February 13, 1997, and in the
event Regency fails or elects not to deliver notice to Branch of the
exercise of the Option on or before February 13, 1997, then the Option
shall terminate, be void, and of no further force and effect.
13.9.3 The Option shall only be exercisable with respect to all of
the Option Properties, and Regency shall not have the right to exercise
the Option and exclude less than all of the Option Properties. In the
event Regency exercises the Option, appropriate revisions to this
Contribution Agreement and the Exhibits and Schedules attached hereto
shall be deemed made in order to exclude the Option Properties from the
Assets to be acquired by the Partnership and to include the Option
Properties as part of the Excluded Assets.
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13.9.4 In the event Regency exercises the Option, Branch shall cause
the Branch Principals and Nicholas B. Telesca to form a new entity (the
"New Branch Entity") which shall acquire the Option Properties from Branch
at the First Closing, and after the First Closing Branch shall have no
further right or interest in the Option Properties.
13.9.5 The aggregate Contribution Value of the Assets shall not
change or be reduced in the event Regency exercises the Option; provided,
however, at the First Closing the New Branch Entity shall pay to Branch
for payment to the Partnership (or at Regency's direction shall be applied
to reduce the Existing Mortgage Debt) an amount equal to the equity,
earnest money, loan deposits, and other amounts described on Schedule
hereof (the "Reimbursement Amount") and the New Branch Entity shall assume
the obligations described in Schedule . In lieu of paying to Branch for
payment to the Partnership the Reimbursement Amount at the First Closing,
the New Branch Entity shall have the right to borrow the money from
Regency and execute and deliver a promissory note payable to Regency for
the Reimbursement Amount (or any portion thereof), with such debt to (i)
bear interest at the rate of ten percent (10%) per year, (ii) be due and
payable in full on the first anniversary of the First Closing, and (iii)
be prepayable without penalty (the "Reimbursement Note"), and at the First
Closing the proceeds of the Reimbursement Note shall be paid to the
Partnership by Regency. The Reimbursement Note shall be jointly and
severally guaranteed by the Branch Principals and Nicholas B. Telesca and
shall be secured at the First Closing by the pledge of security interests
in Units and/or Shares having a Value as of the First Closing equal to
125% of the principal amount of the Reimbursement Note.
13.9.6 In the event Regency exercises the Option, the other
provisions of this Article 13 set forth above shall be revised to reflect
an Aggregate Pipeline Credit and Aggregate Pipeline Deduction equal to
zero.
13.9.7 Regency's right to exercise the Option and require the New
Branch Entity to acquire the Option Properties at the First Closing is
subject to and conditioned upon the receipt by the New Branch Entity of
all consents and approvals required to be obtained from any lenders
providing financing in connection with the Option Properties to the
conveyance and assignment of the Option Properties to the New Branch
Entities, and in the event such consents and approvals are not obtained
from such lenders, then the Option shall be void and of no further force
and effect and the Partnership shall acquire all of the Option Properties.
13.9.8 For purposes of this Section ,, the term Branch Principals
shall mean J. Alexander Branch III and any one or more of the remaining
Branch Principals, at their option.
ARTICLE 14: TERMINATION AND REMEDIES
14.1 Termination. This Agreement may be terminated:
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14.1.1 At any time prior to the First Closing Date, with the
written consent of Regency and Branch;
14.1.2 At any time prior to the First Closing Date, by Regency
(provided it is not in breach of any of its material obligations hereunder), if
there shall have been a material breach of any covenant, representation or
warranty of any Branch Affiliate hereunder, or failure of any condition to
Regency's obligation to close, and such breach or failure shall not have been
remedied within 10 Business Days after receipt by Branch of a notice in writing
from Regency specifying the breach or failure and requesting such be remedied
(and the First Closing Date shall be extended to provide for such cure period);
14.1.3 At any time prior to the First Closing Date, by Branch
(provided it is not in breach of any of its material obligations hereunder), if
there shall have been a material breach of any covenant, representation or
warranty of Regency hereunder, or any failure of any condition of Branch's
obligation to close, and such breach or failure shall not have been remedied
within 10 Business Days after receipt by Regency of a notice in writing from
Branch specifying the breach or failure and requesting such be remedied (and the
First Closing Date shall be extended to provide for such cure period); or
14.1.4 If the First Closing has not taken place by March 31, 1997,
at any time thereafter, by Branch or Regency, upon delivery of written notice of
termination to the other.
14.2 Effect of Termination. If this Agreement is terminated pursuant to
Section , all obligations of the parties hereunder shall terminate, except for
the obligations that expressly survive the termination of this Agreement. No
such termination shall relieve any party from liability pursuant to Section
below.
14.3 Remedies.
14.3.1 (i) The sole and exclusive remedy of Regency or Branch is to
terminate this Agreement in the event of a default in the other's obligation to
close the transactions contemplated by this Agreement at the First Closing which
default is not willful and intentional, and (ii) except as provided below in
this Section , the sole and exclusive remedy of Regency or Branch in the event
of a willful and intentional default in the other's obligation to close the
transactions contemplated by this Agreement at the First Closing is to terminate
this Agreement and receive liquidated damages in the amount of $3,000,000.
Regency shall have the right to elect specific performance (as an alternative
remedy in lieu of liquidated damages) only (a) in order to prevent Branch from
initiating, soliciting or pursuing a Competing Transaction in violation of
Section , (b) to enjoin such a pending or threatened Competing Transaction,
and/or (c) to require Branch to close the transactions contemplated by this
Agreement if (x) there is a willful and intentional default by Branch to close
the transactions contemplated by this Agreement at the First Closing and (y)
prior to the First Closing Branch initiated, solicited or pursued a Competing
Transaction in violation of Section . Branch shall have the right to elect
specific performance (as an alternative remedy in lieu of liquidated
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damages) to require Regency to close the transactions contemplated by this
Agreement only if there is a willful and intentional default by Regency to close
the transactions contemplated by this Agreement. The parties expressly waive any
right to elect specific performance (except as provided above in this Section )
and to damages in excess of such liquidated amount with respect to any such
breach. The parties agree that the amount of damages for a default by the other
would be difficult, if not impossible, to determine, and that such liquidated
damages are a reasonable estimate of damages in the event of such a default. In
the event that a party elects specific performance hereunder (the "Electing
Party") but the court determines that the Electing Party is not entitled to
specific performance, then the Electing Party may seek liquidated damages
hereunder in lieu of specific performance in the event of a willful and
intentional default in the other's obligations to close the transactions
contemplated hereby.
14.3.2 If (i) Branch receives prior to the First Closing an offer
for a Competing Transaction (as defined in Section ), and (ii) OCP, a majority
in interest of the Branch Limited Partners, or the partners of the
Subpartnerships other than Roswell Village, Ltd. fail to consent to the
transactions contemplated by this Agreement for any reason (other than as a
result of a breach by Regency of any of its material obligations hereunder) or
Branch fails to submit the transactions to such Persons for consent, and (iii)
Branch consummates a Competing Transaction on or before December 31, 1997
involving more than (a) a 25% interest in Branch or (b) 25% of the Assets of
Branch, and (iv) Branch has not paid to Regency the $3,000,000 liquidated damage
amount described in Section above, and (v) Regency is not in material breach of
any covenant, representation or warranty made by it in this Agreement and has
performed all material obligations required to be performed by it at or before
the First Closing, Branch shall immediately pay to Regency upon the closing of
such Competing Transaction(by wire transfer) a break-up fee in the amount of
$3,000,000, whereupon Branch shall have no further liability to Regency
whatsoever arising out of any Competing Transaction or under Section above.
ARTICLE 15: INDEMNIFICATION
15.1 By Branch. For a period of one year from the First Closing Date
(except for Claims related to any Tax, for which the survival period shall be
the applicable statute of limitation related to such Claim) and subject to the
terms and conditions of this Article , Branch hereby agrees to indemnify, defend
and hold harmless Regency and the Partnership, and their respective directors,
officers, employees and other Affiliates, from and against all Claims asserted
against, resulting to, imposed upon, or incurred, directly or indirectly, by any
such Person or the Assets transferred to the Partnership pursuant to this
Agreement by reason of, arising out of or resulting from (i) the inaccuracy or
breach of any representation or warranty of Branch contained in or made pursuant
to Article of this Agreement (regardless of whether such breach is deemed
"material") or (ii) any Claim against Branch or any Subpartnership accruing
prior to the First Closing Date not constituting an Assumed Liability. As used
in this Article , the term "Indemnified Claim" shall include all Loss and
Expenses.
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15.2 By Branch Realty. For a period of one year from the First Closing
Date (except for Claims related to any Tax, for which the survival period shall
be the applicable statute of limitation related to such Claim) and subject to
the terms and conditions of this Article , Branch Realty hereby agrees to
indemnify, defend and hold harmless Regency and the Partnership, and their
respective directors, officers, employees and other Affiliates, from and against
all Claims asserted against, resulting to, imposed upon, or incurred, directly
or indirectly, by any such Person or the Assets transferred to the Partnership
pursuant to this Agreement by reason of, arising out of or resulting from the
inaccuracy or breach of any representation or warranty of Branch Realty
contained in or made pursuant to Article of this Agreement (regardless of
whether such breach is deemed "material").
15.3 By the Partnership. Subject to the terms and conditions of this
Article , the Partnership hereby agrees to indemnify, defend and hold harmless
Branch, and its respective directors, officers, employees, partners and other
Affiliates from and against all Claims asserted against, resulting to, imposed
upon or incurred by any such Person, directly or indirectly, by reason of,
arising out of or resulting from all Claims against Branch constituting,
relating to or arising out of any Assumed Liabilities.
15.4 By Regency. For a period of one year from the First Closing Date and
subject to the terms and conditions of this Article , Regency hereby agrees to
indemnify, defend and hold harmless Branch, and its respective directors,
officers, employees, partners and other Affiliates from and against all Claims
asserted against, resulting to, imposed upon or incurred by any such Person,
directly or indirectly, by reason of, arising out of or resulting from the
inaccuracy or breach of any representation or warranty of Regency contained in
or made pursuant to Article of this Agreement (regardless of whether such breach
is deemed "material").
15.5 By TRG. For a period of one year from the First Closing Date and
subject to the terms and conditions of this Article , TRG hereby agrees to
indemnify, defend and hold harmless Branch, and its respective directors,
officers, employees, partners and other Affiliates from and against all Claims
asserted against, resulting to, imposed upon or incurred by any such Person,
directly or indirectly, by reason of, arising out of or resulting from the
inaccuracy or breach of any representation of TRG contained in or made pursuant
to Article of this Agreement (regardless of whether such breach is deemed
"material").
15.6 Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article with respect
to Claims relating to third parties shall be subject to the following terms and
conditions:
15.6.1 Notice and Defense. The party or parties to be indemnified
(whether one or more, the "Indemnified Party") shall give the party from whom
indemnification is sought (the "Indemnifying Party") written notice of any such
Claim prior to the expiration of the survival period to which the Claim relates,
and the Indemnifying Party will undertake the defense thereof by representatives
chosen by it. Failure to give such notice shall not affect the
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Indemnifying Party's duty or obligations under this Article , except to the
extent the Indemnifying Party is prejudiced thereby. So long as the Indemnifying
Party is defending any such Claim actively and in good faith, the Indemnifying
Party shall have the right to settle such Claim in its sole discretion, provided
that the Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Claim or consent to the entry of any
judgment which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party of a release from all
Liability in respect of such Claim. The Indemnified Party shall make available
to the Indemnifying Party or its representatives all records and other materials
required by them and in the possession or under the control of the Indemnified
Party, for the use of the Indemnifying Party and its representatives in
defending any such Claim, and shall in other respects give reasonable
cooperation in such defense. An Indemnified Party includes any Branch partner
who has received Units or Shares pursuant to the transactions contemplated by
this Agreement, and any such Person shall be entitled to enforce a Claim for
indemnification hereunder in such Person's own right.
15.6.2 Failure to Defend. If the Indemnifying Party, within a
reasonable time after notice of any such Claim, fails to defend such Claim
actively and in good faith, the Indemnified Party will (upon further notice and
the failure of the Indemnifying Party to commence the defense of such claim
within thirty (30) days after such further notice) have the right to undertake
the defense, compromise or settlement of such Claim or consent to the entry of a
judgment with respect to such Claim, on behalf of and for the account and risk
of the Indemnifying Party, and the Indemnifying Party shall thereafter have no
right to challenge the Indemnified Party's defense, compromise, settlement or
consent to judgment except if the amount of a Claim to be indemnified by Branch
does not exceed the Value (as defined in the Partnership Agreement) of the
Collateral on the date of the settlement, in which case Branch shall have the
right to consent to any such compromise, settlement or consent, which consent
shall not be unreasonably withheld.
15.7 Payment.
15.7.1 General. The Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article . Upon judgment,
determination, settlement or compromise of any Indemnified Claim pursuant to the
provisions hereof, the Indemnifying Party shall pay promptly on behalf of the
Indemnified Party, and/or to the Indemnified Party in reimbursement of any
amount theretofore required to be paid by it, the amount so determined by
judgment, determination, settlement or compromise pursuant to the provisions
hereof, and all other Loss and Expenses of the Indemnified Party with respect
thereto, unless in the case of a judgment an appeal is made from the judgment.
If the Indemnifying Party desires to appeal from an adverse judgment, then the
Indemnifying Party shall post and pay the cost of the security or bond to stay
execution of the judgment pending appeal. Upon the payment in full by the
Indemnifying Party of such amounts, the Indemnifying Party shall succeed to the
rights of such Indemnified Party, to the extent not waived in settlement,
against the third party who made such Indemnified Claim.
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15.7.2 Security Interest.
(a) Grant. In the event that either Regency or the Partnership
notifies Branch of a Claim, pursuant to Section , on or before the first
anniversary of the First Closing Date, each Branch partner, as a condition to
receiving such partner's respective percentage (as set forth on Schedule ) of
the additional Units or Shares (including Reorganization Shares) to be issued at
the First Property Earn-Out Closing set forth in Section , shall, in addition to
agreeing to the other provisions set forth in this Section , secure such
partner's respective percentage (as set forth on Schedule ) of Branch's
liability, if any, to pay an Indemnified Claim ("Branch's Liability") by
pledging and granting to Regency and the Partnership under the Florida Uniform
Commercial Code a first priority security interest in such Units and/or Shares
(collectively, together with the Shares issued upon the exercise of Redemption
Rights with respect to such Units, the "Collateral") having a Value as of such
date equal to such Branch partner's respective percentage (as set forth on
Schedule ) of 125% of Branch's Liability; provided, however, no Branch partner
shall have to pledge or grant such security interest in Units or Shares with
respect to more than a maximum amount equal to the product of (i) 571,797
multiplied by (ii) such Branch partner's respective percentage set forth on
Schedule hereof. Certificates for the Collateral, together with related stock
powers or other powers or attorney with signature guaranties and otherwise
reasonably acceptable to Regency, shall be held by Regency until the release of
the security interests therein pursuant to this Article . In addition, each
Branch partner shall deliver to Regency and/or the Partnership, as the case may
be, such financing statements, continuation statements, and similar documents as
Regency and/or the Partnership shall deem appropriate to perfect and to continue
perfection of their respective security interests in the Collateral. The
security interests granted pursuant to this Section shall not impair a Branch
partner's Redemption Rights; provided, however, that any Shares issued upon the
exercise of such Redemption Rights must also be pledged hereunder and shall be
part of the Collateral.
(b) No Encumbrance, Sale, Etc. Until such time as Regency and
the Partnership release their respective security interests in the Collateral,
each Branch partner shall agree (i) to keep the Collateral free of all security
interests, voting trust agreements, shareholder agreements, or other interests
and encumbrances, except for the security interest granted herein, and (ii) not
to assign, deliver, sell, transfer, lease or otherwise dispose of (including
dispositions by operation of law) any portion of the Collateral or any interest
therein without the prior written consent of Regency and the Partnership except
to Persons other than lenders described in Section 11.3(a) of the Partnership
Agreement to whom a Limited Partner may transfer Units without the consent of
the General Partner (provided that the transferred Units remain subject to the
security interests granted in Section ).
(c) Disputed Claim. Notwithstanding anything herein to the
contrary, in the event that either Regency or the Partnership notifies Branch of
a Claim on or before the first anniversary of the First Closing Date, and Branch
disputes such Claim, the Collateral shall be pledged, subject to the adjustment
described in Section below, until the amount of such Claim has either (i) been
decided by a court of competent jurisdiction and such decision
75
is not subject to appeal, or (ii) agreed to by the parties; provided, however,
that neither Regency nor the Partnership may exercise its rights with respect to
such security interests until the amount of such Claim has been decided or
agreed upon. Once the amount of such Claim has been decided or agreed upon, the
Collateral may be used to satisfy Branch's Liability, if any, to pay the
Indemnified Claim, based on its then Value. In the event Regency or the
Partnership uses the Collateral to satisfy Branch's Liability, if any, to pay
the Indemnified Claim, Regency and the Partnership, as the case may be, agree to
foreclose against the Units and/or Shares that comprise such Collateral, pro
rata in accordance with the respective percentages set forth on Schedule .
(d) Adjustment. If the number of Units and Shares to be
pledged hereunder times the then Value exceeds 125% of the amount of the pending
Indemnified Claims representing Branch's Liability (if agreed upon by the
parties), then Collateral shall be pledged pro rata in accordance with the
relative percentage interests set forth on Schedule , so that the amount of
Collateral times the then Value equals at least 125% of the amount of the
pending Indemnified Claims representing Branch's Liability. In the event that
the parties are not able to agree on the amount of the pending Indemnified
Claims representing Branch's Liability, the full Collateral shall be pledged
hereunder and Branch shall have the right to request binding arbitration of the
maximum possible amount of such Claims (but not the merits of such Claims), by
delivery of written notice to Regency and the Partnership. Arbitration
proceedings shall be administered by and conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The parties shall
flip a coin to determine where the arbitration proceedings will be held, with
the winning party entitled to select either Atlanta, Georgia, or Jacksonville,
Florida. Three independent arbitrators shall be selected: one shall be a
practicing attorney, one shall be a certified public accountant, and the third
shall be a real estate professional, each of whom shall be knowledgeable about
the subject matter giving rise to the Claims in dispute. The arbitration
proceedings shall be completed within 30 days after the selection of the
arbitrators, who shall render their decision in writing, by majority vote,
within 30 days after the conclusion of the proceeding, stating the factual basis
for their decision. The arbitrators shall have authority to include in their
decision an award in favor of a party of all or any portion of its attorneys'
fees and expenses incurred in connection with the arbitration, together with the
cost of the arbitration. Within two business days after the date of the
arbitration decision, if the amount of Collateral times the then Value equals at
least 125% of the amount determined by the arbitrators to be the maximum
possible exposure of the pending Indemnified Claims representing Branch's
Liability, Regency shall release the excess collateral, pro rata in accordance
with the relative percentages set forth on Schedule .
(e) Substitution of Collateral. Any Branch partner holding
Collateral may substitute a letter of credit issued by a responsible financial
institution located in the United States in favor of both Regency and the
Partnership, provided that the letter of credit (i) is for an amount equal to or
greater than the then Value of the Collateral which such letter of credit is
replacing as collateral for the security interest granted in Section and (ii) is
irrevocable until the security interest is released in the remaining Collateral,
subject to the provisions of Section above.
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(f) Remedies. In the event that either Regency or the
Partnership has the right to use the Collateral to satisfy Branch's Liability,
if any, to pay an Indemnified Claim, without waiving any other right under this
Agreement, Regency and the Partnership, as the case may be, shall have all
rights and remedies of a secured party under the Florida Uniform Commercial Code
in addition to the rights and remedies as may be available hereunder, subject to
the limitations on Regency's and the Partnership's rights to foreclose set forth
in Section (c).
(g) Distributions in Respect of Collateral. Until such time as
Regency and the Partnership release their respective security interests in the
Collateral, each Branch partner shall assign to and authorize Regency and the
Partnership to receive any and all non-cash dividends or distributions of
whatever nature now or hereafter made in respect of the Collateral, including
those made in connection with the dissolution, liquidation, sale of assets,
merger, consolidation or other reorganization of Regency or the Partnership, or
any stock dividend, stock split, recapitalization, reclassification or
otherwise, to surrender such Collateral or any part thereof in exchange
therefor, and to hold any such dividend or distribution as part of the
Collateral. Notwithstanding Regency's and the Partnership's respective security
interests in the Collateral, each Branch partner shall be entitled to receive
all cash dividends and distributions relating to such Collateral without any
security interest attaching thereto.
(h) Jurisdiction. Any suit, action or proceeding against any
Branch partner with respect to this Section may be brought in the courts of the
State of Georgia or in the U.S. District Court for the Northern District of
Georgia as Regency or the Partnership, as the case may be, in its sole
discretion may elect, and each Branch partner shall accept the nonexclusive
jurisdiction of those courts for the purpose of any suit, action or proceeding.
In addition, each Branch partner shall irrevocably waive, to the fullest extent
permitted by law, any objection which such partner may have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Section or any judgment entered by any court in respect to any part thereof
brought in the State of Georgia and shall further irrevocably waive any claim
that any suit, action or proceeding brought in the State of Georgia has been
brought in an inconvenient forum.
15.8 Threshold and Cap. Notwithstanding anything herein to the contrary,
no party required to indemnify any other under this Article shall be responsible
for any Indemnified Claim under the terms of this Article until the cumulative
aggregate amount of such Indemnified Claims suffered by Branch or Branch Realty,
on the one hand, or the Partnership, Regency or TRG, on the other hand, as the
case may be, exceeds $250,000.00, in which case Branch or Branch Realty, on the
one hand, or the Partnership, Regency or TRG, on the other hand, as the case may
be, shall then be liable for all such Indemnified Claims, but in the case of a
breach of a representation, warranty or covenant by Branch or Branch Realty that
is not willful and intentional, only to the extent that the aggregate Loss and
Expenses for all such Indemnified Claims does not exceed the greater of
$12,651,008 or the combined Value of the Collateral, as determined on the date
that such Indemnified Claims are paid and Branch, Branch Realty, the Branch
partners, and their Affiliates shall have no Liability whatsoever for any
77
Indemnified Claim in excess of such amount unless resulting from a willful and
intentional breach of a representation, warranty or covenant. There shall be no
corresponding dollar limitation on Regency's or the Partnership's liability, if
any, for Loss and Expenses for Indemnified Claims.
15.9 No Waiver. Except to the extent waived by virtue of the provisions
set forth in Section , , or , the closing of the transactions contemplated by
this Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification otherwise has knowledge of the breach, violation or failure of
condition constituting the basis of the Claim at or before the First Closing,
and regardless of whether such breach, violation or failure is deemed to be
"material," subject to the provisions of Sections and (requiring notice to the
other party).
15.10 Designated Representatives. The Branch partners shall have the right
to designate (i) OCP and (ii) any one of the Branch Principals or Nicholas B.
Telesca (the "Branch Representative") to represent Branch in connection with any
consent, approval, agreement, settlement, or other action to be taken by Branch
after the First Closing under this Article 15, and the unanimous decision of OCP
and the Branch Representative shall be binding on Branch and the Branch partners
hereunder. It is acknowledged and agreed that the Branch partners shall share
any Branch Liability under this Article 15, subject to the limitations in
Section and the other provisions of this Article 15, in proportion to the
relative percentages set forth on Schedule , and in the event any Branch partner
suffers or pays a disproportionate share of a Branch Liability, then such Branch
partner shall have a right of contribution from any Branch partner suffering or
paying less than such Branch partner's proportionate share. Further, OCP and the
Branch Representative, acting together, shall have the right to engage attorneys
to represent the interest of Branch and the Branch partners and incur reasonable
costs and expenses in connection with any action to be taken or issues arising
under this Article 15, and the Branch partners shall fund such costs and
expenses (including reasonable compensation to OCP and the Branch
Representative) in accordance with the relative percentages set forth on
Schedule .
ARTICLE 16: POST-CLOSING COVENANTS
16.1 Completion of 1996 Audit. Branch agrees to cause, and to cooperate in
facilitating the completion as promptly as practicable after the First Closing
of, the preparation of audited financial statements for Branch as of and for the
year ended December 31, 1996, in accordance with GAAP and reported on by Price
Waterhouse LLP, or another Big 6 accounting firm, and complying in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder for filing by Regency with the SEC in a Form
8-K and in Regency's proxy statement for the meeting of shareholders referred to
in Section . Without limiting the foregoing, Branch agrees to cause its
independent public accountants to give Regency and Regency's independent
certified public accountants access to the work papers for the audits of
Branch's financial statements for the three years ended December 31, 1996.
Regency shall pay the cost of Branch's 1996 audit as described on
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Schedule . The Final Closing Balance Sheet shall be prepared in accordance with
GAAP and on that basis will present fairly the consolidated financial position
and the Assets and Liabilities of the entities included therein (including the
Subpartnerships) as going concerns, shall be in accordance with the books and
records of such entities, shall not reflect any transactions that are not bona
fide transactions and shall not contain any untrue statements of a material fact
or omit to state any material fact necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
16.2 Use of Branch Name. Each of the parties acknowledge and agree that
the name "Branch," together with the goodwill associated with such name, is the
property of J. Alexander Branch, III. For a period of one year following the
First Closing, Mr. Branch agrees that the Partnership and New Management Company
shall have, without the payment of any additional consideration, a nonexclusive
license to use the name "Branch Properties" (but not the name "Branch") in the
United States.
16.3 Access to Books and Records. For a period of seven years following
the First Closing, Regency shall cause the Partnership and New Management
Company to preserve and to give the Branch Affiliates access, upon reasonable
advance notice and during normal business hours, to all books and records
delivered by Branch and the Subpartnerships to the Partnership and the First
Closing to enable the Branch Affiliates to prepare Tax returns or respond to any
request of any Tax authority or Governmental Entity regarding matters prior to
the First Closing.
16.4 German REIT Representative. As promptly as practicable following the
First Closing, Regency shall appoint a tax representative in Germany as required
by Auslandsinvestmentgesetz, enacted July 28, 1969, as it may be amended from
time to time ("AuslinvestG"), and shall otherwise comply with the AuslinvestG,
including its reporting and filing requirements, so long as any Branch partner
residing in Germany continues to hold Units or Regency stock issued pursuant to
the exercise of Redemption Rights.
16.5 Operation of New Management Company. From and after the First Closing
and through December 31, 1999, Regency shall use its reasonable best efforts to
cause New Management Company (i) to be operated in the ordinary and usual course
of business, (ii) to preserve the good will and advantageous relationships it
has received as part of Branch's Third Party Management Business with tenants,
customers, suppliers, independent contractors, employees and other Persons
material to the operation of such Third Party Management Business, and (iii) to
perform New Management's material obligations under the Management Contracts.
Regency agrees to cause to be preserved and made available for inspection,
during normal business hours and upon reasonable prior notice, by a
representative appointed by the Branch Principals, all books and records
relating to amounts due at any Third Party Earn-Out Closing. The Branch
Principals, acting as a group, shall have the right to conduct up to two audits
of such books and records for the purpose of confirming the amount due at any
Third Party Earn-Out Closing, and if any such audit discloses that Third Party
Fees have been
79
understated for any calendar year preceding a Third Party Earn-Out Closing by at
least 5% (five percent), Regency shall reimburse the Branch Principals for the
cost of such audit.
16.6 Reports on Designated Properties. From the First Closing Date until
the Third Earn-Out Closing Date (as defined in Section ), Regency shall provide
the Branch Principals, Nicholas B. Telesca, and OCP with quarterly reports in a
form reasonably acceptable to such parties relating to the performance of the
Designated Properties (as defined in Section ). Regency agrees to cause to be
preserved and made available for inspection, during normal business hours and
upon reasonable prior notice, by a representative appointed by the Branch
Principals, Nicholas B. Telesca, and OCP, all books and records relating to
amounts due at any Property Earn-Out Closing. The Branch Principals, Nicholas B.
Telesca, and OCP, acting as a group, shall have the right to conduct up to three
audits of such books and records for the purpose of confirming the amount due at
any Property Earn-Out Closing, and if any such audit discloses that any
Annualized NOI (as defined in Section ) has been understated for any calendar
year preceding a Property Earn-Out Closing resulting in an understatement of the
Aggregate Increased Value by more than $1,000,000, Regency shall reimburse the
Branch Principals, Nicholas B. Telesca, and OCP, as applicable, for the cost of
such audit.
16.7 Review of Net Credit. From the First Closing Date until the First
Earn-Out Closing Date, Regency shall provide the Branch Principals, Nicholas B.
Telesca and OCP with status reports and such other information applicable to the
calculation of the Net Credit pursuant to Article 13 as may be reasonably
requested by such parties. Regency agrees to cause to be preserved and made
available for inspection, during normal business hours and upon reasonable prior
notice, by a representative appointed by the Branch Principals, Nicholas B.
Telesca, and OCP, all books and records relating to the calculation of the Net
Credit. The Branch Principals, Nicholas B. Telesca, and OCP, acting as a group,
shall have the right to conduct an audit of such books and records for the
purpose of confirming the Net Credit, the Adjustment Amount, and the amount of
any Adjustment Units or Shares due (or the reduction in the Additional Units
due) on the First Earn-Out Closing Date as described in Article hereof, and if
such audit discloses that the Net Credit has been understated by more than five
percent (5%), Regency shall reimburse the Branch Principals, Nicholas B.
Telesca, and OCP as applicable, for the cost of such audit.
16.8 Environmental Matters. Branch hereby waives any claim for contribution
against the Partnership for any damages to the extent they arise from any
pre-closing conditions related to:
16.8.1 any Release of, threatened Release of, or disposal of any
Materials of Environmental Concern at any Property;
16.8.2 the operation or violation of any Environmental Law at any
Property; or
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16.8.3 any Environmental Claim pursuant to any Environmental Law in
connection with any Property.
ARTICLE 17: MISCELLANEOUS
17.1 Headings. The headings contained in this Agreement are for reference
purposes only and are in no way intended to described, interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof.
17.2 Pronouns and Plurals. Whenever required by the context, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
17.3 Time. Time is of the essence for this Agreement.
17.4 Survival. The provisions set forth in Article 1, Sections (c),
Section (d), Section , Section , Section , Section (with respect to the
indemnity set forth therein), Article 6 (subject to the limitations set forth
therein and in Article 15), Article 7 (subject to the limitations set forth
therein), Article 8 (subject to the limitations set forth therein), Article 9
(subject to the limitations set forth therein), Section , Article 13, Article
15, Article 16, and Article 17 shall survive the First Closing and shall not be
deemed to be merged into or waived by the instruments of such First Closing.
Except as provided in the foregoing sentence, no other provisions,
representations, warranties or other covenants or agreements contained in this
Agreement shall survive the First Closing.
17.5 Expenses. At each Closing, Regency shall cause Newco to make a
capital contribution to the Partnership to enable the Partnership to pay
expenses incident to this Agreement and the transactions contemplated hereunder,
including (i) environmental audits, Survey, UCC Searches, the Title Insurance
premium, state and local transfer Taxes, recording costs, assumption fees in
connection with the assumption by the Partnership of the Existing Mortgage Debt;
(ii) the cost of disseminating the disclosure document referred to in Section
and the travel and related expenses incurred in connection with meetings with
Branch partners; and (iii) the reasonable, itemized fees and expenses of
attorneys and accountants for Branch (and its partners) and attorneys and
accountants for OCP, as specifically described on Schedule . Except as otherwise
provided in Section , in the event that this Agreement is terminated before the
First Closing, each party hereto shall pay its own expenses incident to this
Agreement and the transactions contemplated hereunder, including all legal and
accounting fees and disbursements.
17.6 Costs of Litigation. The parties agree that the prevailing party in
any action brought with respect to or to enforce any right or remedy under this
Agreement shall be entitled to recover from the other party or parties all
reasonable costs and expenses of any nature
81
whatsoever incurred by the prevailing party in connection with such action,
including, without limitation, attorneys' fees and prejudgment interest.
17.7 Additional Actions and Documents. Each party hereto hereby agrees to
take or cause to be taken such further actions, to execute, deliver and file or
cause to be executed, delivered and filed such further documents, and to obtain
such consents, as may be necessary or as may be reasonably requested on or after
the Closing Date in order to fully effectuate the purposes, terms and conditions
of this Agreement, including, without limitation, the transfer and assignment to
the Partnership of, and the vesting in the Partnership title to, the Assets.
17.8 Remedies Cumulative. Except as otherwise expressly provided in
Section and subject to the limitations set forth in Article , the remedies
provided in this Agreement shall be cumulative and shall not preclude the
assertion or exercise of any other rights or remedies available by Law, in
equity or otherwise.
17.9 Entire Agreement; Amendment and Modification. This Agreement,
including the schedules, exhibits and other documents referred to herein or
furnished pursuant hereto, together with the letter agreement regarding
confidentiality between Branch and Regency dated July 1, 1996 (the terms of
which are incorporated herein) constitutes the entire understanding and
agreement among the parties hereto with respect to the transactions contemplated
herein, and supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein. No amendment,
modification or discharge of, or supplement to, this Agreement shall be valid or
binding unless set forth in writing and duly executed and delivered by the party
against whom enforcement of the amendment, modification, or discharge is sought.
In addition, this Agreement may not be amended, modified or supplemented without
the prior written consent of Security Capital and OCP.
17.10 Notices. All notices, demands, requests, and other communications
which may be or are required to be given, served, or sent by any party to any
other party pursuant to this Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified U.S. mail, return receipt requested and postage prepaid, or
transmitted by facsimile, telegram, telecopy or telex, addressed as follows:
(i) If to Branch: (ii) If to Regency:
Suite 1600, 400 Colony Square 121 W. Forsyth St., Suite 200
1201 Peachtree Street Jacksonville, Florida 32202
Atlanta, Georgia 30361 Telephone: (904) 356-7000
Telephone: (404) 892-8900 Facsimile: (904) 634-3428
Facsimile: (404) 892-8898 Attention: Martin E. Stein, Jr.,
Attention: J. Alexander Branch III President
Nicholas B. Telesca Bruce M. Johnson
Richard H. Lee
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copy to: copy to:
William B. Fryer, Esq. Charles E. Commander, Esq.
King & Spalding Foley & Lardner
191 Peachtree Street, NE Green Leaf Building
Suite 4800 200 Laura Street
Atlanta, Georgia 30303 Jacksonville, Florida 32202
Telephone: (404) 572-4600 Telephone: (904) 359-2000
Facsimile: (404) 572-5148 Facsimile: (904) 359-8700
and copy to OCP and its counsel
(at the addresses set forth below)
(iii) If to OCP:
c/o LaSalle Advisors Limited
100 E. Pratt Street, 20th Floor
Baltimore, Maryland 21202
Telephone: (410) 347-0600
Facsimile: (410) 528-8129
Attention: Stanley J. Kraska, Jr.
copy to:
Elizabeth Grieb, Esq.
Piper & Marbury LLP
36 South Charles Street
Baltimore, Maryland 21201
Telephone: (410) 539-2530
Facsimile: (410) 539-0489
If personally delivered, such communication shall be deemed delivered upon
actual receipt; if electronically transmitted pursuant to this Section , such
communication shall be deemed delivered the next business day after transmission
(and sender shall bear the burden of proof of delivery); if sent by overnight
courier pursuant to this Section , such communication shall be deemed delivered
upon receipt; and if sent by U.S. mail pursuant to this Section , such
communication shall be deemed delivered as of the date of delivery indicated on
the receipt issued by the relevant postal service, or, if the addressee fails or
refuses to accept delivery, as of the date of such failure or refusal. Any party
to this Agreement may change its address for the purposes of this Agreement by
giving notice thereof in accordance with this Section .
17.11 Waivers. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any other
documents furnished in connection with or pursuant to this Agreement shall
impair any such right, power or privilege to be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right,
83
power or privilege, or the exercise of any other right, power or privilege. No
waiver shall be valid against any party hereto unless made in writing and signed
by the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein.
17.12 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.
17.13 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claim or disputes relating thereto, shall be governed by
and construed and enforced in accordance with the Laws and judicial decisions of
the State of Florida, without regard to conflict of Law principles (excluding
the choice of Law rules thereof), except for actions affecting title to real
property, in which case the Laws of the State in which the real property is
located shall apply.
17.14 Assignment; Parties in Interest.
17.14.1 No party hereto shall assign its rights and/or obligations
under this Agreement, in whole or in part, whether by operation of Law or
otherwise, without the prior written consent of the other parties hereto.
17.14.2 Parties in Interest. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the respective administrators,
successors, legal representatives and permitted assigns of the parties hereto.
Nothing contained herein shall be deemed to confer upon any other Person any
right or remedy under or by reason of this Agreement.
17.15 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto, and no provision of this Agreement shall be
deemed to confer any third party benefit, provided that all representations,
warranties and covenants made by Regency in this Agreement shall run in favor of
Branch's partners upon the dissolution of Branch, who shall have the right to
enforce a Claim for indemnification pursuant to Article in their own right, and
further provided that the amendment provisions set forth in Section shall run in
favor of Security Capital and OCP.
17.16 Severability. Every provision of this Agreement is intended to be
severable. If any provision or term of this Agreement, or the application of a
provision or term to any Person or circumstance, shall be held invalid, illegal
or unenforceable, the validity, legality or enforceability of the other
provisions and terms hereof, or the application of such provision or term to
Persons or circumstances other than those to which it is held invalid, illegal
or enforceable, shall not be affected thereby, and there shall be deemed
substituted for the provision or term at issue a valid, legal and enforceable
provision as similar as possible to the provision or term at issue.
17.17 Limitation of Liability. Any obligation or liability whatsoever of
Regency which may arise at any time under this Agreement or any obligation or
liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be satisfied, if at all,
out of Regency's assets only. No such obligation or liability shall be
84
personally binding upon, nor shall resort for the enforcement thereof be had to,
the property of any of its shareholders, trustees, officers, employees or
agents, regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.
17.18 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTION
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE PROVISIONS OF
THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT.
17.19 Tax Advice. Branch has relied on its accountants, attorneys and
other advisors for advice in connection with structuring the transactions
contemplated by this Agreement and is not relying on Regency or Regency's
accountants, attorneys or other advisors with regard to the structure of such
transactions.
IN WITNESS WHEREOF, the parties hereto have caused this Contribution
Agreement to be duly executed on their behalf as of the date first above
written.
BRANCH PROPERTIES, L.P.
By: Branch Realty, Inc.
Sole General Partner
By: /s/ Richard H. Lee
Its: Executive Vice President
and Secretary
BRANCH REALTY, INC.
By: /s/ Richard H. Lee
Its: Executive Vice President
and Secretary
REGENCY REALTY CORPORATION
By: /s/ Bruce M. Johnson
Bruce M. Johnson
Title: Executive Vice President
THE REGENCY GROUP, INC., as to
Articles and only
By: /s/ Bruce M. Johnson
Bruce M. Johnson
Title: Executive Vice President
/s/ J. Alexander Branch
J. ALEXANDER BRANCH, III, as
to Section only
85
SCHEDULE
Assumed Liabilities
A. The aggregate principal amount of Existing Mortgage Debt, plus current
interest through the First Closing Date, provided, however, that to the extent
any such indebtedness is nonrecourse, the Partnership shall assume such
nonrecourse Existing Mortgage Debt (subject to the nonrecourse provisions
relating thereto).
B. The Permitted Exceptions.
C. All obligations arising after January 1, 1997 under the following
Contracts:
1. Acquisition Contracts (Schedule )
2. Development Contracts (Schedule )
3. Management Contracts (Schedule )
4. Repair Contracts (Schedule )
5. Service Contracts (to the extent provided in Section )
6. TI Contracts (Schedule )
7. Real Property Leases (Schedule )
8. Personal Property Leases (Schedule )
9. Leasing Commission Contracts (Schedule )
10. The insurance policies listed on Schedule
11. The partnership agreements of the Subpartnerships (Schedule )
12. The other Contracts listed on Schedule
D. The permits, licenses, approvals, zoning exceptions and approvals,
consents and orders assigned to the Partnership pursuant to
Section .
E. The employee benefits for Continuing Employees and other obligations
with respect to Branch employees described in Section (Continuation
of Employees).
F. The Liabilities shown on the Final Balance Sheet.
G. Gottlieb Consulting Agreement and Termination Agreement.
H. Corbett letter agreement.
I. Sanzo Termination Agreement
J. Soloman Termination Agreement
K. The Assumed Obligations described in Section hereof.
1
2
SCHEDULE
Properties
1) Limited or Special Warranty Deed
2) Bill of Sale
3) Assignment of Leases, Contracts, Permits and Security Deposits
Acquisition Properties not closed
1) Assignment of Purchase and Sale Agreement and Deposits
2) Bill of Sale
3) Assignment of Leases, Contracts, Permits and Security Deposits
Subpartnership Interests
1) Assignment of Partnership Interest
Branch Headquarters and Other Assets
1) Assignment of Leases, Contracts, Permits and Security Deposits
(including Third Party Management Business)
2) Bill of Sale
3
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS......................................................2
1.1 Definitions......................................................2
ARTICLE 2: FORMATION OF PARTNERSHIP........................................14
2.1 Contribution Values.............................................14
-------------------
2.2 Capitalization of the Partnership...............................14
---------------------------------
2.3 Subsequent Closings.............................................15
-------------------
2.4 Assumption by Partnership of Liabilities........................20
----------------------------------------
ARTICLE 3: REORGANIZATION..................................................20
3.1 Reorganization..................................................20
ARTICLE 4: NEW MANAGEMENT COMPANY..........................................21
4.1 New Management Company..........................................21
ARTICLE 5: COVENANTS.......................................................21
5.1 Implementing Agreement..........................................21
----------------------
5.2 Preservation of Business........................................21
------------------------
5.3 Consents and Approvals..........................................22
----------------------
5.4 Meeting of Regency's Shareholders...............................22
---------------------------------
5.5 Purchase of Acquisition Properties..............................23
----------------------------------
5.6 Additional Acquisitions.........................................23
-----------------------
5.7 Distributions...................................................23
-------------
5.8 Continuation of Employees.......................................24
-------------------------
5.9 Regency Disclosure Document.....................................24
---------------------------
5.10 Exclusivity.....................................................25
-----------
5.11 New Contracts...................................................26
-------------
5.12 Leasing Arrangements............................................26
--------------------
5.13 Obligation to Supplement Information............................26
------------------------------------
5.14 Access to Information; Environmental Audits.....................26
-------------------------------------------
5.15 Monthly Updates of Rent Rolls and Operating Statements..........27
------------------------------------------------------
5.16 Tenant Estoppels................................................27
----------------
5.17 Service Contracts...............................................27
-----------------
5.18 Work Contracts..................................................28
--------------
5.19 Title Matters...................................................28
-------------
5.20 Damage..........................................................29
------
5.21 Condemnation....................................................29
------------
5.22 Peartree Agreement..............................................29
------------------
ARTICLE 6: REPRESENTATIONS, WARRANTIES AND FURTHERCOVENANTS OF
BRANCH................................................................29
i
6.1 As to Branch and the Subpartnerships............................30
------------------------------------
6.1.1 Due Incorporation, etc....................................30
-----------------------
6.1.2 Due Authorization; Consents; No Violations................30
------------------------------------------
6.1.3 Branch Financial Statements...............................31
---------------------------
6.1.4 No Adverse Change.........................................32
-----------------
6.1.5 Title to Assets...........................................32
---------------
6.1.6 Condition and Sufficiency of Assets.......................32
-----------------------------------
6.1.7 Leased Real Property......................................32
--------------------
6.1.8 Leased Personal Property..................................32
------------------------
6.1.9 Intellectual Property.....................................33
---------------------
6.1.10 Existing Mortgage Debt...................................33
----------------------
6.1.11 Contracts................................................33
---------
6.1.12 Management Contracts.....................................35
--------------------
6.1.13 Permits..................................................35
-------
6.1.14 Insurance Policies.......................................35
------------------
6.1.15 Tax Matters..............................................35
-----------
6.1.16 Distribution and Payments................................36
-------------------------
6.1.17 Employee Benefit Plans...................................36
----------------------
6.1.18 Other Employee Matters...................................37
----------------------
6.1.19 No Defaults or Violations................................37
-------------------------
6.1.20 Litigation...............................................38
----------
6.1.21 Brokers..................................................38
-------
6.1.22 Insolvency...............................................38
----------
6.1.23 Branch Closing Agreements................................38
-------------------------
6.1.24 As to the Subpartnerships Only...........................38
------------------------------
6.2 As to the Properties............................................39
--------------------
6.2.1 Title.....................................................39
-----
6.2.2 Purchase Agreement........................................39
------------------
6.2.3 Compliance with Laws; Zoning..............................39
----------------------------
6.2.4 Accuracy of Documents and Information.....................39
-------------------------------------
6.2.5 Fees; Assessments; Condemnation...........................40
-------------------------------
6.2.6 Physical Condition........................................40
------------------
6.2.7 Utilities; Access.........................................40
-----------------
6.2.8 Permits...................................................41
-------
6.2.9 No Default................................................41
----------
6.2.10 Use of Property..........................................41
---------------
6.2.11 Contract Payments........................................41
-----------------
6.2.12 Environmental Matters-Properties.........................41
--------------------------------
6.2.13 Environmental Matters - Previously Owned Properties......42
---------------------------------------------------
6.2.14 Structural Defects.......................................43
------------------
6.2.15 No Obligations...........................................43
--------------
6.2.16 Rent Roll................................................43
---------
6.2.17 Leases...................................................43
------
6.2.18 Non-Certificate Leases...................................43
----------------------
ii
6.2.19 Development Properties...................................44
6.2.20 Budgets and Projections..................................44
6.2.21 Work Contracts...........................................44
6.2.22 Acquisition Properties...................................45
6.3 Accredited Investor Status......................................45
--------------------------
6.4 Accuracy of Statements..........................................45
----------------------
6.5 Limit on Representations........................................45
------------------------
6.6 Limitation on Remedies..........................................45
----------------------
ARTICLE 7: REPRESENTATIONS, WARRANTIES AND FURTHER COVENANTS OF
BRANCH REALTY.........................................................46
7.1 Due Organization................................................46
7.2 Due Authorization; Consents; No Violations......................46
7.3 Shareholders....................................................47
7.4 Tax Matters.....................................................47
7.5 Limitation on Remedies..........................................47
ARTICLE 8: REPRESENTATIONS, WARRANTIES ANDFURTHER COVENANTS OF
REGENCY...............................................................47
8.1 Due Incorporation, etc..........................................48
8.2 Due Authorization; Consents; No Violations......................48
8.3 Capitalization..................................................49
8.4 Valid Issuance of Shares. .....................................50
8.5 Regency Exchange Act Reports....................................50
8.6 Permits.........................................................51
8.7 No Adverse Change...............................................51
8.8 No Defaults or Violations.......................................51
8.9 Litigation......................................................52
8.10 Title to Properties; Leasehold Interests........................52
8.11 Environmental Matters...........................................52
8.12 Taxes...........................................................53
8.13 REIT Status.....................................................54
8.14 Employees: ERISA................................................54
8.15 Accuracy of Statements..........................................54
8.16 Limitation on Remedies..........................................54
8.17 Continuity of Business Enterprise; Tax Treatment of Reorganization.54
ARTICLE 9: REPRESENTATIONS AND WARRANTIES OF TRG............................55
9.1 Due Incorporation, etc..........................................55
9.2 Due Authorization; Consents; No Violations......................55
9.3 Limitation on Remedies..........................................56
ARTICLE 10: CONDITIONS PRECEDENT TO OBLIGATIONS OF REGENCY.................56
10.1 Conditions for the First Closing................................56
iii
ARTICLE 11: CONDITIONS PRECEDENT TO OBLIGATIONSOF BRANCH
AFFILIATES............................................................58
11.1 Conditions for the First Closing................................58
ARTICLE 12: CLOSINGS.......................................................59
12.1 Closing.........................................................59
12.2 Contribution to the Partnership.................................60
12.3 The Reorganization..............................................63
12.4 Closing Statements/Escrow Fees..................................64
ARTICLE 13: PRORATIONS AND ADJUSTMENTS.....................................64
13.1 Adjustments.....................................................64
13.2 Proration Credit................................................65
13.3 Line of Credit..................................................65
13.4 Assumed Obligations.............................................65
13.5 Pipeline Transactions...........................................65
13.6 Final Adjustment Amount.........................................67
13.7 Additional Adjustment Units..................................67
13.8 Reduction in Units...........................................68
13.9 Exclusion Option..............................................68
ARTICLE 14: TERMINATION AND REMEDIES.......................................69
14.1 Termination.....................................................69
14.2 Effect of Termination...........................................70
14.3 Remedies........................................................70
ARTICLE 15: INDEMNIFICATION................................................71
15.1 By Branch.......................................................71
15.2 By Branch Realty................................................71
15.3 By the Partnership..............................................72
15.4 By Regency......................................................72
15.5 By TRG..........................................................72
15.6 Indemnification of Third-Party Claims...........................72
15.7 Payment.........................................................73
15.8 Threshold and Cap...............................................76
15.9 No Waiver.......................................................77
15.10 Designated Representatives......................................77
ARTICLE 16: POST-CLOSING COVENANTS.........................................77
16.1 Completion of 1996 Audit........................................77
16.2 Use of Branch Name..............................................78
16.3 Access to Books and Records.....................................78
16.4 German REIT Representative......................................78
16.5 Operation of New Management Company.............................78
iv
16.6 Reports on Designated Properties................................78
--------------------------------
16.7 Review of Net Credit.........................................79
--------------------
16.8 Environmental Matters...........................................79
---------------------
ARTICLE 17: MISCELLANEOUS..................................................79
17.1 Headings........................................................79
17.2 Pronouns and Plurals............................................80
17.3 Time............................................................80
17.4 Survival........................................................80
17.5 Expenses........................................................80
17.6 Costs of Litigation.............................................80
17.7 Additional Actions and Documents................................80
17.8 Remedies Cumulative.............................................81
17.9 Entire Agreement; Amendment and Modification....................81
17.10 Notices.........................................................81
17.11 Waivers.........................................................82
17.12 Counterparts....................................................82
17.13 Governing Law...................................................82
17.14 Assignment; Parties in Interest.................................83
17.15 No Third Party Beneficiaries....................................83
17.16 Severability....................................................83
17.17 Limitation of Liability.........................................83
17.18 Waiver of Jury Trial............................................83
17.19 Tax Advice......................................................83
v
LIST OF SCHEDULES TO CONTRIBUTION AGREEMENT
Schedule Acquisition Contracts (include closing timetables)
Schedule Assumed Liabilities
Schedule Capital Expenditure Budget and Schedule
Schedule Development Contracts
Schedule Excluded Assets
Schedule Existing Mortgage Debt
Schedule Management Contracts
Schedule Permitted Exceptions
Schedule Real Property
Schedule Rent Roll
Schedule Repair Contracts
Schedule Service Contracts
Schedule Third Party Fees and Clients
Schedule TI Budgets and Schedules
Schedule TI Contracts
Schedule Units to and Percentage Interests of Branch Partners
- Branch limited partners ()
- Units to Branch ( (a))
- Subsequent Closing rights ((b))
- Property Earn-Out Units ()
- Third Party Earn-Out Units ()
- Adjustment Units ()
- Pledge of Security Interests and Liability ()
- Number of Realty Units ()
Schedule Base NOI for Existing Properties
Schedule Base Value for Existing Properties
Schedule Existing Properties
Schedule New Acquisition Properties
Schedule New Development Properties
Schedule Percentage Interests of Branch Principals and
Reorganization Shares
Schedule Disposition Properties
Schedule Assumed Employee Benefits
Schedule Branch Employees with Knowledge of the Properties and
Branch
Schedule States in Which Subpartnerships Do Business
Schedule Branch Consents
Schedule Branch Financial Statements
Schedule Adverse Changes
Schedule Leased Real Property
Schedule Leased Personal Property
Schedule Other Contracts (including Service Contracts with Termination
Fees)
vi
Schedule Rights-of-Setoff, Counterclaims and Defaults under Management
Contracts
Schedule Insurance Policies (including Subpartnerships)
Schedule Tax Matters (including Subpartnerships)
Schedule Options, Warrants, Etc. Entitling Persons to Receive Units
Schedule Employee Benefit Plans
Schedule Defaults and Violations
Schedule Litigation
Schedule Leasing Commissions
Schedule Subpartnerships' Limited Partnership Agreements, Equity
Owners, and prior Properties (successor liabilities)
Schedule Material Property Defaults, Setoffs
Schedule Condemnation Proceedings/road widenings
Schedule Environmental Assessment Reports (Branch, predecessors,
Regency)
Schedule Structural Defects
Schedule Tenant Defaults
Schedule Development Budget and Schedule
Schedule Accredited Investor Status
Schedule Persons Whose Knowledge is Attributed to Regency
Schedule (b) Regency's Non-100% Interests
Schedule (b) Regency Consents
Schedule Commitments to Issue Stock by Regency
Schedule Obligation to Redeem by Regency
Schedule Other Regency Voting Agreements
Schedule Regency Litigation
Schedule Regency Environmental Matters
Schedule Branch's Consents Required by Regency for Closing
Schedule Branch's Consents Required by Branch for Closing
Schedule Transfer Documents
Schedule Prorations and Adjustments
Schedule Reimbursement Amount for Option Properties
Schedule Branch's Legal and Accounting Expenses
vii
LIST OF EXHIBITS TO CONTRIBUTION AGREEMENT
Exhibit A Form of Partnership Agreement
Exhibit B Form of Voting Agreements
Exhibit C Form of Security Capital's Waiver and Consent
Exhibit D Form of OCP Consent
Exhibit Form of Registration Rights Agreement
Exhibit Form of Proposed Amendments to Regency's Articles of
Incorporation
Exhibit Form of Agreement with Augstein and Schwaighofer
Exhibit -1 Form of A. Branch's Non Compete Agreement
Exhibit 12.2.1(e)-2 Form of W. Hall's, R. Lee's, and N. Telesca's Non Compete
Agreement
Exhibit Form of A. Branch's Lock-Up Agreement
viii
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
REGENCY RETAIL PARTNERSHIP, L.P.
TABLE OF CONTENTS
ARTICLE 1
DEFINED TERMS............................................1
"Act" ................................................1
"Additional Limited Partner".............................1
"Additional Unit"........................................1
"Adjusted Capital Account"...............................2
"Adjusted Capital Account Deficit".......................2
"Adjusted Property"......................................2
"Affiliate"..............................................2
"Agreed Value"...........................................2
"Agreement"..............................................2
"Articles of Incorporation"..............................2
"Assignee"...............................................2
"Available Cash".........................................2
"Book-Tax Disparities"...................................3
"Business Day"...........................................3
"Capital Account"........................................3
"Capital Contribution"...................................3
"Capital Transaction"....................................3
"Capital Transaction Proceeds"...........................3
"Carrying Value".........................................4
"Cash Amount"............................................4
"Certificate"............................................4
"Charter Amendment"......................................4
"Class A Units"..........................................4
"Class B Units"..........................................4
"Closing Date"...........................................4
"Code" ................................................4
"Common Stock"...........................................4
"Consent ................................................4
"Contributed Property"...................................5
"Contribution Agreement".................................5
"Cumulative Unpaid Priority Distribution Account"........5
"Debt" ................................................5
"Depreciation"...........................................5
"Event of Dissolution"...................................6
"First Closing"..........................................6
"First Redemption Date"..................................6
"General Partner"........................................6
"General Partnership Interest"...........................6
"Immediate Family".......................................6
"Incapacity".............................................6
"Indemnitee".............................................6
"IRS" ................................................7
"Limited Partner"........................................7
"Limited Partnership Interest"...........................7
"Liquidating Transaction"................................7
"Liquidator".............................................7
"Management Business"....................................7
"Net Income" and "Net Loss"..............................7
"Non-U.S. Person"........................................8
"Nonrecourse Deductions".................................8
"Nonrecourse Liability"..................................8
"Notice of Redemption"...................................8
"Option Date"............................................8
"Original Limited Partner"...............................8
"Original Limited Partnership Unit"......................8
"Partner"................................................8
"Partner Minimum Gain"...................................8
"Partner Nonrecourse Debt"...............................9
"Partner Nonrecourse Deductions".........................9
"Partnership"............................................9
"Partnership Interest"...................................9
"Partnership Minimum Gain"...............................9
"Partnership Record Date"................................9
"Partnership Unit" or "Unit".............................9
"Partnership Year".......................................9
"Percentage Interest"....................................9
"Person" ................................................9
"Pledged Units".........................................10
"Prime Rate"............................................10
"Priority Distribution Amount"..........................10
"Recapture Income"......................................10
"Recourse Liabilities"..................................10
"Redeeming Partner".....................................10
"Redemption Amount".....................................10
"Redemption Right"......................................10
"Regency"...............................................10
"Regulations"...........................................10
"REIT" ...............................................10
"Securities Act"........................................10
"704(c) Value"..........................................10
"Share Amount"..........................................11
"Shares" ...............................................11
"Specified Redemption Date".............................11
"Subsequent Closing"....................................11
"Subsidiary"............................................11
"Substituted Limited Partner"...........................11
"Transaction"...........................................11
"Unit Adjustment Factor"................................11
"Unrealized Gain".......................................11
"Unrealized Loss".......................................12
"Valuation Date".....................................12
"Value" ............................................12
ARTICLE 2
ORGANIZATIONAL MATTERS.............................................12
Section 2.1 Organization; Application of Act................12
Section 2.2 Name............................................12
Section 2.3 Registered Office and Agent; Principal Office...13
Section 2.4 Term............................................13
ARTICLE 3
PURPOSE.............................................................13
Section 3.1 Purpose and Business.............................13
Section 3.2 Powers...........................................13
ARTICLE 4
CAPITAL CONTRIBUTIONS; ISSUANCE OF UNITS;
CAPITAL ACCOUNTS...................................................14
Section 4.1 Capital Contributions of the Partners...........14
Section 4.2 Issuances of Additional Partnership Interests...15
Section 4.3 No Preemptive Rights............................15
Section 4.4 Capital Accounts of the Partners................15
ARTICLE 5
DISTRIBUTIONS........................................................17
Section 5.1 Requirement and Characterization of Distributions.17
Section 5.2 Amounts Withheld.............................. ...18
Section 5.3 Withholding.......................................18
Section 5.4 Distributions Upon Liquidation....................19
ARTICLE 6
ALLOCATIONS.........................................................19
Section 6.1 Allocations of Net Income and Net Loss...........19
Section 6.2 Special Allocation Rules.........................21
Section 6.3 Allocations for Tax Purposes.....................22
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS...............................24
Section 7.1 Management.......................................24
Section 7.2 Certificate of Limited Partnership...............28
Section 7.3 Restriction on General Partner's Authority.......29
Section 7.4 Responsibility for Expenses......................29
Section 7.5 Outside Activities of the General Partner........29
Section 7.6 Contracts with Affiliates........................30
Section 7.7 Indemnification..................................30
Section 7.8 Liability of the General Partner.................31
Section 7.9 Other Matters Concerning the General Partner.....32
Section 7.10 Title to Partnership Assets......................33
---------------------------
Section 7.11 Reliance by Third Parties........................34
-------------------------
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.......................34
Section 8.1 Limitation of Liability........................34
Section 8.2 Management of Business.........................34
Section 8.3 Outside Activities of Limited Partners.........34
Section 8.4 Priority Among Partners........................35
Section 8.5 Rights of Limited Partners Relating to the
Partnership.......................35
Section 8.6 Redemption of Units...........................36
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS...........................40
Section 9.1 Records and Accounting........................40
Section 9.2 Fiscal Year...................................40
Section 9.3 Reports.......................................40
ARTICLE 10
TAX MATTERS.........................................................41
Section 10.1 Preparation of Tax Returns.......................41
Section 10.2 Tax Elections....................................41
Section 10.3 Tax Matters Partner..............................41
Section 10.4 Organizational Expenses..........................42
ARTICLE 11
TRANSFERS AND WITHDRAWALS.........................................43
Section 11.1 Transfer.......................................43
Section 11.2 Transfer of General Partner's Partnership
Interests..........................43
Section 11.3 Limited Partners' Rights to Transfer...........44
Section 11.4 Substituted Limited Partners...................46
Section 11.5 Assignees......................................46
Section 11.6 General Provisions.............................46
ARTICLE 12
ADMISSION OF PARTNERS...............................................47
Section 12.1 Admission of Successor General Partner...........47
Section 12.2 Admission of Additional Limited Partners.........47
Section 12.3 Amendment of Agreement and Certificate...........48
ARTICLE 13
DISSOLUTION AND LIQUIDATION......................................48
Section 13.1 Dissolution...................................48
Section 13.2 Winding Up....................................48
Section 13.3 Compliance with Timing Requirements of Regulations;
Allowance for Contingent or Unforeseen
Liabilities or Obligations............51
-------------------------------------
Section 13.5 Deemed Distribution and Recontribution........52
--------------------------------------
Section 13.6 Rights of Limited Partners......................52
--------------------------
Section 13.7 Notice of Dissolution...........................52
---------------------
Section 13.8 Cancellation of Certificate of Limited
Partnership...........................53
------------------------------------------
Section 13.9 Reasonable Time for Winding-Up................53
------------------------------
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.....................53
Section 14.1 Amendments....................................53
Section 14.2 Meetings of Limited Partners..................54
ARTICLE 15
GENERAL PROVISIONS..................................................55
Section 15.1 Addresses and Notice.............................55
Section 15.2 Titles and Captions..............................55
Section 15.3 Pronouns and Plurals.............................56
Section 15.4 Further Action...................................56
Section 15.5 Binding Effect...................................56
Section 15.6 Waiver of Partition..............................56
Section 15.7 Entire Agreement.................................56
Section 15.8 Remedies Not Exclusive...........................56
Section 15.9 Time.............................................56
Section 15.10 Creditors........................................56
Section 15.11 Waiver...........................................56
Section 15.12 Execution Counterparts...........................56
Section 15.13 Applicable Law...................................56
Section 15.14 Invalidity of Provisions.........................57
ARTICLE 16
POWER OF ATTORNEY...................................................57
Section 16.1 Power of Attorney................................57
SCHEDULES
Schedule 7.8(b) Regency's PFIC Obligations
Schedule 8.6(a) Transfer Restrictions in Regency's Articles of
Incorporation
Schedule 8.6(c)(i) Maximum Aggregate Shares issuable to the Original
Limited Partners prior to the Shareholder Approval
Date
Schedule 13.4(a) Electing Partners with Deficit Capital Account
Make-up Requirement
EXHIBITS
Exhibit A Partners, Contributions and Partnership Interests
(addresses)
Exhibit B Notice of Redemption
Exhibit C Security Capital Waiver and Consent Agreement
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
REGENCY RETAIL PARTNERSHIP, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of Regency
Retail Partnership, L.P. (the "Partnership") is entered into this 7th day of
March, 1997 by and among Regency Atlanta, Inc., a Georgia corporation, as the
General Partner (the "General Partner") and the Persons whose names are set
forth on Exhibit A as attached hereto, as the Limited Partners, together with
any other Persons who become Partners in the Partnership as provided herein;
WHEREAS, the Partnership has been formed as a limited partnership under
the Revised Uniform Limited Partnership Act of the State of Delaware, and the
Partners wish to amend and restate this Agreement to set forth their respective
rights and duties relating to the Partnership on the terms as provided herein;
WHEREAS, Regency Atlanta, Inc. has been admitted as a new General Partner,
Branch Properties, Ltd. has withdrawn as the initial general partner and been
admitted as the Original Limited Partner (as hereinafter defined), and Branch
Retail Corporation has withdrawn as the initial limited partner;
WHEREAS, the Partners have entered into the Contribution Agreement (as
hereafter defined) pursuant to which, among other things, the parties agreed to
establish the Partnership;
WHEREAS, the Partnership has acquired certain properties prior to the
admission of Regency Atlanta, Inc. as General Partner;
WHEREAS, pursuant to the Contribution Agreement the parties have agreed to
contribute additional assets to the Partnership;
WHEREAS, Branch Properties, Ltd. intends to distribute the Units (as
hereafter defined) that it receives pursuant to the Contribution Agreement to
its respective partners, who shall upon such distribution constitute Original
Limited Partners (as hereafter defined) in place of Branch Properties, Ltd.;
NOW, THEREFORE, in consideration of the premises, the mutual promises
and agreements herein made, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the General Partner
and the Limited Partners hereby agree as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 4.2 hereof and who is shown as such on
the books and records of the Partnership.
"Additional Unit" means a Unit issued to an Original Limited Partner
(but not to any holder of a Class A Unit) at a Subsequent Closing pursuant to
the Contribution Agreement.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each Partnership Year (i) increased by any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii)
decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704- 1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as of
the end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 4.4 hereof.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Agreed Value" means (i) in the case of any Contributed Property, (a)
the Agreed Value of such property at the time of its contribution to the
Partnership as set forth by separate letter agreement or (b) if there is no such
letter agreement, the 704(c) Value of such property or other consideration,
reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed; and (ii) in
the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the regulations
thereunder.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Articles of Incorporation" means the Amended and Restated Articles of
Incorporation of Regency, as filed with the Florida Department of State, as
further amended or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have
been transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Section 11.5.
"Available Cash" means with respect to any period for which such
calculation is being made,
(a) all cash revenues and funds received by the Partnership
from whatever source (excluding the proceeds of any Capital
Contribution other than a Capital Contribution made by the General
Partner for the purpose of funding distributions to Limited Partners
and excluding Capital Transaction Proceeds) plus the amount of any
reduction (including, without limitation, a reduction resulting because
the General Partner determines such amounts are no longer necessary) in
reserves of the Partnership, which reserves are referred to in clause
(b)(iv) below;
(b) less the sum of the following (except to the extent made
with the proceeds of any Capital Contribution and except to the extent
taken into account in determining Capital Transaction Proceeds), all of
which shall be paid subject to Section 7.1(h):
(i) all interest, principal and other debt
payments made during such period by the Partnership,
(ii) all other cash expenditures (including
capital expenditures) made by the Partnership during such period,
(iii) investments in any entity (including loans made
thereto) to the extent that such investments are not otherwise
described in clauses (b)(i) or (ii), and
(iv) the amount of any increase in reserves
established during such period which the General Partner
determines is necessary or appropriate in its sole and
absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 4.4 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City, New York are authorized or required by
law to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Section 4.4 hereof.
"Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1 or 4.2 hereof and which shall be treated as a contribution to the
Partnership pursuant to Section 721(a) of the Code.
"Capital Transaction" means a sale, exchange or other disposition
(other than in liquidation of the Partnership) or a financing or refinancing by
the Partnership (which shall not include any loan or financing to the General
Partner as permitted by Section 7.1(a)(iii) of a Partnership asset or any
portion thereof.
"Capital Transaction Proceeds" means the net cash proceeds of a Capital
Transaction, after deducting all expenses incurred in connection therewith and
after application of any proceeds, at the sole discretion of the General
Partner, toward the payment of any indebtedness of the Partnership secured by
the property that is the subject of that Capital Transaction, the purchase,
improvement or expansion of Partnership property, or the establishment of any
reserves deemed reasonably necessary by the General Partner; provided, however,
that if the Partnership obtains financing for Partnership properties for which
no permanent financing has previously been obtained, the proceeds of such
financing shall not be deemed to be Capital Transaction Proceeds if and to the
extent that the General Partner determines to reinvest such proceeds in
additional and existing real property investments of the Partnership.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property (or in the case of an
Adjusted Property, the fair market value of such property at the time of its
latest adjustment under Section 4.4(d)) reduced (but not below zero) by all
Depreciation with respect to such property charged to the Partners' Capital
Accounts and (ii) with respect to any other Partnership property, the adjusted
basis of such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from time to
time in accordance with Section 4.4 hereof, and to reflect changes, additions or
other adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Cash Amount" means an amount of cash arrived at by multiplying (i) the
number of Partnership Units that are the subject of a Notice of Redemption times
(ii) the Unit Adjustment Factor times (iii) the Value on the Valuation Date of a
Share.
"Certificate" means the Certificate of Limited Partnership relating to
the Partnership filed in the office of the Secretary of State of the State of
Delaware, as amended from time to time in accordance with the terms hereof and
the Act.
"Charter Amendment" means the proposed amendment to Regency's Articles
of Incorporation in the form attached as Exhibit 5.4 to the Contribution
Agreement.
"Class A Units" means the Partnership Interest in the Partnership
issued pursuant to Section 4.2 hereof which has the same rights as the Original
Limited Partnership Units (including the right to vote together with the
Original Limited Partners as a class, to receive distributions pursuant to
Article 5 and to receive allocations pursuant to Article 6), except (i) the
holder of such a Class A Unit shall not have the right to receive Additional
Units hereunder and (ii) the Redemption Rights with respect to Class A Units
shall be subordinate as set forth in Sections 8.6(a), 8.6(c)(i) and 8.6(c)(ii)
hereof.
"Class B Units" means the Partnership Interest in the Partnership owned
by a Partner (including the General Partner, Regency or any Affiliate of
Regency), other than an Original Limited Partner and the holders of Class A
Units. As provided in Sections 5.1(a) and 5.1(b), the distribution rights for
the Class B Units are subordinate to the distribution rights for the Units and
Class A Units.
"Closing Date" has the meaning set forth in the Contribution Agreement.
"Code" means the Internal Revenue Code of 1986, as amended. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"Common Stock" means the voting Common Stock, $0.01 par value, of
Regency.
"Consent" means with respect to Limited Partners holding any class of
Units, the written consent of those Limited Partners holding a majority of such
Units at the time in question. Consent of the Original
Limited Partners means the written consent of Original Limited Partners holding
a majority of the Original Limited Partnership Units outstanding at the time in
question.
"Contributed Property" means each property or other asset (but
excluding cash), in such form as may be permitted by the Act contributed or
deemed contributed to the Partnership. Once the Carrying Value of a Contributed
Property is adjusted pursuant to Section 4.4(d) hereof, such property shall no
longer constitute a Contributed Property for purposes of Section 4.4(d) hereof,
but shall be deemed an Adjusted Property for such purposes.
"Contribution Agreement" means that certain Contribution Agreement and
Plan of Reorganization, dated as of February 10, 1997, by and among Branch
Properties, Ltd., Branch Realty Inc. and Regency.
"Cumulative Unpaid Accrued Return Account" means, with respect to any
Original Limited Partner, an amount equal to (i) the interest that would accrue
at the Prime Rate plus two percent (2%) on such Partner's Cumulative Unpaid
Priority Distribution Account outstanding from time to time, less (ii) the
cumulative amount of Available Cash and the cumulative amount of any Capital
Transaction Proceeds distributed with respect to the Original Limited
Partnership Units of such Partner in reduction of such Cumulative Unpaid Accrued
Return Account pursuant to Sections 5.1(a)(ii) and 5.1(b)(i).
"Cumulative Unpaid Priority Distribution Account" means, with respect
to any Original Limited Partner an amount equal to (i) the aggregate of all
Priority Distribution Amounts for Original Limited Partnership Units held by
such Partner, less (ii) the cumulative amount of Available Cash and the
cumulative amount of any Capital Transaction Proceeds distributed with respect
to such Original Limited Partnership Units of such Partner in reduction of such
Cumulative Unpaid Priority Distribution Account pursuant to Sections 5.1(a)(i),
5.1(a)(iii) and 5.1(b)(ii).
"Debt" means, as to any Person, as of any date of determination, (i)
all indebtedness of such Person for money borrowed or for the deferred purchase
price of property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery and title
thereto or the completion of such services; (ii) all amounts owed by such Person
to banks or other Persons in respect of reimbursement obligations under letters
of credit, surety bonds and other similar instruments guaranteeing payment or
other performance of obligations by such Person; (iii) all indebtedness for
money borrowed or for the deferred purchase price of property or services
secured by any lien on any property owned by such Person, to the extent
attributable to such Person's interest in such property, even though such Person
has not assumed or become liable for the payment thereof; and (iv) lease
obligations of such Person which, in accordance with generally accepted
accounting principles, should be capitalized.
"Depreciation" means for each Partnership Year or other period, an
amount equal to the federal income tax depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period, except that if the Carrying Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such year or other
period, Depreciation shall be an amount which bears the same ratio to such
beginning Carrying Value as the federal income tax depreciation, amortization,
or other cost recovery deduction for such year bears to such beginning adjusted
tax basis; provided, however, that if the federal income tax depreciation,
amortization, or other cost recovery deduction for such year is zero,
Depreciation shall be determined with reference to such beginning Carrying Value
using any reasonable method selected by the General Partner, except that in the
case of a zero basis Contributed Property, such property shall be depreciated
for book purposes over a period of not more than ten years.
"Event of Dissolution" has the meaning set forth in Section 13.1.
"First Closing" has the meaning set forth in the Contribution Agreement.
"First Redemption Date" means the earlier of (i) 5:00 p.m. Eastern time
on the first (1st) Business Day after the Shareholder Approval Date or (ii) 5:00
p.m. Eastern time on the first (1st) Business Day after the first (1st)
anniversary of the First Closing.
"General Partner" means Regency Atlanta, Inc. [or its permitted
successors as a general partner of the Partnership.
"General Partnership Interest" means a Partnership Interest held by a
General Partner that is a general partnership interest. A General Partnership
Interest may be expressed as a number of Class B Units.
"Immediate Family" means, with respect to any natural Person, such
natural Person's spouse, parents, descendants, nephews, nieces, brothers and
sisters and trusts for the benefit of any of the foregoing.
"Incapacity" or "Incapacitated" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when the Partner (a)
makes an assignment for the benefit of creditors, (b) files a voluntary petition
in bankruptcy, (c) is adjudged a bankrupt or insolvent, or has entered against
him an order of relief in any bankruptcy or insolvency proceeding, (d) files a
petition or answer seeking for himself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation, (e) files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against him in
any proceeding of this nature, (f) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of the Partner or of all or any
substantial part of his properties, (g) is the debtor in any proceeding seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, which has not been
dismissed within 120 days after the commencement thereof, or (h) is the subject
of a proceeding whereby a trustee, receiver or liquidator is appointed for the
Partner or all or any substantial part of its properties without the Partner's
consent or acquiescence of a trustee, receiver or liquidator, and such
appointment has not been vacated or stayed within 90 days after the appointment
or such appointment is not vacated within 90 days after the expiration of any
such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of his status as (a) the General Partner, (b) a Limited Partner or (c) a
director or officer of the Partnership or a Partner, and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) acting in good
faith on behalf of the Partnership as determined by the General Partner in its
good faith judgment other than for any action by such Person involving fraud,
willful misconduct or gross negligence.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Limited Partner" means any Person named as a Limited Partner in
Exhibit A attached hereto, as such Exhibit may be amended from time to time in
accordance with the terms of this Agreement, or any Substituted Limited Partner
or Additional Limited Partner, in such Person's capacity as a Limited Partner in
the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a
Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Limited Partnership Interest may
be expressed as a number of Partnership Units, Class A Units, or Class B Units
as provided herein.
"Liquidating Transaction" means any sale or other disposition of all or
substantially all of the assets of the Partnership following the adoption by the
General Partner of a plan of liquidation for the Partnership.
"Liquidator" has the meaning set forth in Section 13.2.
"Management Business" has the meaning set forth in Section 7.1(g).
"Net Income" and "Net Loss" means for any taxable period, an amount
equal to the Partnership's taxable income or loss for such taxable period
determined in accordance with Section 703(a) of the Code (for this purpose all
items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in taxable income or
loss), with the following adjustments:
(a) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain,
loss and deduction shall be made without regard to any election under
Section 754 of the Code which may be made by the Partnership; provided,
that the amounts of any adjustments to the adjusted bases of the assets
of the Partnership made pursuant to Section 734 of the Code as a result
of the distribution of property by the Partnership to a Partner (to the
extent that such adjustments have not previously been reflected in the
Partners' Capital Accounts) shall be reflected in the Capital Accounts
of the Partners in the manner and subject to the limitations prescribed
in Regulations Section 1.704-1(b)(2)(iv)(m).
(b) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Net Income
or Net Loss pursuant to this definition shall be added to such Net
Income or Net Loss.
(c) The computation of all items of income, gain, loss and
deduction shall be made without regard to the fact that items described
in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not includable
in gross income or are neither currently deductible nor capitalized for
federal income tax purposes.
(d) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if the
adjusted basis of such property as of such date of disposition
were equal in amount to the Partnership's Carrying Value with respect
to such property as of such date.
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such fiscal
year.
(f) In the event the Carrying Value of any Partnership asset
is adjusted pursuant to Section 4.4(c) hereof, the amount of any such
adjustment shall be taken into account as gain or loss from the
disposition of such asset.
(g) Any items specially allocated under Sections 6.2 and
6.3 hereof shall not be taken into account.
"Non-U.S. Person" means with respect to the acquisition, ownership or
transfer of any Partnership Interest or Shares, the direct or indirect
acquisition or ownership thereof by or a transfer that results in the direct or
indirect ownership thereof by any Person who is not (i) a citizen or resident of
the United States, (ii) a partnership or corporation created or organized in the
United States or under the laws of the United States or any state therein
(including the District of Columbia), or (iii) a foreign estate or trust within
the meaning of Section 7701(a)(31) of the Code.
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption, Security
Agreement and Investor Questionnaire substantially in the form of Exhibit B to
this Agreement, as it may be amended from time to time by the General Partner
effective upon written notice to the Limited Partners.
"Option Date" means the four hundred twentieth (420th) day after the
date of the First Closing.
"Original Limited Partner" means Branch Properties, Ltd. and, following
the distribution of the Units it receives to its respective partners pursuant to
the Contribution Agreement, those persons who receive such Units pursuant
thereto. The Original Limited Partners are listed on Exhibit A attached hereto.
The term "Original Limited Partner" shall also include any permitted transferee
of an Original Limited Partner pursuant to Section 11.3 other than the General
Partner, Regency or any Affiliate of Regency.
"Original Limited Partnership Unit" means a Partnership Unit (including
any Additional Units) issued to an Original Limited Partner.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement, and any successor thereto.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution and includes any and all benefits to which
the holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units, Class A Units or Class B Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in Partnership Minimum Gain, for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"Partnership Record Date" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.1
hereof, which record date shall be the same as the record date established by
Regency for a dividend to the holders of Common Stock. No Partnership Record
Date shall occur until after the First Closing.
"Partnership Unit" or "Unit" means the Partnership Interest in the
Partnership to be issued to and held by the Original Limited Partners pursuant
to Sections 4.1 and 4.2. The number of Units to be issued to each Original
Limited Partner at the First Closing is set forth on Exhibit A attached hereto.
As provided in the Contribution Agreement, Additional Units may be issued to the
Original Limited Partners after the First Closing, as more particularly set
forth in the Contribution Agreement. The terms "Partnership Unit" or "Unit"
includes the initial Units issued at the First Closing and any Additional Units
issued after the First Closing to the Original Limited Partners. Exhibit A shall
be amended from time to time to reflect the issuance of any Additional Units.
The terms "Partnership Unit" and "Unit" do not include or refer to any Class A
Units or Class B Units.
"Partnership Year" means the fiscal year of the Partnership, which
shall be the calendar year.
"Percentage Interest" means, as to a Partner, its interest in the
Partnership as determined by dividing (i) the Partnership Units , Class A Units
and Class B Units owned by such Partner by (ii) the total number of Partnership
Units, Class A Units and Class B Units then outstanding and as specified in
Exhibit A attached hereto, as such Exhibit may be amended from time to time in
accordance with the terms of this Agreement.
"Person" means an individual or a corporation, limited liability
company, partnership, trust, unincorporated organization, association or other
entity.
"Pledged Units" has the meaning set forth in Section 8.6(f).
"Prime Rate" means, on any date, a fluctuating rate of interest per
annum equal to the rate of interest most recently established by Wachovia Bank
of Georgia, N.A. at its Atlanta, Georgia office (or, at the General Partner's
election, another major lender to the Partnership, at the office with which the
Partnership deals), as its prime rate of interest for loans in United States
dollars.
"Priority Distribution Amount" means with respect to an Original
Limited Partnership Unit outstanding on a Partnership Record Date (i) the cash
dividend per share of Common Stock (including any dividend designated by Regency
as capital gain pursuant to Section 857(b)(3)(C) of the Code) declared by
Regency on the Partnership Record Date, multiplied by (ii) the Unit Adjustment
Factor in effect on such Partnership Record Date.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or Section
743 of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to such
property or asset.
"Recourse Liabilities" has the meaning set forth in Regulations Section
1.752-1(a)(1).
"Redeeming Partner" means a Limited Partner who duly exercised a
Redemption Right pursuant to Section 8.6.
"Redemption Amount" means the Share Amount or, as determined by the
General Partner in its sole and absolute discretion after the Option Date, the
Cash Amount or any combination of the Share Amount and the Cash Amount. As
provided in Section 8.6(b), in the event a Specified Redemption Date occurs on
or before the Option Date, then the General Partner shall be required to cause
the Partnership to issue the Share Amount (and not the Cash Amount) in
satisfaction of the Redemption Amount, except as otherwise provided in Section
8.6(c).
"Redemption Right" has the meaning set forth in Section 8.6(a) hereof.
"Regency" means Regency Realty Corporation, a Florida corporation.
"Regulations" means the Income Tax Regulations, including the Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the
Code.
"Securities Act" means the Securities Act of 1933, as amended.
"704(c) Value" of any Contributed Property means the fair market value
of such property or other consideration at the time of contribution as
determined by the General Partner in its discretion using such reasonable method
of valuation as it may adopt. The General Partner shall use such method as it
deems reasonable and appropriate in its sole and absolute discretion to allocate
the aggregate of the 704(c) Value of
Contributed Properties received in a single or integrated transaction among each
separate property on a basis proportional to its fair market value.
"Share Amount" means a number of Shares arrived at by multiplying (i)
the number of Partnership Units that are the subject of a Notice of Redemption
times (ii) the Unit Adjustment Factor.
"Shareholder Approval Date" means the date that the shareholders of
Regency approve (i) the transactions contemplated by the Contribution Agreement
as required by Rule 312.03(c) of the New York Stock Exchange Listed Company
Manual and (ii) the Charter Amendment, as described in Section 5.4 of the
Contribution Agreement.
"Shares" means (i) the Common Stock of Regency, and (ii) any securities
issuable with respect to Shares as a result of the application of Section
11.2(b).
"Specified Redemption Date" means the later of (i) 5:00 p.m. Eastern
time, on the date specified by the Redeeming Partner in such Partner's Notice of
Redemption, or (ii) the close of business, Eastern time, on the first Business
Day after the date in clause (i) if such date is not a Business Day, or (iii)
5:00 p.m. Eastern time, on the tenth Business Day after receipt by the General
Partner of a Notice of Redemption.
"Subsequent Closing" has the meaning set forth in the Contribution
Agreement.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
"Transaction" has the meaning set forth in Section 11.2(b).
"Unit Adjustment Factor" means initially 1.0; provided that, in order
to prevent dilution of the Redemption Right, in the event that Regency (i)
declares or pays a dividend on its outstanding Common Stock in Common Stock or
makes a distribution to all holders of its outstanding Common Stock in Common
Stock, (ii) subdivides its outstanding Common Stock, or (iii) combines its
outstanding Common Stock into a smaller number of shares, the Unit Adjustment
Factor shall be adjusted by multiplying the Unit Adjustment Factor by a
fraction, the numerator of which shall be the number of Shares issued and
outstanding on the record date (assuming for such purposes that such dividend,
distribution, subdivision or combination has occurred as of such time), and the
denominator of which shall be the actual number of Shares (determined without
the above assumption) issued and outstanding on the record date for such
dividend, distribution, subdivision or combination. Any adjustment to the Unit
Adjustment Factor shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Section 4.4 hereof) as of
such date, over (ii) the Carrying Value of such property (prior to any
adjustment to be made pursuant to Section 4.4 hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the Carrying
Value of such property (prior to any adjustment to be made pursuant to Section
4.4 hereof) as of such date, over (ii) the fair market value of such property
(as determined under Section 4.4 hereof) as of such date.
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a Share, the average of the daily market
price of the Common Stock for the ten (10) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be: (i) if the Common Stock is listed or admitted to trading on any securities
exchange or the NASDAQ-National Market, the closing price, regular way, on such
day, or if no such sale takes place on such day, the average of the closing bid
and asked prices on such day, (ii) if the Common Stock is not listed or admitted
to trading on any securities exchange or the NASDAQ-National Market, the last
reported sale price on such day or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reliable quotation source designated by the General Partner, or (iii) if the
Common Stock is not listed or admitted to trading on any securities exchange or
the NASDAQ-National Market and no such last reported sale price or closing bid
and asked prices are available, the average of the reported high bid and low
asked prices on such day, as reported by a reliable quotation source designated
by the General Partner, or if there shall be no bid and asked prices on such
day, the average of the high bid and low asked prices, as so reported, on the
most recent day (not more than 10 days prior to the date in question) for which
prices have been so reported; provided, that if there are no bid and asked
prices reported during the 10 days prior to the date in question, the Value of
the Common Stock shall be determined by Regency's board of directors acting in
good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization; Application of Act.
(a) Organization and Formation of Partnership. The Partnership
has been formed as a limited partnership under the Act, the initial
general and limited partners have withdrawn from the Partnership and
the General Partner and the Limited Partners do hereby amend and
restate this Agreement to provide for the continuation of the
Partnership according to all of the terms and provisions of this
Agreement and otherwise in accordance with the Act. The General Partner
is the sole general partner and the Limited Partners are the sole
limited partners of the Partnership.
(b) Application of Act. The Partnership is a limited
partnership pursuant to the provisions of the Act and upon the terms
and conditions set forth in this Agreement. Except as expressly
provided herein to the contrary, the rights and obligations of the
Partners and the administration and termination of the Partnership
shall be governed by the Act. No Partner has any interest in any
Partnership property, and the Partnership Interest of each Partner
shall be personal property for all purposes.
Section 2.2 Name. The name of the Partnership is Regency Retail
Partnership, Ltd. The Partnership's business may be conducted under any other
name or names deemed advisable by the General
Partner, including the name of the General Partner or any Affiliate thereof. The
words "Limited Partnership," "Ltd.," "Ltd." or similar words or letters shall be
included in the Partnership's name where necessary for the purposes of complying
with the laws of any jurisdiction that so requires. The General Partner in its
sole and absolute discretion may change the name of the Partnership at any time
and from time to time and shall promptly notify the Limited Partners of such
change; provided, that the name of the Partnership may not be changed to include
the name, or any variant thereof, of any Limited Partner without the written
consent of that Limited Partner.
Section 2.3 Registered Office and Agent; Principal Office. The address
of the registered office of the Partnership in the State of Delaware is located
at 1013 Centre Road, City of Wilmington, County of New Castle, Delaware 19801,
and the registered agent for service of process on the Partnership in the State
of Delaware at such registered office is Corporation Service Company. The
principal office of the Partnership is 121 W. Forsyth Street, Suite 200,
Jacksonville, Florida 32202, or such other place as the General Partner may from
time to time designate by notice to the Limited Partners. The Partnership may
maintain offices at such other place or places within or outside the State of
Florida as the General Partner deems advisable.
Section 2.4 Term. The term of the Partnership shall commence on the
date hereof and shall continue until December 31, 2097, unless it is dissolved
sooner pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business. The purpose and nature of the
business to be conducted by the Partnership is (i) to conduct any business that
may be lawfully conducted by a limited partnership organized pursuant to the Act
and in connection therewith to sell or otherwise dispose of Partnership assets,
(ii) to enter into any partnership, joint venture or other similar arrangement
to engage in any of the foregoing or the ownership of interests in any entity
engaged in any of the foregoing and (iii) to do anything necessary or incidental
to the foregoing which, in each case, is not in breach of this Agreement;
provided, however, that each of the foregoing clauses (i), (ii), and (iii) shall
be limited and conducted in such a manner as to permit Regency at all times to
be classified as a REIT, unless Regency provides notice to the Partnership that
it intends to cease or has ceased to qualify as a REIT.
Section 3.2 Powers. 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;
provided, however, that the Partnership shall not take, or refrain from taking,
any action which, in the judgment of the General Partner, (i) could adversely
affect the ability of Regency to continue to qualify as a REIT, unless Regency
provides notice to the Partnership that it intends to cease or has ceased to
qualify as a REIT, (ii) could subject Regency to any additional taxes under
Section 857 or Section 4981 of the Code or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
General Partner, Regency or their securities, unless such action (or inaction)
shall have been specifically consented to by the General Partner in writing.
ARTICLE 4
CAPITAL CONTRIBUTIONS; ISSUANCE OF UNITS;
CAPITAL ACCOUNTS
Section 4.1 Capital Contributions of the Partners.
(a) Initial Capital Contributions. At the time of the
execution of this Agreement, Branch Properties, Ltd. shall make or
shall have made the Capital Contributions set forth in Exhibit A to
this Agreement, and such Capital Contributions shall be deemed to have
been made by its respective partners as Original Limited Partners, in
the respective amounts set forth in Exhibit A. The Original Limited
Partners shall own Partnership Units in the amounts set forth in
Exhibit A and shall have a Percentage Interest in the Partnership as
set forth in Exhibit A, which Percentage Interest shall be adjusted in
Exhibit A from time to time by the General Partner to the extent
permitted by this Agreement to reflect accurately redemptions, Capital
Contributions, the issuance of additional Partnership Units, Class A
Units or Class B Units, or similar events having an effect on a
Partner's Percentage Interest. The number of Units shall be increased
and the Percentage Interests adjusted in the event that and each time
that a Subsequent Closing occurs. Any Partnership Interests held by the
General Partner, Regency or any Affiliate (including Partnership
Interests acquired under Sections 4.2, 8.6 and 8.7) shall be Class B
Units.
(b) Additional Capital Contributions or Assessments. No
Partner shall be assessed or be required to contribute additional funds
or other property to the Partnership, except for any such amounts which
a Limited Partner may be obligated to repay under Section 5.3 or
Section 13.4 and such amounts which the General Partner may be
obligated to contribute as provided under Section 7.1(a)(iii). Any
additional funds required by the Partnership, as determined by the
General Partner in its reasonable business judgment, may, at the option
of the General Partner and without an obligation to do so, be
contributed by the General Partner as additional Capital Contributions.
If and as the General Partner or any other Partner makes additional
Capital Contributions to the Partnership, each such Partner shall
receive Class A Units, Class B Units or other Partnership Interests,
subject to the provisions of Section 4.2 and such Partner's Capital
Account shall be adjusted as provided in Section 4.4.
(c) Return of Capital Contributions. Except as otherwise
expressly provided herein, the Capital Contribution of each Partner
will be returned to that Partner only in the manner and to the extent
provided in Article 5 and Article 13 hereof, and no Partner may
withdraw from the Partnership or otherwise have any right to demand or
receive the return of its Capital Contribution to the Partnership (as
such), except as specifically provided herein. Under circumstances
requiring a return of any Capital Contribution, no Partner shall have
the right to receive property other than cash, except as specifically
provided herein. No Partner shall be entitled to interest on any
Capital Contribution or Capital Account notwithstanding any
disproportion therein as between the Partners. Except as specifically
provided herein, the General Partner shall not be liable for the return
of any portion of the Capital Contribution of any Limited Partner, and
the return of such Capital Contributions shall be made solely from
Partnership assets. The General Partner may, but shall not be obligated
to, make Capital Contributions for the purpose of enabling the
Partnership to make distributions of Available Cash to Limited
Partners.
(d) Liability of Limited Partners. No Limited Partner shall
have any further personal liability to contribute money to, or in
respect of, the liabilities or the obligations of the Partnership, nor
shall any Limited Partner be personally liable for any obligations of
the Partnership, except as otherwise provided in Section 4.1(b) or in
the Act. No Limited Partner shall be required to make any contributions
to the capital of the Partnership other than its Capital Contribution.
Section 4.2 Issuances of Additional Partnership Interests. The
Contribution Agreement sets forth the provisions upon which Additional Units
shall be issued to the Original Limited Partners. The General Partner and
Regency shall cause the Additional Units to be issued to the Original Limited
Partners as set forth in the Contribution Agreement and to amend this Agreement
to reflect the issuance of any such Additional Units. Subject to the
restrictions set forth below, the General Partner is hereby authorized to cause
the Partnership at any time or from time to time to issue to the Partners or to
other Persons such additional Class B Units or other Partnership Interests in
one or more classes, or one or more series of any such classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, and for such consideration as shall be determined by
the General Partner in its sole and absolute discretion, subject to Delaware
law, including, without limitation, (i) the allocations of items of Partnership
income, gain, loss, deduction and credit to each such class or series of
Partnership Interests, (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions, and (iii) the
rights of each such class or series of Partnership Interests upon dissolution
and liquidation of the Partnership; provided, however, that so long as there
shall be any Original Limited Partnership Units outstanding, without the Consent
of the Original Limited Partners, (a) any Partnership Interests issued shall be
subordinate to the Original Limited Partnership Units and will not affect the
priority of distributions with respect to the Original Limited Partnership Units
as set forth in Section 5.1 hereof, except as provided below with respect to
Class A Units, (b) no Partnership Interests other than Class B Units shall be
issued to the General Partner, Regency or any Affiliate of Regency or the
General Partner, and (c) no Partnership Interests on a parity with the Original
Limited Partnership Units shall be issued to any Person, except as provided
below with respect to Class A Units. No later than six months after the First
Closing, the General Partner shall have the right, without the Consent of the
Original Limited Partners, to issue up to 250,000 Class A Units in exchange for
the contribution to the Partnership of certain interests and rights in either or
both of the properties generally known as Peartree Village and Roswell Village
(or cash), with such number of Class A Units being computed by dividing the
agreed net contribution value of such contributed interests and rights (or cash)
by $22-1/8.
Section 4.3 No Preemptive Rights. No Person shall have any preemptive,
preferential or other similar right with respect to (i) additional Capital
Contributions or loans to the Partnership or (ii) issuance or sale of any
Partnership Interests.
Section 4.4 Capital Accounts of the Partners.
(a) General. The Partnership shall maintain for each Partner a
separate Capital Account in accordance with the rules of Regulations
Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by
(i) the amount of all Capital Contributions made by such Partner to the
Partnership pursuant to this Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from tax)
allocated to such Partner pursuant to Sections 6.1 and 6.2 of this
Agreement, and decreased by (x) the amount of cash or Agreed Value of
all actual and deemed distributions of cash or property made to such
Partner pursuant to this Agreement and (y) all items of Partnership
deduction and loss allocated to such Partner pursuant to Sections 6.1
and 6.2 of this Agreement. Upon the issuance of any Additional Units to
an Original Limited Partner, the aggregate Agreed Value of
the Contributed Property contributed by such Partner to the Partnership
shall be increased by the value of such Additional Units (which is
agreed to be $22-1/8 per Additional Unit), and such increase shall be
allocated among the items of Contributed Property contributed by such
Partner in proportion to their then book values. The increase in the
Agreed Value of such Contributed Property shall be credited to such
Partner's Capital Account under this Section 4.4(a).
(b) Transfers of Partnership Units. A transferee of a
Partnership Unit, Class A Unit, Class B Unit or other Partnership
Interest shall succeed to a pro rata portion of the Capital Account of
the transferor; provided, however, that, if the transfer causes a
termination of the Partnership under Section 708(b)(1)(B) of the Code,
the Partnership's properties shall be deemed to have been transferred
in accordance with Regulations Section 1.708-1 and appropriate
adjustments resulting from such deemed transfers shall be made
hereunder.
(c) Unrealized Gains and Losses.
(i) Consistent with the provisions of Regulations
Section 1.704-1(b)(2)(iv)(f), and as provided in Section
4.4(c)(ii) , the Carrying Values of all Partnership assets
shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership
property, as of the times of the adjustments provided in
Section 4.4(c)(ii) hereof, as if such Unrealized Gain or
Unrealized Loss had been recognized on an actual sale of each
such property and allocated pursuant to Section 6.1 of the
Agreement.
(ii) Such adjustments shall be made as of the
following times: (i) immediately prior to the acquisition of
an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis
Capital Contribution; (ii) immediately prior to the
distribution by the Partnership to a Partner of more than a de
minimis amount of Property as consideration for an interest in
the Partnership; and (iii) immediately prior to the
liquidation of the Partnership or the General Partner's
interest in the Partnership within the meaning of Regulations
Section 1.704-l(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (i) and (ii) above shall be
made only if the General Partner determines such adjustments
are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership.
(iii) In accordance with Regulations Section
1.704-1(b)(2)(iv)(e), the Carrying Value of Partnership assets
distributed in kind shall be adjusted upward or downward to
reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as of the time any such asset is
distributed.
(iv) In determining such Unrealized Gain or
Unrealized Loss the aggregate cash amount and fair market
value of all Partnership assets (including cash or cash
equivalents) shall be determined by the General Partner using
such reasonable method of valuation as it may adopt, or in the
case of a liquidating distribution pursuant to Article 13 of
this Agreement, be determined and allocated by the Liquidator
using such reasonable methods of valuation as it may adopt.
The General Partner, or the Liquidator, as the case may be,
shall allocate such aggregate value among the assets of the
Partnership (in such manner as it determines to arrive at fair
market value for individual properties).
(d) Modification by General Partner. The provisions of this
Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event
the General Partner shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or
which are assumed by the Partnership, the General Partner, or any
Limited Partners), are computed in order to comply with such
Regulations, the General Partner may make such modification without
regard to Article 14 of this Agreement. The General Partner also shall
(i) make any adjustments that are necessary or appropriate to maintain
equality between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as
computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in
the event unanticipated events might otherwise cause this Agreement not
to comply with Regulations Section 1.704-1(b).
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions.
(a) The General Partner shall distribute quarterly an amount
equal to 100% of Available Cash generated by the Partnership during
such quarter to the Partners who are Partners on the Partnership Record
Date with respect to such quarter as follows (and for this purpose, the
holders of Class A Units shall be treated as if they were Original
Limited Partners):
(i) First, one hundred percent (100%) to the Original
Limited Partners, pro rata based on the number of Original
Limited Partnership Units held by each such Partner on the
applicable Partnership Record Date, until each has received an
amount equal to the Priority Distribution Amount for the
quarter for each such Unit;
(ii) Next, if any Original Limited Partners have a
positive Cumulative Unpaid Accrued Return Account, one hundred
percent (100%) to such Original Limited Partners, pro rata
based on the relative amounts of their Cumulative Unpaid
Accrued Return Accounts, until each such Cumulative Unpaid
Accrued Return Account reaches zero;
(iii) Next, if any Original Limited Partners have a
positive Cumulative Unpaid Priority Distribution Account, one
hundred percent (100%) to such Original Limited Partners, pro
rata based on the relative amounts of their Cumulative Unpaid
Priority Distribution Accounts, until each such Cumulative
Unpaid Priority Distribution Account reaches zero; and
(iv) Thereafter, to the General Partner and any other
holders of Class B Units, pro rata in accordance with the
relative number of Class B Units held by each.
(b) The General Partner shall distribute Capital Transaction
Proceeds received by the Partnership within 30 days after the date of
such Capital Transaction, provided that the General Partner has given
the Limited Partners 20 days' prior written notice of the date for any
such
distribution, as follows (and for this purpose, the holders of Class A
Units shall be treated as if they were Original Limited Partners):
(i) First, if any Original Limited Partners have a
positive Cumulative Unpaid Accrued Return Account, one hundred
percent (100%) to such Original Limited Partners, pro rata
based on the relative amounts of their Cumulative Unpaid
Accrued Return Accounts, until each such Cumulative Unpaid
Accrued Return Account reaches zero;
(ii) Next, if any Original Limited Partners have a
positive Cumulative Unpaid Priority Distribution Account, one
hundred percent (100%) to such Original Limited Partners, pro
rata based on the relative amounts of their Cumulative Unpaid
Priority Distribution Accounts, until each such Cumulative
Unpaid Priority Distribution Account reaches zero; and
(iii) Thereafter, to the General Partner and any
other holders of Class B Units, pro rata in accordance with
the relative number of Class B Units held by each.
Section 5.2 Amounts Withheld. All amounts withheld pursuant to the Code
or any provisions of any state or local tax law and Section 5.3 hereof with
respect to any allocation, payment or distribution to the General Partner, or
any Limited Partners or Assignees shall be promptly paid, solely out of funds of
the Partnership (except as otherwise provided in Section 5.3 in connection with
the exercise by a Limited Partner of a Redemption Right), by the General Partner
to the appropriate taxing authority and treated as amounts distributed to the
General Partner or such Limited Partners or Assignees pursuant to Section 5.1
for all purposes under this Agreement.
Section 5.3 Withholding. Each Limited Partner hereby authorizes the
Partnership to withhold from or pay on behalf of or with respect to such Limited
Partner any amount of federal, state, local, or foreign taxes that the General
Partner determines that the Partnership is required to withhold or pay with
respect to any amount distributable or allocable to such Limited Partner
pursuant to this Agreement or with respect to the exercise by such Limited
Partner of the Redemption Rights set forth in Section 8.6, including, without
limitation, any taxes required to be withheld or paid by the Partnership
pursuant to Section 1441, 1442, 1445, or 1446 of the Code and Section 48-7-129
of the Official Code of Georgia Annotated. Any amount paid on behalf of or with
respect to a Limited Partner shall constitute a loan by the Partnership to such
Limited Partner, which loan shall be repaid by such Limited Partner within 15
days after notice from the General Partner that such payment must be made unless
(i) the Partnership withholds such payment from a distribution which would
otherwise be made to the Limited Partner or (ii) the General Partner determines,
in its sole and absolute discretion, that such payment may be satisfied out of
the available funds of the Partnership which would, but for such payment, be
distributed to the Limited Partner. Any amounts withheld pursuant to the
foregoing clauses (i) or (ii) shall be treated as having been distributed to
such Limited Partner and shall be promptly paid, solely out of funds of the
Partnership, by the General Partner to the appropriate taxing authority. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest as to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 5.3 (together with attorney's fees and other
costs in enforcing the Partnership's rights against the collateral). In the
event that a Limited Partner or Redeeming Partner fails to pay any amounts owed
to the Partnership pursuant to this Section 5.3 when due, the General Partner
may, in its sole and absolute discretion, elect to make the payment on behalf of
such defaulting Partner, and in such event shall be deemed to have loaned such
amount to such defaulting Partner
and shall succeed to all rights and remedies of the Partnership as against such
defaulting Partner (including, without limitation, in the case of a default by
other than a Redeeming Partner the right to receive distributions from the
Partnership). Any amounts payable by a Limited Partner or a Redeeming Partner
hereunder shall bear interest at the Prime Rate, plus two percentage points (but
not higher than the maximum lawful rate) from the date such amount is due (i.e.,
15 days after demand) until such amount is paid in full. In the event that the
Partnership or the General Partner is required to withhold tax with respect to
the exercise by a Limited Partner of a Redemption Right, the Limited Partner
exercising the Redemption Right shall make arrangements with the Partnership or
the General Partner, as the case may be, to provide the funds to the Partnership
necessary to effect the required withholding. In the event that, pursuant to
applicable laws and regulations, the General Partner may withhold a reduced
amount pending a determination by applicable taxing authorities as to whether
any additional withholding tax must subsequently be deposited, the General
Partner shall have the right to require the Redeeming Partner to pledge a first
priority security interest in a portion of the Redemption Amount as collateral
for the Redeeming Partner's obligation to provide the funds necessary to effect
any subsequent required holding (together with attorney's fees and other costs
in enforcing the Partnership's rights against the collateral), in an amount in
the case of a Share Amount equal to Shares having a Value on the date of the
pledge equal to 125% of the maximum possible subsequent required withholding (or
100% of the maximum possible subsequent required withholding if the Redemption
Amount is paid in the form of the Cash Amount) (the "Withholding Collateral").
The General Partner shall be entitled to retain possession of the Withholding
Collateral until either the Redeeming Partner provides funds to the General
Partner sufficient to make any subsequent required withholding deposit or the
General Partner receives a determination from the applicable authorities that no
subsequent withholding is required. All dividends, distributions, interest or
other income on the Withholding Collateral while subject to the pledge hereunder
shall be paid to the Redeeming Partner pledging the Withholding Collateral. If
the applicable authorities advise that subsequent withholding is required and
the Redeeming Partner does not deliver the necessary funds to the General
Partner within 20 days after receipt of the General Partner's request therefor,
the General Partner shall be entitled to exercise all rights and remedies of a
secured party under the Uniform Commercial Code in the State of Georgia with
respect to the Withholding Collateral. Each Limited Partner and each Redeeming
Partner shall take such actions as the Partnership or the General Partner shall
request in order to perfect or enforce the security interest created hereunder.
Section 5.4 Distributions Upon Liquidation. Notwithstanding anything
contained in Section 5.1 to the contrary, proceeds from a Liquidating
Transaction shall be distributed to the Partners in accordance with Section
13.2.
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations of Net Income and Net Loss. For purposes of
maintaining the Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's Net Income and Net Loss shall be allocated
among the Partners for each taxable year (or portion thereof) as provided herein
below.
(a) Net Income. After giving effect to the special allocations
set forth in Section 6.2 below, Net Income shall be allocated as
follows (and for this purpose, the holders of Class A Units shall be
treated as if they were Original Limited Partners):
(i) First, one hundred percent (100%) to the General
Partner in an amount equal to the excess, if any, of (A) the
cumulative Net Losses allocated to the General Partner
pursuant to Section 6.1(b)(v) and the last sentence of Section
6.1(b) for all prior fiscal years, over (B) the cumulative Net
Income allocated pursuant to this Section 6.1(a)(i) for all
prior fiscal years;
(ii) Second, one hundred percent (100%) to the
Original Limited Partners in an amount equal to the excess, if
any, of (A) the cumulative Net Losses allocated to such
Partners pursuant to Section 6.1(b)(iv) for all prior fiscal
years, over (B) the cumulative Net Income allocated pursuant
to this Section 6.1(a)(ii) for all prior fiscal years, which
amount shall be allocated among the Partners in the same
proportions and in the reverse order as the Net Losses were
allocated pursuant to Section 6.1(b)(iv);
(iii) Third, one hundred percent (100%) to the
Partners in an amount equal to the excess, if any, of (A) the
cumulative Net Losses allocated to the Partners pursuant to
Section 6.1(b)(iii) for all prior fiscal years, over (B) the
cumulative Net Income allocated pursuant to this Section
6.1(a)(iii) for all prior fiscal years, which amount shall be
allocated among the Partners in the same proportions and in
the reverse order as the Net Losses were allocated pursuant to
Section 6.1(b)(iii);
(iv) Fourth, one hundred percent (100%) to the
Original Limited Partners until the cumulative allocations of
Net Income to each Original Limited Partner under this Section
6.1(a)(iv) for the current and all prior fiscal years equal
the cumulative distributions paid to the Original Limited
Partner pursuant to Section 5.1(a)(i) and Section
13.2(a)(iii);
(v) Fifth, one hundred percent (100%) to the Original
Limited Partners until the cumulative allocations of Net
Income to each Original Limited Partner under this Section
6.1(a)(v) for the current and all prior fiscal years equal the
sum of the cumulative amounts credited to such Partner's
Cumulative Unpaid Priority Distribution Account and Cumulative
Unpaid Accrued Return Account for the current and all prior
fiscal years; and
(vi) Thereafter, to the General Partner and any other
holders of Class B Units, pro rata in accordance with the
relative number of Class B Units held by each.
(b) Net Losses. After giving effect to the special allocations
set forth in Section 6.2 below, Net Losses shall be allocated as
follows (and for this purpose, the holders of Class A Units shall be
treated as if they were Original Limited Partners):
(i) First, one hundred percent (100%) to the General
Partner and the Class B Unit holders in an amount equal to the
excess, if any, of (A) the cumulative Net Income allocated
pursuant to Section 6.1(a)(vi) hereof for all prior fiscal
years, over (B) the cumulative Net Losses allocated pursuant
to this Section 6.1(b)(i) for all prior fiscal years;
(ii) Second, to the Original Limited Partners until
the cumulative allocations of Net Loss under this Section
6.1(b)(ii) equal the excess, if any, of the cumulative
allocations of Net Income under Section 6.1(a)(v) to such
Partners for all prior fiscal years over the cumulative
distributions to such Partners under Section 5.1(a)(ii) and
(iii) and Section
5.1(b)(i) and (ii) for the current and all prior fiscal years
(such allocation being made in proportion to such Partners'
respective excess amounts);
(iii) Third, to the Partners with positive Adjusted
Capital Account balances (determined, solely for purposes of
this Section 6.1(b)(iii), without regard to any obligation of
a Partner to restore a negative Capital Account under Section
13.4), in proportion to such balances, until such balances are
reduced to zero;
(iv) Fourth, to the Original Limited Partners in
proportion to their relative Percentage Interests; provided,
however, that to the extent that an allocation under this
Section 6.1(b)(iv) would cause or increase an Adjusted Capital
Account Deficit for such Partner, such Net Loss shall be
allocated to those Original Limited Partners (in proportion to
their relative Percentage Interests) for whom such allocation
would not cause or increase an Adjusted Capital Account
Deficit; and
(v) Any remaining Net Loss shall be allocated
solely to the General Partner.
Notwithstanding the foregoing, Net Losses shall not be allocated to any Limited
Partner pursuant to this Section 6.1(b) to the extent that such allocation would
cause such Limited Partner to have an Adjusted Capital Account Deficit at the
end of such taxable year (or increase any existing Adjusted Capital Account
Deficit). All Net Losses in excess of the limitations set forth in the preceding
sentence of this Section 6.1(b) shall be allocated to the General Partner.
(c) Nonrecourse Liabilities. The Partners agree that excess
Nonrecourse Liabilities of the Partnership (within the meaning of
Section 1.752-3(a)(3) of the Regulations) will be allocated among the
partners for purposes of Section 752 of the Code in accordance with
their respective Percentage Interests.
(d) Gains. Any gain allocated to the Partners upon the sale or
other taxable disposition of any Partnership asset shall to the extent
possible, after taking into account other required allocations of gain
pursuant to Section 6.2 below, be characterized as Recapture Income in
the same proportions and to the same extent as such Partners have been
allocated any deductions directly or indirectly giving rise to the
treatment of such gains as Recapture Income.
Section 6.2 Special Allocation Rules. Notwithstanding any other provision
of the Agreement, the following special allocations shall be made in the
following order:
(a) Minimum Gain Chargeback. Notwithstanding any other
provisions of Article 6, if there is a net decrease in Partnership
Minimum Gain during any Partnership Year, each Partner shall be
specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain, as
determined under Regulations Section 1.704-2(g). Allocations pursuant
to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Partner pursuant thereto. The
items to be so allocated shall be determined in accordance with
Regulations Section 1.704-2(f)(6). This Section 6.2(a) is intended to
comply with the minimum gain chargeback requirements in Regulations
Section 1.704-2(f) and for purposes of this Section 6.2(a) only, each
Partner's Adjusted Capital Account Deficit shall be determined prior to
any other
allocations pursuant to Section 6.1 of the Agreement with respect to
such fiscal year and without regard to any decrease in Partner Minimum
Gain during such Partnership Year.
(b) Partner Minimum Gain Chargeback. Notwithstanding any other
provision of Article 6 (except Section 6.2(a) hereof), if there is a
net decrease in Partner Minimum Gain attributable to a Partner
Nonrecourse Debt during any Partnership Year, each Partner who has a
share of the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Partner's share of the net decrease in Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined
in accordance with Regulations Section 1.704-2(i)(5). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(i)(4). This Section 6.2(b) is intended
to comply with the minimum gain chargeback requirement in such Section
of the Regulations and shall be interpreted consistently therewith.
Solely for purposes of this Section 6.2(b), each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other
allocations pursuant to Article 6 of this Agreement with respect to
such Partnership Year, other than allocations pursuant to Section
6.2(a) hereof.
(c) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), and after giving
effect to the allocations required under Sections 6.2(a) and 6.2(b)
hereof, such Partner has an Adjusted Capital Account Deficit, items of
Partnership income and gain shall be specially allocated to such
Partner in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, its Adjusted Capital Account Deficit
created by such adjustments, allocations or distributions as quickly as
possible.
(d) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period
shall be allocated to the Partners in accordance with their respective
Percentage Interests.
(e) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Partnership Year shall be specially allocated to the
Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(2).
(f) Code Section 754 Adjustments. To the extent an adjustment
to the adjusted tax basis of any Partnership asset pursuant to Section
734(b) or 743(b) of the Code is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis),
and such item of gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.
Section 6.3 Allocations for Tax Purposes.
(a) General. Except as otherwise provided in this Section 6.3,
for federal income tax purposes, each item of income, gain, loss and
deduction shall be allocated among the Partners in the same manner as
its correlative item of "book" income, gain, loss or deduction is
allocated pursuant to Sections 6.1 and 6.2 of this Agreement.
(b) To Eliminate Book-Tax Disparities. In an attempt to
eliminate Book-Tax Disparities attributable to a Contributed Property
or Adjusted Property, items of income, gain, loss, and deduction shall
be allocated for federal income tax purposes among the Partners as
follows:
(i) To the extent that the fair market value of a
Contributed Property differed from its adjusted tax basis at
the time it was originally contributed to Branch Properties,
Ltd. (the "Original Book-Tax Disparity"), the allocation of
tax items with respect to such Contributed Property shall take
into account any remaining Original Book-Tax Disparity at the
time such property is contributed to the Partnership in a
manner consistent with the principles of Section 704(c) of the
Code, using the "traditional method" under Section 1.704- 3(b)
of the Regulations, so that the Original Limited Partners who
originally contributed such property to Branch Properties,
Ltd. (or their successors-in-interest) bear the tax burden (or
benefit, if applicable) of the remaining Original Book-Tax
Disparity;
(ii) In the case of a Contributed Property, such
items attributable thereto shall be allocated, subject to
Section 6.3(b)(i), among the Partners consistent with the
principles of Section 704(c) of the Code that takes into
account the variation between the 704(c) Value of such
property and its adjusted tax basis at the time of the
contribution;
(iii) In the case of an Adjusted Property, such items
shall (A) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code
to take into account the Unrealized Gain or Unrealized Loss
attributable to such property (prior to any adjustments in the
Carrying Value of such property under Section 4.4 hereof) and
(B) second, in the event such property was originally a
Contributed Property, be allocated among the Partners
consistent with Section 6.3(b)(ii); and
(iv) All other items of income, gain, loss and
deduction shall be allocated among the Partners in the same
manner as their correlative item of "book" gain or loss is
allocated pursuant to Sections 6.1 and 6.2 of this Agreement.
(c) Power of General Partner to Elect Method. The General
Partner shall elect the traditional method without curative allocations
to be used by the Partnership in eliminating Book-Tax Disparities under
Section 704(c) of the Code and the Regulations thereunder and such
election shall be binding on all Partners.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management.
(a) Powers of General Partner. Except as otherwise expressly
provided in this Agreement, all management powers over the business and
affairs of the Partnership are exclusively vested in the General
Partner, and no Limited Partner shall have any right to participate in
or exercise control or management power over the business and affairs
of the Partnership. Notwithstanding anything to the contrary in this
Agreement, the General Partner may not be removed by the Limited
Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner under any
other provision of this Agreement, the General Partner shall have full
power and authority to do all things deemed necessary or desirable by
it to conduct the business of the Partnership, to exercise all powers
set forth in Section 3.2 hereof and to effectuate the purposes set
forth in Section 3.1 hereof, including, without limitation:
(i) the making of any expenditures, the lending or
borrowing of money (including, without limitation, borrowing
money to permit the Partnership to make distributions to its
Partners in such amounts as will permit Regency (so long as
Regency desires to qualify as a REIT) to avoid the payment of
any federal income tax (including, for this purpose, any
excise tax pursuant to Section 4981 of the Code) and to make
distributions to its shareholders sufficient to permit Regency
to maintain REIT status), the assumption or guarantee of, or
other contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness (including the securing
of same by mortgage, deed of trust or other lien or
encumbrance on the Partnership's assets), the incurring of any
obligations it deems necessary for the conduct of the
activities of the Partnership, and the repayment (including
prepayment) of such indebtedness, liabilities and obligations;
(ii) the making of tax, regulatory and other filings,
or rendering of periodic or other reports to governmental or
other agencies having jurisdiction over the business or assets
of the Partnership;
(iii) the acquisition, disposition, conveyance,
mortgage, pledge, encumbrance, hypothecation or exchange of
all or any assets of the Partnership or the merger or other
combination of the Partnership with or into another entity
(provided that such merger or other combination does not
result in the Partnership recognizing taxable gain or loss for
federal income tax purposes) on such terms as the General
Partner deems proper (subject to Section 7.6 in the case of
transactions between the Partnership and the General Partner
or any Affiliate), and no approval of the Limited Partners
shall be required for the exercise of such powers, which
powers shall include, without limitation, the power to pledge
any or all of the assets of the Partnership to secure a loan
or other financing to the General Partner (the proceeds of
which are not required to be contributed or loaned to the
Partnership), provided, however, that to the extent that any
payment of debt service or closing costs on any such mortgage,
pledge, encumbrance or hypothecation shall result in the
Partnership being unable to pay the maximum amount payable
with respect to any distributions to the Original Limited
Partners pursuant to Section 5.1, then Regency shall cause the
General Partner to make such
additional Capital Contributions as are necessary to enable
the Partnership to pay the maximum amount payable with respect
to any distributions to the Original Limited Partners pursuant
to Section 5.1 (provided that the General Partner shall have
no obligation to make such additional Capital Contributions in
an amount exceeding the amount of debt service and closing
costs paid), and provided, further, that the General Partner
shall use reasonable efforts to effect all dispositions of the
Partnership's assets that were contributed by the Original
Limited Partners in accordance with Section 1031 of the Code
although, except as provided in Section 7.1(c) hereof, it
shall not be required to do so;
(iv) subject to the provisions of Section 7.1(h)
hereof, the use of the assets of the Partnership (including,
without limitation, cash on hand) for any purpose consistent
with the terms of this Agreement and on any terms it sees fit,
including, without limitation, the financing of the conduct of
the operations of the General Partner, the Partnership or any
of the Partnership's Subsidiaries, the lending of funds to
other Persons (including Regency or any of the Partnership's
Subsidiaries) and the repayment of obligations of the
Partnership and its Subsidiaries and any other Person in which
it has an equity investment and the making of capital
contributions to its Subsidiaries, the holding of any real,
personal and mixed property of the Partnership in the name of
the Partnership or in the name of a nominee or trustee
(subject to Section 7.10), the creation, by grant or
otherwise, of easements or servitudes, and the performance of
any and all acts necessary or appropriate to the operation of
the Partnership assets including, but not limited to,
applications for rezoning, objections to rezoning,
constructing, altering, improving, repairing, renovating,
rehabilitating, razing, demolishing or condemning any
improvements or property of the Partnership;
(v) the negotiation, execution, and performance of
any contracts, conveyances or other instruments (including
with Affiliates of the Partnership to the extent provided in
Section 7.6) that the General Partner considers useful or
necessary to the conduct of the Partnership's operations or
the implementation of the General Partner's powers under this
Agreement, including, without limitation, the execution and
delivery of a REIT management agreement on behalf of or in the
name of the Partnership providing for the day-to-day
management and operation of the Partnership and including,
without limitation, the execution and delivery of leases on
behalf of or in the name of the Partnership (including the
lease of Partnership property for any purpose and without
limit as to the term thereof, whether or not such term
(including renewal terms) shall extend beyond the date of
termination of the Partnership and whether or not the portion
so leased is to be occupied by the lessee or, in turn,
subleased in whole or in part to others);
(vi) the opening and closing of bank accounts, the
investment of Partnership funds in securities, certificates of
deposit and other instruments, and the distribution of
Partnership cash or other Partnership assets in accordance
with this Agreement;
(vii) the selection and dismissal of employees of the
Partnership or the General Partner (including, without
limitation, employees having titles such as "president," "vice
president," "secretary" and "treasurer"), and the engagement
and dismissal of agents, outside attorneys, accountants,
engineers, appraisers, consultants, contractors and other
professionals on behalf of the General Partner or the
Partnership and the determination of their compensation and
other terms of employment or hiring;
(viii) the maintenance of such insurance for the
benefit of the Partnership and the Partners as it deems
necessary or appropriate;
(ix) subject to the provisions of Sections 4.2 and
7.1(h) hereof, the formation of, or acquisition of an interest
in, and the contribution of property to any further limited or
general partnerships, joint ventures or other relationships
that it deems desirable (including, without limitation, the
acquisition of interests in, and the contribution of property
to, its Subsidiaries and any other Person in which it has an
equity investment from time to time) (provided that such
transaction does not result in the Partnership recognizing
taxable gain or loss for federal income tax purposes);
(x) the control of any matters affecting the rights
and obligations of the Partnership, including the conduct of
litigation and the incurring of legal expense and the
settlement of claims and litigation, the submission of any
matter to arbitration, and the indemnification of any Person
against liabilities and contingencies to the extent permitted
by law;
(xi) subject to the provisions of Section 7.1(h)
hereof, the undertaking of any action in connection with the
Partnership's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, the contribution or loan of funds by the
Partnership to such Persons) (provided that such action does
not result in the Partnership recognizing taxable gain or loss
for federal income tax purposes);
(xii) the distribution in kind of the Briarcliff
Village property pursuant to Section 13.2(c);
(xiii) the determination of the fair market value of
any Partnership property distributed in kind using such
reasonable method of valuation as it may adopt; and
(xiv) the execution, acknowledgment and delivery
of any and all documents and instruments to effectuate any or
all of the foregoing.
(b) No Approval Required for Above Powers. Subject to any
other restriction set forth in this Agreement, each of the Limited
Partners agrees that the General Partner is authorized to execute,
deliver and perform the above-mentioned agreements and transactions on
behalf of the Partnership without any further act, approval or vote of
the Partners, notwithstanding any other provision of this Agreement
(except where Limited Partner Consent or Original Limited Partner
Consent is expressly required herein), the Act or any applicable law,
rule or regulation. The execution, delivery or performance by the
General Partner or the Partnership of any agreement authorized or
permitted under this Agreement shall not constitute a breach by the
General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this
Agreement or of any duty stated or implied by law or equity.
(c) Approval of Sale of Briarcliff Village. Except pursuant to
the dissolution and liquidation of the Partnership in accordance with
Article 13 hereof, the property commonly known as Briarcliff Village
(the "Briarcliff Village Property") shall not be sold by the
Partnership or the General Partner on or before December 19, 2005
(other than in a transaction in which the Partnership
recognizes no taxable gain or loss for federal income purposes) without
the approval of a Majority-in-Interest of the Original Briarcliff
Partners (as defined below) who continue, as of such time, to hold
Original Limited Partnership Units attributable to the contribution of
the Briarcliff Village Property to Branch Properties, Ltd. and Branch
Properties, Ltd.'s subsequent contribution of the Briarcliff Village
Property to the Partnership (the "Original Briarcliff Partners"). Such
approval right of the Original Briarcliff Partners is personal to the
Original Briarcliff Partners and shall terminate upon the death of an
Original Briarcliff Partner or a sale, assignment, conveyance, or other
transfer by an Original Briarcliff Partner, with respect to that
Partner's Original Limited Partnership Units, and shall not be
exercisable by any successor, transferee or assignee of an Original
Briarcliff Partner. In the event of a like-kind exchange involving the
Briarcliff Village Property by the Partnership, then such approval
right for the benefit of the Original Briarcliff Partners will continue
to be enforceable after such like-kind exchange, but shall relate to
the property (whether real, personal or mixed, tangible or intangible)
acquired by the Partnership in such like-kind exchange. Nothing herein
shall be deemed to require that the Partnership or the General Partner
take any action to avoid or prevent an involuntary disposition of all
or part of said Briarcliff Village pursuant to a condemnation
proceeding or other taking. For purposes of this Section 7.1(c),
Majority-In-Interest of the Original Briarcliff Partners shall mean the
Original Briarcliff Partners who hold, in the aggregate, more than
fifty percent (50%) of the Percentage Interests then allocable to and
held by all of the Original Briarcliff Partners with respect to the
Original Limited Partnership Units received by the Original Briarcliff
Partners as a result of the contribution of the Briarcliff Village
Property to Branch Properties, Ltd. and Branch Properties, Ltd.'s
subsequent contribution of the Briarcliff Village Property to the
Partnership. The Partnership shall not engage in any merger,
consolidation or other business combination with or into another Person
unless the Partnership has entered into an agreement with such Person
in which such Person expressly agrees to be bound by the provisions of
this Section 7.1(c).
(d) Insurance. At all times from and after the date hereof,
the General Partner may cause the Partnership to obtain and maintain
casualty, liability and other insurance on the properties of the
Partnership and liability insurance for the Indemnitees hereunder.
(e) Working Capital Reserves. At all times from and after the
date hereof, the General Partner may cause the Partnership to establish
and maintain working capital reserves in such amounts as the General
Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time subject to the provisions of Section
7.1(h) hereof.
(f) No Obligation to Consider Tax Consequences to Limited
Partners. Except as provided in Sections 7.1(c) and 13.2(c) with
respect to Briarcliff Village, except as provided in Section 7.1(g)
with respect to the sale of the Management Business, and except for the
obligation of the General Partner set forth in Section 7.1(a)(iii) to
use reasonable efforts to effect all dispositions of the Partnership's
assets that were contributed by the Original Limited Partners in
accordance with Section 1031 of the Code, (i) in exercising its
authority under this Agreement, the General Partner may, but shall be
under no obligation to, take into account the tax consequences to any
Partner of any action taken by it, and (ii) the General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such
Limited Partner as a result of an action (or inaction) by the General
Partner pursuant to its authority under this Agreement.
(g) Approval of Sale of Management Business. Notwithstanding
anything contained herein to the contrary, the Third Party Management
Business (as defined in the Contribution Agreement) contributed by
Branch Properties, Ltd. to the Partnership as part of its initial
Capital Contribution (the "Management Business") shall not be sold by
the Partnership on or before the tenth (10th) anniversary of the First
Closing (other than in a transaction in which the Partnership
recognizes no taxable gain or loss for federal income tax purposes);
provided, however, that the Partnership shall be permitted to undertake
the following transactions: (i) contribution of the Management Business
to a corporation (the "New Management Company") in which the
Partnership owns five percent (5%) of the issued and outstanding voting
common stock and 100% of the issued and outstanding non-voting
preferred stock and in which The Regency Group, Inc., a Florida
corporation, owns ninety-five percent (95%) of the issued and
outstanding voting common stock and in which no other shares of stock
are issued and outstanding following the contribution; (ii) a
distribution by the Partnership of part or all of the stock of the New
Management Company to the General Partner on or after the fifth (5th)
anniversary of the First Closing; or (iii) a sale of part or all of the
stock of the New Management Company if no Original Limited Partners
hold Units which they received on the date of this Agreement or any
Additional Units received by them subsequent to the date of this
Agreement, or with the unanimous written consent of the Original
Limited Partners then holding such Units (but excluding the holders of
any Class A Units).
(h) Distributions. Notwithstanding anything contained in this
Agreement to the contrary, the General Partner, acting as a fiduciary,
shall use its reasonable best efforts and act in good faith to operate
the Partnership's assets and manage the Partnership's business,
including its indebtedness, so as to produce sufficient Available Cash
and Capital Transaction Proceeds to fund to the Original Limited
Partners the Priority Distribution Amount on a current basis and any
balance in the Cumulative Unpaid Accrued Return Accounts and Cumulative
Unpaid Priority Distribution Accounts of the Original Limited Partners
pursuant to Section 5.1 hereof.
(i) Designated Properties. Notwithstanding anything contained
in this Agreement to the contrary, the General Partner, acting as a
fiduciary, shall use its reasonable best efforts and act in good faith
to acquire, develop, lease and operate the Designated Properties (as
defined in the Contribution Agreement) in a manner to maximize the
Annualized NOI (as defined in the Contribution Agreement) for the
Designated Properties.
Nothing in Sections 7.1(h) or 7.1(i) shall require the General Partner to
contribute additional capital to the Partnership.
Section 7.2 Certificate of Limited Partnership. To the extent that such
action is determined by the General Partner to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate and do all the things to maintain the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) under the laws of the State of Delaware and each other jurisdiction
in which the Partnership may elect to do business or own property. Subject to
the terms of Section 8.5(a)(iv)hereof, the General Partner shall not be
required, before or after filing, to deliver or mail a copy of the Certificate
or any amendment thereto to any Limited Partner. The General Partner shall use
all reasonable efforts to cause to be filed such other certificates or documents
as may be reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited partnership (or a
partnership in which the Limited Partners have limited liability) in the State
of Delaware and any other jurisdiction in which the Partnership may elect to do
business or own property.
Section 7.3 Restriction on General Partner's Authority. Without the consent
of all the Limited Partners, the General Partner may not:
(a) Take any action that would make it impossible to carry on the ordinary
business of the Partnership, except as otherwise provided in this Agreement;
(b) Possess Partnership property for other than a Partnership purpose;
(c) Admit a Person as a Partner, except as otherwise provided in this
Agreement; or
(d) perform any act that would subject a Limited Partner to liability as a
general partner.
Section 7.4 Responsibility for Expenses.
(a) No Compensation. Except as provided in this Section 7.4
and elsewhere in this Agreement (including the provisions of Articles 5
and 6 regarding distributions, payments, and allocations to which it
may be entitled), the General Partner shall not be compensated for its
services as general partner of the Partnership.
(b) Responsibility for Ownership and Operation Expenses. The
Partnership shall be responsible for and shall pay all expenses
relating to the Partnership's ownership of its assets, and the
operation of, or for the benefit of, the Partnership, and the General
Partner shall be reimbursed on a monthly basis, or such other basis as
the General Partner may determine in its sole and absolute discretion,
for all expenses it incurs relating to the Partnership's ownership of
its assets and the operation of, or for the benefit of, the
Partnership; provided, that the amount of any such reimbursement shall
be reduced by any interest earned by the General Partner with respect
to bank accounts or other instruments held by it as permitted in
Section 7.10. Such reimbursements shall be in addition to any
reimbursement to the General Partner pursuant to Section 10.3(c) and as
a result of indemnification pursuant to Section 7.7. The General
Partner shall determine in good faith the amount of expenses incurred
by it relating to the operation of, or that inure to the benefit of,
the Partnership. In the event that certain expenses are incurred for
the benefit of the Partnership and other Persons (including the General
Partner), such expenses will be allocated to the Partnership and such
other Persons in such a manner as the General partner deems fair and
reasonable, subject to the provisions of Section 7.1(h) hereof.
(c) Responsibility for Organizational Expenses. The Partnership shall be
responsible for and shall pay all expenses incurred relating to the organization
of the Partnership.
(d) Partnership Interest Issuance Expenses. The General Partner and Regency
shall be reimbursed for all expenses either incurs relating to any issuance of
additional Partnership Interests pursuant to Section 4.2 hereof.
Section 7.5 Outside Activities of the General Partner. Nothing
contained in this Agreement shall prevent or prohibit the General Partner or any
employee, officer, director, agent, shareholder or Affiliate of the General
Partner from entering into, engaging in or conducting any other activity or
performing for a fee any service including (without limiting the generality of
the foregoing) engaging in any business dealing with real property of any type
or location, including, without limitation, property of a type similar to those
properties owned by the Partnership, its Subsidiaries or any other Person in
which the Partnership has an equity investment; acting as a director, officer or
employee of any corporation, as a trustee of any trust, as a general partner of
any partnership, or as an administrative official of any other business entity;
or receiving compensation for services to, or participating in profits derived
from, the investments of any such corporation, trust, partnership or other
entity, regardless of whether such activities are competitive, directly or
indirectly, with the Partnership. Nothing herein shall require the General
Partner or any employee, agent, shareholder or Affiliate thereof to offer any
interest in such activities or any particular opportunity to the Partnership or
any Partner, and neither the Partnership nor any Partner shall have any right by
virtue of this Agreement or the partnership relationship established hereby in
or to such other activities or to the income or proceeds derived therefrom. The
pursuit of such activities, even if competitive with the business of the
Partnership (including, without limitation, causing tenants to transfer from one
of the Partnership's properties to other properties in which the General Partner
has an interest, directly or indirectly, without compensation to the
Partnership, or taking other actions for the benefit of the General Partner or
Affiliates of the General Partner that are detrimental to the Partnership),
shall not be deemed wrongful or improper.
Section 7.6 Contracts with Affiliates.
(a) General. The General Partner or any of its Affiliates may
enter into transactions or agreements with the Partnership, including
transactions and agreements (i) to sell, transfer or convey any
property to, or purchase any property from, the Partnership, directly
or indirectly, or (ii) for the provision of services to the
Partnership, provided that such transactions or agreements, including
transactions and agreements with Security Capital Investment Research,
Inc. or any of its Affiliates, are on terms that are fair and
reasonable and no less favorable to the Partnership than would be
obtained from an unaffiliated third party in connection therewith. In
entering into such transactions with Affiliates the General Partner
shall not allocate expenses and similar items disproportionately
between the General Partner and the Partnership.
(b) Employee Benefit Plans. The General Partner may propose
and adopt on behalf of the Partnership employee benefit plans funded by
the Partnership for the benefit of employees of the General Partner,
the Partnership, Subsidiaries of the Partnership or any Affiliate of
any of them in respect of services performed, directly or indirectly,
for the benefit of the Partnership, the General Partner, or any of the
Partnership's Subsidiaries, subject to the provisions of Section 7.1(h)
hereof.
(c) Conflict Avoidance Agreements. The General Partner is
expressly authorized to enter into, in the name and on behalf of the
Partnership, a right of first opportunity arrangement and other
conflict avoidance agreements with various Affiliates of the
Partnership and the General Partner, on such terms as the General
Partner believes are advisable, subject to the provisions of Sections
7.6(a) and 7.1(h) hereof.
Section 7.7 Indemnification.
(a) General. The Partnership shall indemnify an Indemnitee
from and against any and all losses, claims, damages, liabilities,
joint or several, expenses (including legal fees and expenses),
judgments, fines, settlements, and other amounts arising from any and
all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the
Partnership as set forth in this Agreement in which any Indemnitee may
be involved, or is threatened to be involved, as a party or otherwise,
unless it is established that: (i) the act or omission
of the Indemnitee was material to the matter giving rise to the
proceeding and constituted willful misconduct or fraud; (ii) the
Indemnitee actually received an improper personal benefit in money,
property or services; or (iii) in the case of any criminal proceeding,
the Indemnitee had reasonable cause to believe that the act or omission
was unlawful. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the Indemnitee did not
meet the requisite standard of conduct set forth in this Section
7.7(a). The termination of any proceeding by conviction or upon a plea
of nolo contendere or its equivalent, or an entry of an order of
probation prior to judgment, creates a rebuttable presumption that the
Indemnitee acted in a manner contrary to that specified in this Section
7.7(a). Any indemnification pursuant to this Section 7.7 shall be made
only out of the assets of the Partnership.
(b) Advancement of Expenses. Reasonable expenses incurred by
an Indemnitee who is, or is threatened to be made, a party to a
proceeding may be paid or reimbursed by the Partnership in advance of
the final disposition of the proceeding upon receipt by the Partnership
of (i) a written affirmation by the Indemnitee of the Indemnitee's good
faith belief that the standard of conduct necessary for indemnification
by the Partnership as authorized in this Section 7.7 has been met and
(ii) a written undertaking by or on behalf of the Indemnitee to repay
the amount if it shall ultimately be determined that the standard of
conduct has not been met.
(c) No Limitation of Rights. The indemnification provided by
this Section 7.7 shall be in addition to any other rights to which an
Indemnitee or any other Person may be entitled under any agreement,
pursuant to any vote of the Partners, as a matter of law or otherwise,
and shall continue as to an Indemnitee who has ceased to serve in such
capacity.
(d) Insurance. The Partnership may purchase and maintain
insurance, on behalf of the Indemnitees and such other Persons as the
General Partner shall determine, against any liability that may be
asserted against or expenses that may be incurred by such Person in
connection with the Partnership's activities, regardless of whether the
Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement.
(e) No Personal Liability for Partners. In no event may an Indemnitee
subject any Partner to personal liability by reason of the
indemnification provisions set forth in this Agreement.
(f) Interested Transactions. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.7 because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by
the terms of this Agreement.
(g) Benefit. The provisions of this Section 7.7 are for the
benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the
benefit of any other Persons.
Section 7.8 Liability of the General Partner.
(a) General. Notwithstanding anything to the contrary set forth in
this Agreement, the General Partner shall not be liable for
monetary damages to the Partnership, any Partners or any
Assignees for losses sustained or liabilities incurred as a result of
errors in judgment or of any act or omission if the General Partner
acted in good faith.
(b) No Obligation to Consider Interests of Limited Partners.
The Limited Partners expressly acknowledge that the General Partner is
acting on behalf of the Partnership, the General Partner, Regency and
Regency's shareholders collectively, that except as provided in Section
7.1(e) with respect to the establishment and maintenance of working
capital reserves, except as provided in Section 7.1(f) with respect to
tax consequences, except as provided in Section 7.1(h) with respect to
the generation of funds for distributions and except as expressly
provided otherwise in Sections 7.1(a)(iv), 7.1(a)(ix) and 7.1(a)(xi)
with respect to the powers of the General Partner, the General Partner
is under no obligation to consider the separate interests of the
Limited Partners (including, without limitation, the tax consequences
to Limited Partners or Assignees except as expressly provided otherwise
in Sections 7.1(f) and 7.1(h)) in deciding whether to cause the
Partnership to take (or decline to take) any actions which the General
Partner has undertaken in good faith on behalf of the Partnership, and
that the General Partner shall not be liable for monetary damages for
losses sustained, liabilities incurred, or benefits not derived by
Limited Partners in connection with such decisions, provided that the
General Partner has acted in good faith and in accordance with the
provisions of this Agreement. For purposes hereof, a Person acting in a
manner which furthers compliance by Regency with the REIT requirements
of the Code, shall be deemed to satisfy the standards of conduct
hereunder. The Limited Partners further expressly acknowledge that
Regency is obligated to cause the Partnership to take (or decline to
take) certain actions in order to assist Security Capital U.S. Realty,
a Luxembourg corporation, Security Capital Holdings, S.A., a Luxembourg
corporation, and their Affiliates ("Security Capital") in avoiding
classification as a passive foreign investment company within the
meaning of Section 1296 of the Code. Such obligation is set forth on
Schedule 7.8(b).
(c) Acts of Agents. Subject to its obligations and duties as
General Partner set forth in Section 7.1(a) hereof, the General Partner
may exercise any of the powers granted to it by this Agreement and
perform any of the duties imposed upon it hereunder either directly or
by or through its agents. The General Partner shall not be responsible
for any misconduct or negligence on the part of any such agent
appointed by it in good faith.
(d) Effect of Amendment. Any amendment, modification or repeal
of this Section 7.8 or any provision hereof shall be prospective only
and shall not in any way affect the limitations on the General
Partner's liability to the Partnership and the Limited Partners under
this Section 7.8 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating
to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be
asserted.
Section 7.9 Other Matters Concerning the General Partner.
(a) Reliance on Documents. The General Partner may rely and
shall be protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
(b) Reliance on Consultants and Advisers. The General Partner
may consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and advisers
selected by it, and any act taken or omitted to be taken in reliance
upon and in accordance with the opinion of such Persons as to matters
which such General Partner reasonably believes to be within such
Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance
with such opinion.
(c) Action Through Officers and Attorneys. The General Partner
shall have the right, in respect of any of its powers or obligations
hereunder, to act through any of its duly authorized officers and a
duly appointed attorney or attorneys-in-fact. Each such attorney shall,
to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and
duty which is permitted or required to be done by the General Partner
hereunder.
(d) Actions to Maintain REIT Status or Avoid Taxation of the
General Partner. Notwithstanding any other provisions of this Agreement
or the Act, any action of the General Partner on behalf of the
Partnership or any decision of the General Partner to refrain from
acting on behalf of the Partnership, undertaken in the good faith
belief that such action or omission is necessary or advisable in order
(i) to protect the ability of Regency to continue to qualify as a REIT
or (ii) to avoid the General Partner or Regency incurring any taxes
under Section 857 or Section 4981 of the Code, is expressly authorized
under this Agreement and is deemed approved by all of the Limited
Partners.
(e) Sales of Assets. In the event that Regency or any of its
Affiliates in which it owns, directly or indirectly, an interest
disposes of properties or assets (other than those properties or assets
owned by the Partnership) in transactions or exchanges which Regency
reasonably believes create capital gains to Regency and a resulting
distribution or dividend to Regency's shareholders, the General Partner
shall provide the Limited Partners with at least 20 days prior written
notice of the record date for any distribution of the proceeds thereof,
together with relevant information concerning such dividend, including
the amount, to enable the Limited Partners to exercise the Redemption
Right prior to said record date. Regency shall not sell any material
portion of its assets after the First Closing and prior to the
thirtieth (30th) day after the First Redemption Date in a manner which
would create a material amount of capital gains to Regency and a
resulting distribution or dividend to Regency shareholders.
Section 7.10 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership assets for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
Section 7.11 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership (including, without limitation, in connection with any pledge of
Partnership assets to secure a loan or other financing to the General Partner as
provided by Section 7.1(a)(iii)) and to enter into any contracts on behalf of
the Partnership, and such Person shall be entitled to deal with the General
Partner as if it were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement except as expressly provided in Section 5.3
hereof, or under the Act.
Section 8.2 Management of Business. No Limited Partner or Assignee
(other than the General Partner, any of its Affiliates or any officer, director,
employee, partner, agent or trustee of the General Partner, the Partnership or
any of their Affiliates, in their capacity as such) shall take part in the
operation, management or control (within the meaning of the Act) of the
Partnership's business, transact any business in the Partnership's name or have
the power to sign documents for or otherwise bind the Partnership. The
transaction of any such business by the General Partner, any of its Affiliates
or any officer, director, employee, partner, agent or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such,
shall not affect, impair or eliminate the limitations on the liability of the
Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners. Subject to any
agreements entered into by a Limited Partner or its Affiliates with the General
Partner, the Partnership, Regency or a Subsidiary or an Affiliate of any of
them, the following rights shall govern outside activities of Limited Partners:
(i) any Limited Partner and any officer, director, employee, agent, trustee,
Affiliate, partner, beneficiary or shareholder of any such Limited Partner shall
be entitled to and may have business interests and engage in business activities
in addition to those relating to the Partnership, including business interests
and activities in direct competition with the Partnership, the General Partner
or their Affiliates; (ii) neither the Partnership nor any Partners shall have
any rights by virtue of this Agreement in any business ventures of any Partner
or Assignee; (iii) none of the Partners nor any other Person shall have any
rights by virtue of this Agreement or the partnership relationship established
hereby in any business ventures of any other Person, and such Person shall have
no obligation pursuant to this Agreement to offer any interest in any such
business ventures to the Partnership, any Partner or any such other Person, even
if such opportunity is of a character which, if
presented to the Partnership, any Partner or such other Person, could be taken
by such Person; (iv) the fact that a Partner may encounter opportunities to
purchase, otherwise acquire, lease, sell or otherwise dispose of real or
personal property and may take advantage of such opportunities himself or
introduce such opportunities to entities in which it has or has not any
interest, shall not subject such Partner to liability to the Partnership or any
of the other Partners on account of the lost opportunity; and (v) except as
otherwise specifically provided herein, nothing contained in this Agreement
shall be deemed to prohibit a Partner or any Affiliate of a Partner from
dealing, or otherwise engaging in business, with Persons transacting business
with the Partnership or from providing services relating to the purchase, sale,
rental, management or operation of real or personal property (including real
estate brokerage services) and receiving compensation therefor, from any Persons
who have transacted business with the Partnership or other third parties.
Section 8.4 Priority Among Partners. Except to the extent provided by
Sections 4.2, 5.1(a), 5.1(b), 6.1, 6.2 or 6.3 hereof (with respect to the
priority of the Original Limited Partner Units over the Class B Units), or
otherwise expressly provided in this Agreement, no Partner (Limited or General)
or Assignee shall have priority over any other Partner (Limited or General) or
Assignee either as to the return of Capital Contributions or as to profits,
losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership.
(a) Copies of Business Records. In addition to other rights
provided by this Agreement or by the Act, and except as limited by
Section 8.5(c) hereof, each Limited Partner shall be provided the
following without demand, except as otherwise provided below, at the
Partnership's expense:
(i) promptly after becoming available, a copy of the
most recent annual, quarterly and current reports and proxy
statements filed with the Securities and Exchange Commission
by Regency pursuant to the Securities Exchange Act of 1934, if
any;
(ii) promptly after becoming available, a copy
of the Partnership's federal, state and local income tax
returns for each Partnership Year;
(iii) upon written demand and for a purpose
reasonably related to such Limited Partner's interest as a
Limited Partner in the Partnership, a current list of the name
and last known business, residence or mailing address of each
Partner;
(iv) a copy of this Agreement and the Certificate and
all amendments hereto and thereto, together with executed
copies of all powers of attorney pursuant to which this
Agreement, the Certificate and all amendments hereto and
thereto have been executed; and
(v) upon written demand, true and full information
regarding the amount of cash and a description and statement
of any other property or services contributed by each Partner
and which each Partner has agreed to contribute in the future,
and the date on which each became a Partner.
(b) Notification of Changes in Unit Adjustment Factor. The
General Partner shall notify each Limited Partner in writing of any
change made to the Unit Adjustment Factor within 10 Business Days of
the date such change becomes effective.
(c) Confidential Information. Notwithstanding any other
provision of this Section 8.5, the General Partner may keep
confidential from the Limited Partners, for such period of time as the
General Partner determines in its discretion to be reasonable, any
information (i) relating to the General Partner, Regency or any of
their Affiliates or the conduct of their business that the General
Partner believes, in its good faith judgment, the disclosure of which
information would adversely affect a material financing, acquisition,
disposition of assets or securities or other comparable transaction to
which the General Partner, Regency or any of their Affiliates is a
party, (ii) that the General Partner believes to be in the nature of
trade secrets of Regency or its Affiliates or (iii) that the
Partnership, Regency or any of their Affiliates is required by law or
by agreements with unaffiliated third parties to keep confidential.
Nothing contained in this Section 8.5(c) shall permit the General
Partner to keep confidential from the Limited Partners any information
relating to the Partnership or its business.
Section 8.6 Redemption of Units
(a) Exercise. Subject to the provisions of this Section 8.6,
the Original Limited Partners shall have the right (the "Redemption
Right") to require the Partnership to redeem any Unit held by such
Original Limited Partner in exchange for the Redemption Amount to be
paid by the Partnership. A Redemption Right shall be exercised pursuant
to a Notice of Redemption delivered to the General Partner by the
Original Limited Partner who is exercising the Redemption Right (the
"Redeeming Partner"), which shall be irrevocable except as set forth in
this Section 8.6(a). The redemption shall occur on the Specified
Redemption Date; provided, however, a Specified Redemption Date shall
not occur until on or after the First Redemption Date (or such later
date as may be specified pursuant to any agreement with an Original
Limited Partner); and provided further that a holder of Class A Units
shall not exercise a Redemption Right until as of the first Subsequent
Closing. An Original Limited Partner may exercise a Redemption Right
any time after the date hereof with an effective Specified Redemption
Date as of a date on or after the First Redemption Date and any number
of times; provided, however, that a holder of Class A Units shall not
exercise a Redemption Right until as of the first Subsequent Closing. A
Redeeming Partner may not exercise the Redemption Right for less than
1,000 Units or, if such Redeeming Partner holds less than 1,000 Units,
all of the Units held by such Redeeming Partner. If (i) an Original
Limited Partner acquires any Units after the First Closing from another
Original Limited Partner or holds or acquires any Shares otherwise than
pursuant to the exercise of a Redemption Right hereunder and (ii) the
issuance of a Share Amount pursuant to the exercise of a Redemption
Right would violate the provisions of Section 5.2 of the Articles of
Incorporation as a result of the ownership of such additional Units or
Shares so acquired by such Original Limited Partner (the number of
Shares in excess of the number of Shares permitted pursuant to said
Section 5.2 is herein referred to as the "Excess Shares") and (iii)
such Original Limited Partner does not revoke or amend the exercise of
such Redemption Right to comply with the provisions of said Section 5.2
of the Articles of Incorporation within five days after receipt of
written notice from the General Partner that the redemption would be in
violation thereof, then the Partnership shall pay to such Redeeming
Partner, in lieu of the Share Amount or the Cash Amount attributable to
the Excess Shares, the amount which would be payable to such Redeeming
Partner pursuant to Section 5.3 of the Articles of Incorporation if
such Excess Shares were issued in violation of Section 5.2 of the
Articles of Incorporation and Regency exercised the remedies pursuant
to said Section 5.3 of the Articles of Incorporation. The relevant
provisions of the Articles of Incorporation as presently in effect are
attached hereto as Schedule 8.6(a). This Section 8.6(a) shall in no way
or manner be construed as
limiting the application of the Articles of Incorporation or constitute
any form of waiver or exemption thereunder.
(b) Payment. The General Partner shall have the right to elect
to fund the Redemption Amount through the issuance of (i) the Share
Amount or (ii) the Cash Amount; provided, however, in the event a
Specified Redemption Date occurs on or before the Option Date, then the
General Partner shall be required to cause the Partnership to issue the
Share Amount (and not the Cash Amount) in satisfaction of the
Redemption Amount, except as otherwise provided in Section 8.6(c)
below. The Redeeming Partner shall have no right, with respect to any
Unit so redeemed, to receive any distributions paid by the Partnership
after the Specified Redemption Date.
(c) Exceptions for Payment. Notwithstanding anything contained
in this Section 8.6 to the contrary, the following provisions shall
apply with respect to the payment of a Redemption Amount:
(i) If the Shareholder Approval Date has not occurred
on or before a Specified Redemption Date and if such Specified
Redemption Date is on or before the Option Date, then a
Redeeming Partner (other than the holders of Class A Units)
shall have the right to receive the Share Amount only with
respect to such number of Shares, when added to any Shares
previously received by such Redeeming Partner pursuant to the
exercise of Redemption Rights, as will equal the Maximum
Aggregate Shares issuable to such Redeeming Partner prior to
the Shareholder Approval Date as described on Schedule
8.6(c)(i), and the balance of any Redemption Amount shall be
paid by the Partnership to the Redeeming Partner as a Cash
Amount.
(ii) If the funding of the Share Amount with respect
to the exercise of a Redemption Right would cause the issuance
of the Shares in connection therewith to violate Article 5.14
of the Articles of Incorporation of Regency, then the
Redeeming Partner shall not have the right to receive the
Share Amount with respect to the issuance of any Shares
resulting in such a violation, and the balance of any
Redemption Amount relating to the exercise of such Redemption
Right shall be paid by a Cash Amount. Upon the effectiveness
of the Charter Amendment amending Article 5.14 of the Charter,
a Non-U.S. Person who (i) has signed a Waiver and Consent
Agreement in the form of Exhibit C attached hereto for the
benefit of Regency and Security Capital (the "Security Capital
Waiver and Consent") and (ii) is exercising a Redemption Right
(and will receive a Share Amount) in compliance with the
Security Capital Waiver and Consent, will not be in violation
of the provisions of Article 5.14 of the Articles of
Incorporation if (x) the aggregate number of Shares to be
issued on such Specified Redemption Date to all Redeeming
Partners who are Non-U.S. Persons is equal to or less than (y)
the aggregate number of Shares to be issued on such Specified
Redemption Date to all Redeeming Partners who are other than
Non-U.S. Persons (the maximum number of Shares which may be
issued to Redeeming Partners on a Specified Redemption Date
who are Non-U.S. Persons in order to satisfy the foregoing
requirement is herein referred to as the "Matching Share
Amount"). If more than one Redeeming Partner who is a Non-U.S.
Person exercises a Redemption Right for the same Specified
Redemption Date and if the aggregate Share Amount payable to
all such Redeeming Partners would cause the issuance of Shares
to such Non-U.S. Persons to exceed the Matching Share Amount
on such Specified Redemption Date, then the Matching Share
Amount shall be allocated among
such Redeeming Partners who are Non-U.S. Persons pro rata in
proportion to the respective Share Amounts otherwise payable
to such Redeeming Partners, and any balance of a Redemption
Amount payable to any such Redeeming Partner on such Specified
Redemption Date shall be paid by a Cash Amount. If the holders
of any Class A Units who are Non-U.S. Persons are exercising
Redemption Rights on a Specified Redemption Date and the
aggregate Share Amount issuable to all Non-U.S. Persons on
such Specified Redemption Date exceeds the Matching Share
Amount, then the Shares otherwise issuable to the holders of
Class A Units shall be reduced first, pro rata by those
holders whose Class A Units were issued in exchange for
interests in Roswell Village, and next, pro rata by those
holders whose Class A Units were issued in exchange for cash
and interests in Peartree Village until such aggregate Share
Amount equals the Matching Share Amount, and the holders of
such Class A Units shall receive the Cash Amount for any
balance of the Redemption Amount due such holders of the Class
A Units.
(iii) If the issuance of Shares for a Share Amount to
a Redeeming Partner would be in violation of the Securities
Act and applicable state securities laws then such Redeeming
Partner shall not have the right to receive the Share Amount,
and the Redemption Amount shall be paid by the Cash Amount;
provided, however, the issuance of Shares for a Share Amount
shall not violate the registration requirements of the
Securities Act as in effect on the date hereof if such Shares
are issued to an "accredited investor" as defined in the
Securities Act.
(d) Additional Units. Each Original Limited Partner has the
right to receive certain Additional Units pursuant to the provisions of
the Contribution Agreement. If a Redeeming Partner exercises a
Redemption Right on one or more occasions with respect to Units issued
at the First Closing ("Initial Redeemed Units"), then such Redeeming
Partner shall be deemed to have exercised a Redemption Right with
respect to the corresponding percentage of Additional Units issuable
with respect to such Initial Redeemed Units, based on the number of
Initial Redeemed Units being redeemed as a percentage of the total
number of Units issued to the Redeeming Partner at the First Closing
(the "Redemption Percentage"), all as provided in the Contribution
Agreement. In such event, Regency shall assume the obligation to pay
the Redemption Amount with respect to any such Additional Units issued
with respect to the Initial Redeemed Units, and if a Share Amount has
been funded to a Redeeming Partner with respect to the Initial Redeemed
Units, then Regency shall be required to pay the Share Amount for a
number of Additional Units equal to the corresponding Redemption
Percentage multiplied by the Additional Units issuable to such Original
Limited Partner, subject, however, to the restrictions set forth in
Section 8.6(a) and 8.6(c) above.
(e) Conditions. As a condition to exercising a Redemption
Right, each Redeeming Partner shall execute a Notice of Redemption in
the form attached as Exhibit B and, if a Non-U.S. Person, the Security
Capital Waiver and Consent in the form attached as Exhibit C; and
execute such other documents and take such other actions as the General
Partner may reasonably require, including a Foreign Investment and Real
Property Tax Act ("FIRPTA") or similar state and/or local affidavit (or
make appropriate arrangements for deposit with the General Partner for
payment to the Internal Revenue Service or any state or local
governmental authority of the amount required for the General Partner
to comply with the withholding provisions of such federal, state and
local laws, and if applicable, providing a withholding certificate
evidencing the Redeeming Partner's right to a reduced rate of FIRPTA
withholding). As a further condition to exercising a Redemption Right,
the Units to
be redeemed shall be delivered to the Partnership or Regency, as the
case may be, free and clear of all liens, security interests, deeds of
trust, pledges and other encumbrances of any nature whatsoever
(collectively the "Liens"), subject to the provisions of Sections 5.3
and 8.6(f) hereof. In the event any Lien exists on the Specified
Redemption Date with respect to the Units to be redeemed, neither the
Partnership nor Regency (if Regency assumes the Redemption Right
pursuant to Section 8.6(d) or Section 8.7) shall have any obligation to
redeem such Units, unless, in connection therewith, the General Partner
has elected to pay a portion of the Redemption Amount in cash and such
cash is sufficient to discharge such Lien, subject to the provisions of
Sections 5.3 and 8.6(f) hereof. Each Redeeming Partner hereby expressly
authorizes the General Partner to apply such portion of such cash as
may be necessary to discharge such Lien in full.
(f) Security Interest. Additional Units issued on the First
Earn-Out Closing Date (as defined in the Contribution Agreement)
pursuant to Section 2.3.2 of the Contribution Agreement may be required
to be pledged to Regency and the Partnership pursuant to Article 15 of
the Contribution Agreement (the "Pledged Units"). In the event a
Redeeming Partner exercises a Redemption Right with respect to Pledged
Units, or in the event a Redeeming Partner has previously exercised a
Redemption Right with respect to Units and the corresponding Additional
Units to be redeemed are Pledged Units, as described in Section 8.6(d)
above, then such Redeeming Partner, as a condition to the receipt of
the Redemption Amount with respect to such Pledged Units, shall be
required to pledge and grant to Regency and the Partnership a first
priority security interest in any and all Shares and/or cash delivered
in payment of the Redemption Amount with respect to such Pledged Units
and shall be required to consent to Regency holding such Shares and/or
cash as "Collateral" under Article 15 of the Contribution Agreement;
provided, however, if a Cash Amount is to be paid to the Redeeming
Partner with respect to such Pledged Units, then such Redeeming Partner
shall have the right to substitute a letter of credit for such Cash
Amount as provided in Section 15.7.2(e) of the Contribution Agreement.
(g) Regency Agreement. Regency agrees (i) to perform Regency's
obligations described in this Section 8.6, (ii) to cause the General
Partner to perform the General Partner's obligations described in this
Section 8.6 and (iii) to cause the General Partner to cause the
Partnership to perform the Partnership's obligations described in this
Section 8.6.
(h) Additional Rights. In case Regency shall issue rights,
options or warrants to all holders of its Shares entitling them to
subscribe for or purchase Shares or other securities convertible into
Shares at a price per share less than the current per share market
price as of the day before the "ex date" with respect to the issuance
or distribution requiring such computation, each Original Limited
Partner holding Redemption Rights shall be entitled to receive such
number of such rights, options or warrants, as the case may be, as he
would have been entitled to receive had he exercised all of his then
existing Redemption Rights immediately prior to the record date for
such issuance by Regency. The term "ex date" shall mean the first date
on which Shares trade regularly without the right to receive such
issuance or distribution. In case the Shares shall be changed into the
same or a different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification, or otherwise
(other than subdivision or combination of Shares or a stock dividend
described in this definition), then and in each such event the Original
Limited Partners holding Redemption Rights shall have the right
thereafter to exercise their Redemption Rights for the kind and amount
of shares and other securities and property that would have been
received upon such reorganization, reclassification or other change by
holders of the number of Shares with respect to
which such Redemption Rights could have been exercised immediately
prior to such reorganization, reclassification or change.
(i) Distributions. A Redeeming Partner exercising a Redemption
Right with a Specified Redemption Date after a Partnership Record Date
and prior to the payment of the distribution of Available Cash relating
to such Partnership Record Date shall retain the right to receive such
distribution with respect to such Units redeemed on such Specified
Redemption Date.
Section 8.7 Regency's Assumption of Right. Notwithstanding the
provisions of Section 8.6, Regency may, in its sole and absolute discretion,
assume directly and satisfy a Redemption Right by paying to the Redeeming
Partner the Share Amount on the Specified Redemption Date, whereupon Regency
shall acquire the Units offered for redemption by the Redeeming Partner and
shall be treated for all purposes of this Agreement as the owner of such Units,
which shall become Class B Units. In the event Regency shall exercise its right
to satisfy the Redemption Right in the manner described in the preceding
sentence, the Partnership shall have no obligation to pay any amount to the
Redeeming Partner with respect to such Redeeming Partner's exercise of the
Redemption Right, and each of the Redeeming Partner, the Partnership, the
General Partner and Regency shall treat the transaction between Regency and the
Redeeming Partner as a sale of the Redeeming Partner's Units to Regency for
federal income tax purposes. Regency agrees that it shall assume the General
Partner's obligation to pay the Redemption Amount by the payment of the Share
Amount through the Option Date, and Regency further agrees that if the General
Partner elects to pay the Redemption Amount through the payment of the Share
Amount, Regency shall guarantee the General Partner's payment thereof.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting. The General Partner shall keep or
cause to be kept at the principal office of the Partnership appropriate books
and records with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to Sections 8.5 or 9.3 hereof. Any records maintained by or on behalf of the
Partnership in the regular course of its business may be kept on, or be in the
form of, magnetic tape, photographs, micrographics or any other information
storage device; provided, that the records so maintained are convertible into
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained for financial purposes on an accrual basis
in accordance with generally accepted accounting principles and for tax
reporting purposes on the accrual basis.
Section 9.2 Fiscal Year. The fiscal year of the Partnership
shall be the calendar year.
Section 9.3 Reports.
(a) Annual Reports. As soon as practicable, but in no event
later than the date when mailed to Regency's shareholders, the General
Partner shall cause to be mailed to each Limited Partner as of the
close of the Partnership Year, an annual report containing financial
statements of the Partnership, or of Regency if such statements are
prepared solely on a consolidated basis with Regency for such
Partnership Year, presented in accordance with generally accepted
accounting principles, such statements to be audited by a nationally
recognized firm of independent public accountants selected by the
General Partner.
(b) Quarterly Reports. As soon as practicable, but in no event
later than the date when mailed to Regency's shareholders, the General
Partner shall cause to be mailed to each Limited Partner as of the last
day of the calendar quarter (except the last calendar quarter of each
year) who has asked to be placed on the mailing list for the same, a
report containing unaudited financial statements of the Partnership, or
of Regency if such statements are prepared solely on a consolidated
basis with Regency, and such other information as may be required by
applicable law or regulation, or as the General Partner determines to
be appropriate.
(c) Other. During the pendency of the Redemption Rights, the
Original Limited Partners shall receive in a timely manner all other
communications transmitted from time to time by Regency to its
shareholders.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns. The General Partner shall
arrange for the preparation and timely filing of all returns of Partnership
income, gains, deductions, losses and other items required of the Partnership
for federal and state income tax purposes and shall use all reasonable efforts
to furnish, within 90 days of the close of each taxable year, the tax
information reasonably required by Limited Partners for federal and state income
tax reporting purposes.
Section 10.2 Tax Elections. Except as otherwise provided herein, the
General Partner shall, in its sole and absolute discretion, determine whether to
make any available election pursuant to the Code; provided, however, that the
General Partner shall make the election under Section 754 of the Code in
accordance with applicable Regulations thereunder. The General Partner shall
have the right to seek to revoke any such election (including, without
limitation, the election under Section 754 of the Code) upon the General
Partner's determination in its sole and absolute discretion that such revocation
is in the best interests of the Partners.
Section 10.3 Tax Matters Partner.
(a) General. The General Partner shall be the "tax matters
partner" of the Partnership for federal income tax purposes. Pursuant
to Section 6223(c) of the Code, upon receipt of notice from the IRS of
the beginning of an administrative proceeding with respect to the
Partnership, the tax matters partner shall furnish the IRS with the
name, address and profit interest of each of the Limited Partners;
provided, however, that such information is provided to the Partnership
by the Limited Partners.
(b) Powers. The tax matters partner is authorized, but
not required:
(i) to enter into any settlement with the IRS with
respect to any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such
administrative proceedings being referred to as a "tax audit"
and such judicial proceedings being referred to as "judicial
review"), and in the settlement agreement the tax matters
partner may expressly state that such agreement shall bind all
Partners, except that such settlement agreement shall not bind
any Partner (1) who (within the time prescribed pursuant to
the Code and Regulations) files a statement with
the IRS providing that the tax matters partner shall not have
the authority to enter into a settlement agreement on behalf
of such Partner or (2) who is a "notice partner" (as defined
in Section 6231 of the Code) or a member of a "notice group"
(as defined in Section 6223(b)(2) of the Code), and, to the
extent provided by law, the General Partner shall cause each
Limited Partner to be designated a notice partner;
(ii) in the event that a notice of a final
administrative adjustment at the Partnership level of any item
required to be taken into account by a Partner for tax
purposes (a "final adjustment") is mailed or otherwise given
to the tax matters partner, to seek judicial review of such
final adjustment, including the filing of a petition for
readjustment with the Tax Court or the United States Claims
Court, or the filing of a complaint for refund with the
District Court of the United States for the district in which
the Partnership's principal place of business is located;
(iii) to intervene in any action brought by any
other Partner for judicial review of a final adjustment;
(iv) to file a request for an administrative
adjustment with the IRS at any time and, if any part of such
request is not allowed by the IRS, to file an appropriate
pleading (petition, complaint or other document) for judicial
review with respect to such request;
(v) to enter into an agreement with the IRS to extend
the period for assessing any tax which is attributable to any
item required to be taken into account by a Partner for tax
purposes, or an item affected by such item; and
(vi) to take any other action on behalf of the
Partners of the Partnership in connection with any tax audit
or judicial review proceeding to the extent permitted by
applicable law or regulations.
The taking of any action and the incurring of any expense by
the tax matters partner in connection with any such proceeding, except
to the extent required by law, is a matter in the sole and absolute
discretion of the tax matters partner, and the provisions relating to
indemnification of the General Partner set forth in Section 7.7 of this
Agreement shall be fully applicable to the tax matters partner in its
capacity as such.
(c) Reimbursement. The tax matters partner shall receive no
compensation for its services. All third-party costs and expenses
incurred by the tax matters partner in performing its duties as such
(including legal and accounting fees) shall be borne by the
Partnership. Nothing herein shall be construed to restrict the
Partnership from engaging an accounting firm and a law firm to assist
the tax matters partner in discharging his duties hereunder, so long as
the compensation paid by the Partnership for such services is
reasonable.
Section 10.4 Organizational Expenses. The Partnership shall elect to
deduct expenses, if any, incurred by it in organizing the Partnership ratably
over a 60 month period as provided in Section 709 of the Code.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer.
(a) Definition. The term "transfer," when used in this Article
11 with respect to a Partnership Unit, shall be deemed to refer to a
transaction by which the General Partner purports to assign its General
Partnership Interest to another Person or by which a Limited Partner
purports to assign its Limited Partnership Interest to another Person,
and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or
otherwise. The term "transfer" when used in this Article 11 does not
include any redemption of Partnership Units by an Original Limited
Partner (or a holder of Class A Units) pursuant to Section 8.6 or any
acquisition of Partnership Units from a Limited Partner by the General
Partner pursuant to the Reorganization (as defined in the Contribution
Agreement).
(b) Requirements. No Partnership Interest shall be
transferred, in whole or in part, except in accordance with the terms
and conditions set forth in this Article 11. Any transfer or purported
transfer of a Partnership Interest not made in accordance with this
Article 11 shall be null and void.
Section 11.2 Transfer of General Partner's Partnership Interests.
(a) General Partnership Interest. The General Partner may not
transfer any of its General Partnership Interest (other than any
transfer to an Affiliate of the General Partner) or withdraw as General
Partner (other than pursuant to a permitted transfer), other than in
connection with a transaction described in Section 11.2(b). Any
transfer or purported transfer of the General Partner's Partnership
Interest not made in accordance with this Section 11.2 shall be null
and void. Notwithstanding any permitted transfer of its General
Partnership Interest or withdrawal as General Partner hereunder (other
than in connection with a transaction described in Section 11.2(b)),
Regency shall remain subject to Sections 7.1(a)(iii), 7.9(e), 8.6 and
8.7 of this Agreement unless such transferee General Partner provides
substantially similar rights to the Limited Partners and Limited
Partner Consent is obtained. Nothing contained in this Section 11.2(a)
shall entitle the General Partner to withdraw as General Partner unless
a successor General Partner has been appointed and approved by the
Original Limited Partners. Regency Atlanta, Inc. shall be a subsidiary
of Regency so long as Regency Atlanta, Inc. is the General Partner,
unless the Consent of the Original Limited Partners is obtained.
(b) Transfer in Connection With Reclassification,
Recapitalization, or Business Combination Involving General Partner.
Neither the General Partner nor Regency shall engage in any merger,
consolidation or other business combination or transaction with or into
another Person or sale of all or substantially all of its assets, or
any reclassification, or recapitalization (other than a change in par
value, or a change in the number of shares of Common Stock resulting
from a subdivision or combination as described in the definition of
Unit Adjustment Factor) ("Transaction"), unless as a result of the
Transaction such other Person (i) agrees that each Limited Partner
shall thereafter remain entitled to exchange each Partnership Unit
owned by such Limited Partner (after application of the Unit Adjustment
Factor) for an amount of cash, securities, or other property equal to
the greatest amount of cash, securities or other property paid to a
holder of one Share in
consideration of one Share which a Limited Partner would have received
at any time during the period from and after the date on which the
Transaction is consummated, as if the Limited Partner had exercised its
Redemption Right immediately prior to the Transaction and received the
Share Amount, and (ii) agrees to assume the General Partner's
obligations pursuant to Section 8.6 hereof, provided, that if, in
connection with the Transaction, a purchase, tender or exchange offer
shall have been made to and accepted by the holders of more than 50
percent of the outstanding shares of Common Stock, the holders of
Partnership Units shall receive the greatest amount of cash,
securities, or other property which a Limited Partner would have
received had it exercised the Redemption Right and received the Share
Amount in redemption of its Partnership Units immediately prior to the
expiration of such purchase, tender or exchange offer. Prior to
consummating any such Transaction, Regency shall cause appropriate
amendments to be made to this Agreement pursuant to Section 14.1(b)
(including the definitions of Shares, Unit Adjustment Factor and Value)
to carry out the intent of the parties that the rights of the Limited
Partners hereunder shall not be prejudiced as the result of any such
Transaction. Notwithstanding anything contained in this Section 11.2(b)
to the contrary, the General Partner shall not engage in a Transaction
that causes the Partnership to recognize gain or loss for federal
income tax purposes.
(c) Limited Partnership Interests. The General Partner may
transfer all or any portion of its Limited Partnership Interests
represented by Class B Units, or any of the rights associated with such
Limited Partnership Interests, to any party without the consent of the
Partnership or any Partner (regardless of whether such transfer
triggers a termination of the Partnership for tax purposes under
Section 708 of the Code).
(d) Admission of Additional General Partner. Except as provided in
Sections 11.2(a) and 11.2(b), the General Partner may not admit an
additional general partner other than an Affiliate of the General Partner
pursuant to Section 11.2(a).
Section 11.3 Limited Partners' Rights to Transfer.
(a) General. No transfer of a Limited Partnership Interest by
a Limited Partner is permitted without the prior written consent of the
General Partner, which it may withhold in its sole and absolute
discretion; provided, that a Limited Partner may transfer Units without
the consent of the General Partner: (i) to members of the Limited
Partner's Immediate Family or one or more trusts for their benefit
pursuant to applicable laws of descent and distribution, gift or
otherwise; (ii) among its Affiliates; (iii) to a lender, provided that
the Units are not Pledged Units, where such Units are pledged to secure
a bona fide obligation of the Limited Partner and any transfer in
accordance with the rights of such lender under the instruments
evidencing such obligation (provided that the General Partner receives
10 days prior written notice of any transfer under this clause (a));
(iv) if the Limited Partner is a trust, to the beneficiaries of the
Limited Partner or to another trust (1) that is either established by
the same grantor as the Limited Partner or (2) whose beneficiaries
consist of members of the Immediate Family of the grantor of the
Limited Partner or (3) whose beneficiaries consist of beneficiaries of
the transferor trust or members of their Immediate Family; (v) if the
Limited Partner is an entity, to the direct or indirect equity holders
of the Limited Partner; and (vi) to other Limited Partners. In order to
effect any transfer under this Section 11.3, the Limited Partner must
deliver to the General Partner a duly executed copy of the instrument
making such transfer and such instrument must evidence the written
acceptance by the assignee of all of the terms and conditions of this
Agreement, including, where applicable, the security interest,
described in Sections 5.3 and 8.6(f),
and represent that such assignment was made in accordance with all
applicable laws and regulations. For a period of one year following the
First Closing, each Original Limited Partner agrees not (A) to request
the General Partner to consent to any transfer of Units requiring the
consent of the General Partner or (B) to transfer any economic or other
interest, right or attribute therein except to a Person to whom such
Partner may transfer Units without the consent of the General Partner.
(b) Incapacitated Limited Partners. If a Limited Partner is
subject to Incapacity, the executor, administrator, trustee, committee,
guardian, conservator or receiver of such Limited Partner's estate
shall have all the rights of a Limited Partner, but not more rights
than those enjoyed by other Limited Partners for the purpose of
settling or managing the estate and such power as the Incapacitated
Limited Partner possessed to transfer all or any part of his or its
interest in the Partnership. The Incapacity of a Limited Partner, in
and of itself, shall not dissolve or terminate the Partnership.
(c) No Transfers Violating Securities Laws. The General
Partner may prohibit any transfer by a Limited Partner of his
Partnership Units if, in the opinion of legal counsel to the
Partnership, such transfer would require filing of a registration
statement under the Securities Act of 1933 or would otherwise violate
any federal or state securities laws or regulations applicable to the
Partnership or the Partnership Units.
(d) Transfers Resulting in Corporation Status. Regardless of
whether the General Partner is required to provide or has provided its
consent under Section 11.3(a), no transfer by a Limited Partner of his
Partnership Units (or any economic or other interest, right or
attribute therein) may be made to any Person if legal counsel for the
Partnership renders an opinion letter that it creates a substantial
risk that the Partnership would be treated as an association taxable as
a corporation.
(e) Transfers Causing Termination. Regardless of whether the
General Partner is required to provide or has provided its consent
under Section 11.3(a), no transfer of any Partnership Interests other
than the exercise of Redemption Rights shall be effective if such
transfer would, in the opinion of counsel for the Partnership, result
in the termination of the Partnership for federal income tax purposes,
in which event such transfer shall be made effective as of the first
fiscal quarter in which such termination would not occur, if the
Partner making such transfer continues to desire to effect the
transfer.
(f) Transfer to Certain Lenders. Notwithstanding anything
contained herein to the contrary, no transfer of any Partnership Units
may be made to a lender to the Partnership or any Person who is related
(within the meaning of Section 1.752-4(b) of the Regulations) to any
lender to the Partnership whose loan constitutes a Non-Recourse
Liability, without the consent of the General Partner, which consent
may be given or withheld by the General Partner in its sole and
absolute discretion, provided, that as a condition to such consent the
lender will be required to enter into an arrangement with the
Partnership and the General Partner to redeem for the Redemption Amount
any Partnership Units in which a security interest is held,
simultaneously with the time at which such lender would be deemed to be
a partner in the Partnership for purposes of allocating liabilities to
such lender under Section 752 of the Code.
Section 11.4 Substituted Limited Partners.
(a) Consent of General Partner Required. The Limited Partner
shall have the right to substitute a transferee as a Limited Partner in
his place, but only if such transferee is a permitted transferee under
Section 11.3, in which event such substitution shall occur if the
Limited Partner so provides. With respect to any other transfers, the
General Partner shall have the right to consent to the admission of a
transferee of the interest of a Limited Partner pursuant to this
Section 11.4 as a Substituted Limited Partner, which consent may be
given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a
transferee of any such interests to become a Substituted Limited
Partner shall not give rise to any cause of action against the
Partnership or any Partner.
(b) Rights and Duties of Substituted Limited Partners. A
transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers
and be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement.
(c) Amendment of Exhibit A. Upon the admission of a
Substituted Limited Partner, the General Partner shall amend Exhibit A
to reflect the name, address, number of Partnership Units, and
Percentage Interest of such Substituted Limited Partner and to
eliminate or adjust, if necessary, the name, address and interest of
the predecessor of such Substituted Limited Partner.
Section 11.5 Assignees. If a transferee is not admitted as a
Substituted Limited Partner in accordance with Section 11.4(a), such transferee
shall be considered an Assignee for purposes of this Agreement. An Assignee
shall be entitled to all the rights of an assignee of a limited partnership
interest under the Act, including the right to redeem Units under Section 8.6,
and the right to receive distributions from the Partnership and the share of Net
Income, Net Losses, gain, loss and Recapture Income attributable to the
Partnership Units assigned to such transferee, but shall not be deemed to be a
holder of Partnership Units for any other purpose under this Agreement, and
shall not be entitled to vote such Partnership Units in any matter presented to
the Limited Partners for a vote (such Partnership Units being deemed to have
been voted on such matter in the same proportion as all Partnership Units held
by Limited Partners are voted). In the event any such transferee desires to make
a further assignment of any such Partnership Units, such transferee shall be
subject to all the provisions of this Article 11 to the same extent and in the
same manner as any Limited Partner desiring to make an assignment of Partnership
Units.
Section 11.6 General Provisions.
(a) Withdrawal of Limited Partner. No Limited Partner may
withdraw from the Partnership other than as a result of a permitted
transfer of all of such Limited Partner's Partnership Units in
accordance with this Article 11 or pursuant to the redemption of all of
his Partnership Units under Section 8.6.
(b) Termination of Status as Limited Partner. Any Limited
Partner who shall transfer all of his Partnership Units in a transfer
permitted pursuant to this Article 11 or pursuant to the redemption of
all of his Partnership Units under Section 8.6 shall cease to be a
Limited Partner.
(c) Timing of Transfers. Transfers pursuant to this Article 11
may only be made on the first day of a fiscal quarter, unless the
General Partner otherwise agrees, or unless resulting by operation of
law.
(d) Allocation When Transfer Occurs. If any Partnership
Interest is transferred during any quarterly segment of the
Partnership's fiscal year in compliance with the provisions of this
Article 11 or redeemed pursuant to Section 8.6, Net Income, Net Losses,
each item thereof and all other items attributable to such interest for
such fiscal year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the fiscal year in accordance with Section 706(d) of
the Code, using the interim closing of the books method (other than Net
Income or Net Loss attributable to a Capital Transaction, which shall
be allocated as of the Capital Transaction Record Date). Solely for
purposes of making such allocations, each of such items for the
calendar month in which the transfer or redemption occurs shall be
allocated to the Person who is a Partner as of midnight on the last day
of said month. All distributions of Available Cash with respect to
which the Partnership Record Date is before the date of such transfer
or redemption shall be made to the transferor Partner, and all
distributions of Available Cash thereafter shall be made to the
transferee Partner.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner. A successor to all
of the General Partner's General Partnership Interest pursuant to Section 11.2
hereof who is proposed and permitted to be admitted as a successor General
Partner shall be admitted to the Partnership as the General Partner, effective
upon such transfer. Any such transferee shall assume all of the General
Partner's obligations under this Agreement and shall carry on the business of
the Partnership without dissolution. In each case, the admission shall be
subject to the successor General Partner executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this Agreement
and such other documents or instruments as may be required to effect the
admission.
Section 12.2 Admission of Additional Limited Partners.
(a) General. After the admission to the Partnership of the
Original Limited Partners on the date hereof, a Person who makes a
Capital Contribution to the Partnership in accordance with Section 4.2
of this Agreement shall be admitted to the Partnership as an Additional
Limited Partner upon furnishing to the General Partner (i) evidence of
acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation,
the power of attorney granted in Article 16 hereof and (ii) such other
documents or instruments as may be required in the sole and absolute
discretion of the General Partner in order to effect such Person's
admission as an Additional Limited Partner.
(b) Consent of General Partner Required. Notwithstanding
anything to the contrary in this Section 12.2, no Person shall be
admitted as an Additional Limited Partner without the consent of the
General Partner (other than a Person to whom a Limited Partner may
transfer Units pursuant to Section 11.3(a) without the consent of the
General Partner), which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as
an Additional Limited Partner shall become effective on the date upon
which the name of such Person
is recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
Section 12.3 Amendment of Agreement and Certificate. For the admission
to the Partnership of any Partner, the General Partner shall, subject to the
requirements of Section 4.2, take all steps necessary and appropriate under the
Act to amend the records of the Partnership and, if necessary, to prepare as
soon as practical an amendment of this Agreement (including an amendment of
Exhibit A) and, if required by law, shall prepare and file an amendment to the
Certificate and may for this purpose exercise the power of attorney granted
pursuant to Article 16 hereof.
ARTICLE 13
DISSOLUTION AND LIQUIDATION
Section 13.1 Dissolution. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. Notwithstanding
anything contained herein to the contrary, except as provided below in this
Section 13.1, the General Partner and the Partnership shall not dissolve the
Partnership, adopt a plan of liquidation for the Partnership or sell all or
substantially all of the assets of the Partnership in a Liquidating Transaction
or otherwise without the Consent of the Original Limited Partners. The
Partnership shall dissolve, and its affairs shall be wound up, upon the first to
occur of any of the following (each an "Event of Dissolution"):
(a) Expiration of Term--the expiration of its term as
provided in Section 2.4 hereof;
(b) Withdrawal of General Partner--an event of withdrawal of
the last remaining General Partner, as defined in the Act (other than
an event of bankruptcy), unless, within 90 days after the withdrawal,
all the remaining Original Limited Partners agree in writing to
continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal, of a substitute General
Partner;
(c) Judicial Dissolution Decree--entry of a decree of
judicial dissolution of the Partnership pursuant to the provisions of
the Act; or
(d) Bankruptcy or Insolvency of General Partner--the last
remaining General Partner shall be Incapacitated by reason of its
bankruptcy unless, within 90 days after the withdrawal, all the
remaining Original Limited Partners agree in writing to continue the
business of the Partnership and to the appointment, effective as of the
date of withdrawal, of a substitute General Partner.
Section 13.2 Winding Up.
(a) General. The General Partner shall provide written notice
to the Limited Partners of the occurrence of an Event of Dissolution,
giving them at least 20 days in which to exercise their Redemption
Right prior to the distribution of any proceeds from the liquidation of
the Partnership pursuant to this Section 13.2(a). Upon the occurrence
of an Event of Dissolution, the Partnership shall continue solely for
the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and
Partners. No Partner shall take any action that
is inconsistent with, or not necessary to or appropriate for, the
winding up of the Partnership's business and affairs. The General
Partner (or, in the event there is no remaining General Partner, any
Person elected by a majority in interest of the Limited Partners (the
"Liquidator")) shall be responsible for overseeing the winding up and
dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership property
(subject to Sections 13.2(b) and 13.2(c)) shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and
the proceeds therefrom shall be applied and distributed in the
following order:
(i) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(ii) Second, to the payment and discharge of all of the Partnership's debts
and liabilities to the Partners, pro rata in accordance with amounts owed
to each such Partner;
(iii) Third, one hundred percent (100%) to the
Original Limited Partners, pro rata based on the number of
Original Limited Partnership Units held by such Partners,
until each such Partner has received an amount equal to the
aggregate Priority Distribution Amounts for each Partnership
Record Date (if any) occurring subsequent to the Event of
Dissolution; and
(iv) The balance, if any, to the General Partner and
Limited Partners in accordance with their Capital Accounts,
after giving effect to all contributions, distributions, and
allocations for all periods.
The General Partner shall not receive any additional compensation for
any services performed pursuant to this Article 13.
(b) Deferred Liquidation. Notwithstanding the provisions of
Section 13.2(a) hereof which require liquidation of the assets of the
Partnership, but subject to the order of priorities set forth therein,
and further subject to Section 13.2(c) hereof, if prior to or upon
dissolution of the Partnership the Liquidator determines that an
immediate sale of part or all of the Partnership's assets would be
impractical or would cause undue loss to the Partners, the Liquidator
may, in its sole and absolute discretion, defer for a reasonable time
the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as
creditors) and/or distribute to the Partners, in lieu of cash, as
tenants in common and in accordance with the provisions of Section
13.2(a) and Section 13.2(c) hereof, undivided interests in such
Partnership assets as the Liquidator deems not suitable for
liquidation. Any such distributions in kind shall be made only if, in
the good faith judgment of the Liquidator, such distributions in kind
are in the best interest of the Partners, and shall be subject to such
conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may
adopt.
(c) Distribution of Briarcliff Village.
(i) In the event that the Partnership is dissolved in
accordance with this Article 13, the Briarcliff Village
Property (as defined in Section 7.1(c)) will be distributed
in-kind to the Original Briarcliff Partners (as defined in
Section 7.1(c)) who continue, as of such time, to hold
Original Limited Partnership Units attributable to the
contribution of the Briarcliff Village Property to Branch
Properties, Ltd. and Branch Properties, Ltd.'s subsequent
contribution of the Briarcliff Village Property to the
Partnership, with such Partners to take title to the
Briarcliff Village Property in any manner which they are able
to agree among themselves. In the event that such Partners are
to receive the Briarcliff Village Property pursuant to this
Section 13.2(c), then the Briarcliff Village Property shall
have the net value agreed upon by the General Partner and the
Partners receiving an interest in the Briarcliff Village
Property, or, if they cannot agree, then the Briarcliff
Village Property shall be valued in accordance with Section
13.2(d).
(ii) If the net value of the Briarcliff Village
Property determined pursuant to Section 13.2(c)(i) exceeds the
amount to which the Partners receiving the Briarcliff Village
Property are entitled pursuant to this Article 13, then such
partners may contribute to the capital of the Partnership the
amount of cash equal to such excess, pro rata in proportion to
the relative number of Units of each such Partners
attributable to the contribution of the Briarcliff Village
Property to Branch Properties, Ltd. and Branch Properties,
Ltd.'s subsequent contribution of the Briarcliff Village
Property to the Partnership. If such a contribution is not
made in full, then Section 13.2(c)(i) shall not apply and the
Liquidator shall be entitled to sell the Briarcliff Village
Property in connection with the dissolution of the
Partnership.
(d) Appraisal. In the event that the Briarcliff Village
Property is to be distributed to the Original Briarcliff Partners in
liquidation of the Partnership pursuant to the provisions of this
Section 13.2, then the amount of such distribution shall be determined
as follows if the net value thereof has not been agreed on pursuant to
Section 13.2(c)(i):
(i) Within twenty (20) days after the determination
that the Partnership shall distribute the Briarcliff Village
Property to the Original Briarcliff Partners, the General
Partner and a Majority-In-Interest of the Original Briarcliff
Partners (as defined in Section 7.1(c)) shall each select an
independent, regionally or nationally recognized appraiser or
appraisal group which is experienced in valuing separate real
estate property ("Appraiser"), and the two Appraisers selected
by the parties shall jointly select a third Appraiser. Each
party shall pay the cost of their respective Appraiser and
shall split the cost of the third Appraiser.
(ii) Within sixty (60) days of selection of the third
Appraiser, each of the three Appraisers shall determine the
gross fair market value of the Briarcliff Village Property as
of the date of the election to liquidate the Partnership,
calculated based on the net fair market value of Briarcliff
Village (net of the loans encumbering Briarcliff Village),
taking into consideration the terms and relative value of the
loans encumbering Briarcliff Village, the fact that Briarcliff
Village is not being sold and the loans are not being repaid.
(iii) Upon receipt of the three appraisals
determining the gross fair market value of the Briarcliff
Village Property, the two closest gross fair market values
shall be averaged, with such average to constitute the
distribution value of the Briarcliff Village Property.
Section 13.3 Compliance with Timing Requirements of Regulations;
Allowance for Contingent or Unforeseen Liabilities or Obligations.
Notwithstanding anything to the contrary in this Agreement, in the event the
Partnership is "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article 13 to
the General Partner and Limited Partners who have positive Capital Accounts in
compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2) (including any
timing requirements therein). Except as provided in Section 13.4, if any
Original Limited Partner has a deficit balance in his Capital Account (after
giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), such
Partner shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever. In the sole and absolute discretion of the General Partner, a pro
rata portion of the distributions that would otherwise be made to the General
Partner and Limited Partners pursuant to this Article 13 may be: (i) distributed
to a liquidating trust established for the benefit of the General Partner and
Limited Partners for the purposes of liquidating Partnership assets, collecting
amounts owed to the Partnership, and paying any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner arising
out of or in connection with the Partnership (the assets of any such trust shall
be distributed to the General Partner and Limited Partners from time to time, in
the reasonable discretion of the General Partner, in the same proportions as the
amount distributed to such trust by the Partnership would otherwise have been
distributed to the General Partner and Limited Partners pursuant to this
Agreement); or (ii) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership; provided, that such
withheld amounts shall be distributed to the General Partner and Limited
Partners as soon as practicable.
Section 13.4 Deficit Capital Account Restoration.
(a) Subject to Section 13.4(b), if an Original Limited Partner
listed on Schedule 13.4(a) (who constituted an "Electing Partner" of
Branch and is referred to hereinafter as an "Electing Partner"), on the
date of the "liquidation" of his respective interest in the Partnership
(within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g)), has a
negative balance in his Capital Account, then such Electing Partner
shall contribute in cash to the capital of the Partnership the lesser
of (i) the maximum amount (if any such maximum amount is stated) listed
beside such Electing Partner's name on Schedule 13.4(a) or (ii) the
amount required to increase his Capital Account as of such date to
zero. Any such contribution required of a Partner hereunder shall be
made on or before the later of (i) the end of the Partnership fiscal
year in which the interest of such Partner is liquidated or (ii) the
ninetieth (90th) day following the date of such liquidation.
Notwithstanding any provision hereof to the contrary, all amounts so
contributed by a partner to the capital of the Partnership shall, upon
the liquidation of the Partnership under this Article 13, be first paid
to any then creditors of the Partnership, including Partners that are
Partnership creditors (in the order provided in Section 13.2(a)), and
any remaining amount shall be distributed to the other Partners then
having positive balances in their respective Capital Accounts in
proportion to such positive balances.
(b) After the death of an Electing Partner, the executor of
the estate of such an Electing Partner may elect to reduce (or
eliminate) the deficit Capital Account restoration obligation of such
an Electing Partner pursuant to Section 13.4(a). Such election may be
made by such executor by delivering to the General Partner within two
hundred seventy (270) days of the death of such an Electing Partner a
written notice setting forth the maximum deficit balance in his Capital
Account that such executor agrees to restore under Section 13.4(a), if
any. If such executor does not make a timely election pursuant to this
Section 13.4(b) (whether or not the balance in his Capital Account is
negative at such time), then such Electing partner's estate (and the
beneficiaries thereof who receive distribution of Partnership Units
therefrom) shall be deemed to have a deficit Capital Account
restoration obligation as set forth pursuant to the terms of Section
13.4(a).
(c) If the General Partner, on the date of "liquidation" of
its interest in the Partnership, within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations, has a negative balance in its
Capital Account, then the General Partner shall contribute in cash to
the capital of the Partnership the amount needed to restore its Capital
Account balance to zero. Any such contribution required to be made by
the General Partner shall be made by the General Partner on or before
the later of (i) the end of the Partnership Year in which the General
Partner's interest is liquidated, or (ii) the ninetieth (90th) calendar
day following the date of such liquidation. Notwithstanding any
provision of this Agreement to the contrary, all amounts so contributed
to the capital of the Partnership in accordance with this Section 13.4
shall be distributed in accordance with Section 13.2(a). Regency
unconditionally guarantees the obligation of the General Partner under
this Section 13.4(c) for the benefit of the Partnership and the other
Partners.
Section 13.5 Deemed Distribution and Recontribution. Notwithstanding
any other provision of this Article 13 (but subject to Section 13.3), in the
event the Partnership is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Event of Dissolution has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, the Partnership shall be deemed to have distributed the Property in
kind to the General Partner and Limited Partners, who shall be deemed to have
assumed and taken such property subject to all Partnership liabilities, all in
accordance with their respective Capital Accounts. Immediately thereafter, the
General Partner and Limited Partners shall be deemed to have recontributed the
Partnership property in kind to the Partnership, which shall be deemed to have
assumed and taken such property subject to all such liabilities.
Section 13.6 Rights of Limited Partners. Except as specifically
provided in this Agreement, including Sections 7.1(a)(iii), 8.6, 8.7 and 13.4,
each Limited Partner shall look solely to the assets of the Partnership for the
return of his Capital Contribution and shall have no right or power to demand or
receive property other than cash from the Partnership. Except as specifically
provided in this Agreement, no Limited Partner shall have priority over any
other Limited Partner as to the return of his Capital Contributions,
distributions, or allocations.
Section 13.7 Notice of Dissolution. In the event an Event of
Dissolution or an event occurs that would, but for the provisions of Section
13.1, result in a dissolution of the Partnership, the General Partner shall,
within 30 days thereafter, provide written notice thereof to each of the
Partners and to all other parties with whom the Partnership regularly conducts
business (as determined in the sole and absolute discretion of the General
Partner) and shall publish notice thereof in a newspaper of general circulation
in each place in which the Partnership regularly conducts business (as
determined in the sole and absolute discretion of the General Partner).
Section 13.8 Cancellation of Certificate of Limited Partnership. Upon
the completion of the liquidation of the Partnership as provided in Section 13.2
hereof, the Partnership shall be terminated and the Certificate and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
Section 13.9 Reasonable Time for Winding-Up. A reasonable time shall be
allowed for the orderly winding-up of the business and affairs of the
Partnership and the liquidation of its assets pursuant to Section 13.2 hereof,
in order to minimize any losses otherwise attendant upon such winding-up, and
the provisions of this Agreement shall remain in effect between the Partners
during the period of liquidation.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments.
(a) General. Amendments to this Agreement may be proposed only
by the General Partner, who shall submit any proposed amendment (other
than an amendment pursuant to Section 14.1(b)) to the Limited Partners.
The General Partner shall seek the written vote of the Partners on the
proposed amendment or shall call a meeting to vote thereon and to
transact any other business that it may deem appropriate. Except as
provided in Section 14.1(b), 14.1(c), 14.1(d) or 14.1(e), 14.1(f), a
proposed amendment shall be adopted and be effective as an amendment
hereto if it is approved by the General Partner and it receives the
Consent of the Original Limited Partners.
(b) General Partner's Power to Amend. Notwithstanding Section
14.1(a), the General Partner shall have the power, without the consent
of the Limited Partners, to amend this Agreement as may be required to
facilitate or implement any of the following purposes:
(i) to add to the obligations of the General Partner or surrender any
right or power granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited Partners;
(ii) to add to or change the name of the Partnership;
(iii) to reflect the admission, substitution,
termination, or withdrawal of Partners in accordance
with this Agreement;
(iv) to set forth the rights, powers, duties and
preferences of the holders of any additional
Partnership Interests issued pursuant to Section 4.2;
(v) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited Partners in
any material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent
with law or with other provisions, or make other changes with
respect to matters arising under this Agreement that will not
be inconsistent with law or with the provisions of this
Agreement; and
(vi) to satisfy any requirements, conditions, or
guidelines contained in any order, directive, opinion, ruling
or regulation of a federal or state agency or contained in
federal or state.
The General Partner will provide 10 days' prior written notice to the
Limited Partners when any action under this Section 14.1(b) is taken.
(c) Consent of Adversely Affected Partner Required.
Notwithstanding Section 14.1(a) hereof, this Agreement shall not be
amended without the consent of each Partner adversely affected if such
amendment would (i) convert a Limited Partner's interest in the
Partnership into a general partner's interest, (ii) modify the limited
liability of a Limited Partner, (iii) alter rights of the Partner to
receive distributions pursuant to Articles 5 or 13, or the allocations
specified in Article 6 (except as permitted pursuant to Sections 4.2 or
4.4(d) hereof), (iv) alter or modify the Redemption Right or Redemption
Amount as set forth in Section 8.6 and related definitions hereof, or
(v) amend Sections 4.2 (issuances of additional Partnership Interests),
7.1(a)(iii), (Section 1031 exchanges), 7.1(h) (distributions), 7.3
(restrictions on General Partner's authority), or (vi) amend this
Section 14.1(c).
(d) When Consent of Limited Partnership Interests Required.
Notwithstanding Section 14.1(a) hereof, the General Partner shall not
amend Sections 4.2 (issuances of additional Partnership Interests),
7.1(h) (distributions), 7.6 (contracts with Affiliates) or 11.2
(transfer of General Partnership Interest) without the Consent of the
Limited Partners and the General Partner shall not amend this Section
14.1(d) without the unanimous consent of the Limited Partners.
(e) When Consent of Other Limited Partners Required.
(i) Matters Relating to Briarcliff. Notwithstanding
Section 14.1(a) hereof, Section 7.1(c) (sale of Briarcliff
Village), 13.2(c) (distribution of Briarcliff Village) and
this Section 14.1(e), 14.1(f)(i) may be amended only with the
Consent of a Majority in Interest of the Original Briarcliff
Partners (as defined in Section 7.1(c).
(ii) Matters Relating to Other Classes of Partners. Notwithstanding Section
14.1(a) hereof, except as provided in Section 14.1(c), any amendment that would
adversely affect only a class of Limited Partners other than the Original
Limited Partners may be amended with the Consent of such class of Limited
Partners.
(f) Security Capital Consent. So long as the Stockholders Agreement
referred to in Schedule 7.8(b) remains in effect, this Agreement shall not be
amended, modified or supplemented, in any such case, without the prior written
consent of Security Capital. Any amendment, modification or supplement adopted
without Security Capital's consent shall be void.
Section 14.2 Meetings of Limited Partners.
(a) General. Meetings of the Limited Partners may be called
only by the General Partner. Such meeting shall be held at the
principal office of the Partnership, or at such other place as may be
designated by the General Partner. Notice of any such meeting shall be
given to all Limited Partners not less than fifteen days nor more than
sixty days prior to the date of such meeting. The notice shall state
the purpose or purposes of the meeting. Limited Partners may vote in
person or by
proxy at such meeting. Whenever the vote or consent of Limited Partners
is permitted or required under this Agreement, such vote or consent may
be given at a meeting of Limited Partners or may be given in accordance
with the procedure prescribed in Section 14.1 hereof. Except as
otherwise expressly provided in this Agreement, the consent of holders
of a majority of the Percentage Interests of the Original Limited
Partners (other than Units held by the General Partner, Regency or any
Affiliate of Regency) shall control.
(b) Actions Without a Meeting. Any action required or
permitted to be taken at a meeting of the Limited Partners may be taken
without a meeting if a written consent setting forth the action so
taken is signed by a majority of the Percentage Interests of the
Original Limited Partners (other than Units held by the General
Partner, Regency or any Affiliate of Regency) (or such other percentage
as is expressly required by this Agreement). Such consent may be in one
instrument or in several instruments, and shall have the same force and
effect as a vote of a majority of the Percentage Interests of the
Original Limited Partners (other than Units held by the General
Partner, Regency or any Affiliate of Regency)(or such other percentage
as is expressly required by this Agreement). Such consent shall be
filed with the General Partner. An action so taken shall be deemed to
have been taken at a meeting held on the effective date so certified.
(c) Proxy. Each Limited Partner may authorize any Person or
Persons to act for him by proxy on all matters in which a Limited
Partner is entitled to participate, including waiving notice of any
meeting, or voting or participating at a meeting. Every proxy must be
signed by the Limited Partner or his attorney-in-fact. No proxy shall
be valid after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Limited Partner executing it.
(d) Conduct of Meeting. Each meeting of Limited Partners shall
be conducted by the General Partner or such other Person as the General
Partner may appoint pursuant to such rules for the conduct of the
meeting as the General Partner or such other Person deems appropriate.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice. All notices and demands under this
Agreement shall be in writing, and may be either delivered personally (which
shall include deliveries by courier) by U.S. mail or a nationally recognized
overnight courier, by telefax, telex or other wire transmission (with request
for assurance of receipt in a manner appropriate with respect to communications
of that type; provided, that a confirmation copy is concurrently sent by a
nationally recognized express courier for overnight delivery) or mailed, postage
prepaid, by certified or registered mail, return receipt requested, directed to
the parties at their respective addresses set forth on Exhibit A attached
hereto, as it may be amended from time to time, and, if to the Partnership, such
notices and demands sent in the aforesaid manner must be delivered at its
principal place of business set forth above. Notices and demands shall be
effective upon receipt. Any party hereto may designate a different address to
which notices and demands shall thereafter be directed by written notice given
in the same manner and directed to the Partnership at its office hereinabove set
forth.
Section 15.2 Titles and Captions. All article or section titles or captions
in this Agreement are for convenience only. They shall not be deemed part of
this Agreement and in no way define, limit, extend or
describe the scope or intent of any provisions hereof. Except as specifically
provided otherwise, references to "Articles" and "Sections" are to Articles and
Sections of this Agreement.
Section 15.3 Pronouns and Plurals. Whenever the context may require,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
Section 15.4 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns. Section
14.1(f) shall inure to the benefit of Security Capital.
Section 15.6 Waiver of Partition. The Partners hereby agree that the
Partnership properties are not and will not be suitable for partition.
Accordingly, each of the Partners hereby irrevocably waives any and all rights
(if any) that it may have to maintain any action for partition of any of the
Partnership properties.
Section 15.7 Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the matters contained herein; it
supersedes any prior agreements or understandings among them with respect to the
matters contained herein and it may not be modified or amended in any manner
other than pursuant to Article 14.
Section 15.8 Remedies Not Exclusive. Any remedies herein contained for
breaches of obligations hereunder shall not be deemed to be exclusive and shall
not impair the right of any party to exercise any other right or remedy, whether
for damages, injunction or otherwise.
Section 15.9 Time. Time is of the essence of this Agreement.
Section 15.10 Creditors. None of the provisions of this Agreement shall be
for the benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 15.11 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
Section 15.12 Execution Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart.
Section 15.13 Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws and judicial decisions of the State of
Delaware, without regard to the principles of conflicts of law.
Section 15.14 Invalidity of Provisions. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
ARTICLE 16
POWER OF ATTORNEY
Section 16.1 Power of Attorney.
(a) Scope. Each Limited Partner and each Assignee hereby
constitutes and appoints the General Partner, any Liquidator, and
authorized officers and attorneys-in-fact of each, and each of those
acting singly, in each case with full power of substitution and
resubstitution, as its true and lawful agent and attorney-in-fact, with
full power and authority in its name, place and stead to:
(i) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (1) all certificates,
documents and other instruments (including, without
limitation, this Agreement and the Certificate and all
amendments or restatements thereof) that the General Partner
or the Liquidator deems appropriate or necessary to form,
qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in
which the limited partners have limited liability) in the
State of Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (2) all
instruments that the General Partner deems appropriate or
necessary to reflect any amendment, change, modification or
restatement of this Agreement in accordance with its terms;
(3) all conveyances and other instruments or documents that
the General Partner deems appropriate or necessary to reflect
the dissolution and liquidation of the Partnership pursuant to
the terms of this Agreement, including, without limitation, a
certificate of cancellation; (4) all instruments or documents
and all certificates and acknowledgments relating to any
mortgage, pledge, or other form of encumbrance in connection
with any loan or other financing to the General Partner as
provided by Section 7.1(a)(iii); (5) all instruments relating
to the admission, withdrawal, removal or substitution of any
Partner pursuant to, or other events described in, Article 11,
12 or 13 hereof or the Capital Contribution of any Partner;
(6) all certificates, documents and other instruments relating
to the determination of the rights, preferences and privileges
of Partnership Interests; and (7) all financing statements,
continuation statements and similar documents which the
General Partner deems appropriate to perfect and to continue
perfection of the security interest referred to in Section
5.3; and
(ii) execute, swear to, acknowledge and file all
ballots, consents, approvals, waivers, certificates and other
instruments appropriate or necessary, to evidence, confirm or
ratify any vote, consent, approval, agreement or other action
which is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or appropriate or
necessary, to effectuate the terms or intent of this
Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
(b) Additional Power of Attorney of Original Limited Partners.
Each Original Limited Partner hereby grants to the General Partner and
any Liquidator and authorizes officers and attorneys-in-fact of such
Persons, and each of those acting singly, in each case with full power
of substitution and resubstitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and
stead to execute and file in such Original Partner's name any financing
statements, continuation statements and similar documents and to
perform all other acts which the General Partner deems appropriate to
perfect and to continue perfection of the security interest in the
Pledged Units referred to in Section 8.6(f).
(c) Irrevocability. The foregoing power of attorney is hereby
declared to be irrevocable and a power coupled with an interest, in
recognition of the fact that each of the Partners will be relying upon
the power of the General Partner and any Liquidator to act as
contemplated by this Agreement in any filing or other action by it on
behalf of the Partnership, and it shall survive and not be affected by
the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives.
Each such Limited Partner or Assignee hereby agrees to be bound by any
representation made by the General Partner, acting in good faith
pursuant to such power of attorney; and each such Limited Partner or
Assignee hereby waives any and all defenses which may be available to
contest, negate or disaffirm the action of the General Partner, taken
in good faith under such power of attorney. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or the
Liquidator, within 15 days after receipt of the General Partner's
request therefor, such further designations, powers of attorney and
other instruments as the General Partner or the Liquidator, as the case
may be, deems necessary to effectuate this Agreement and the purposes
of the Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
REGENCY ATLANTA, INC.
By: /s/ Bruce M. Johnson
Name: Bruce M. Johnson
Title: Executive Vice President
REGENCY REALTY CORPORATION,
Sections 7.1(a)(iii), 7.9(e), 8.6, 8.7, 11.2(b) and
13.4(c) only
By: /s/ Bruce M. Johnson
Name: Bruce M. Johnson
Title: Executive Vice President
ORIGINAL LIMITED PARTNER:
BRANCH PROPERTIES, Ltd.
By: Branch Realty, Inc., General Partner
By: /s/ Richard H. Lee
Name: Richard H. Lee
Title: Executive Vice President and Secretary
OTHER ORIGINAL LIMITED PARTNERS
OPPORTUNITY CAPITAL PARTNERS II LIMITED
PARTNERSHIP, a Maryland limited partnership
By: Opportunity Capital Corporation, a Maryland
corporation, its General Partner
By: /s/ Stanley J. Kraska, Jr.
Stanley J. Kraska, Jr.,
Vice President
/s/ Richard H. Lee
Richard H. Lee, attorney-in-fact for each of the Original
Limited Partners (other than Branch Properties, Ltd. and
Opportunity Capital Partners II Limited Partnership) listed
on Exhibit A.)
EXHIBIT A
PARTNERS, CONTRIBUTIONS, UNITS AND
PARTNERSHIP INTERESTS
[TO BE ATTACHED]
A-1
A-2
1
SCHEDULE 7.8(b)
REGENCY'S PFIC OBLIGATIONS
SCHEDULE 8.6(a)
TRANSFER RESTRICTIONS IN REGENCY'S
ARTICLES OF INCORPORATION
SCHEDULE 8.6(c)(i)
MAXIMUM AGGREGATE SHARES ISSUABLE TO THE ORIGINAL
LIMITED PARTNERS PRIOR TO THE SHAREHOLDER APPROVAL DATE
SCHEDULE 13.4(a)
ELECTING PARTNERS WITH DEFICIT
CAPITAL ACCOUNT MAKE-UP REQUIREMENT
[to be completed prior to execution]
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), made as of the
7th day of March, 1997, among REGENCY REALTY CORPORATION, a Florida
corporation (the "Company"), and the investors listed on the signature pages
hereto (referred to collectively as the "Investors" and individually as an
"Investor");
W I T N E S S E T H
WHEREAS, the Company, certain of the Investors and other persons are
parties to that certain Contribution Agreement and Plan of Reorganization dated
as of February 10, 1997 (the "Contribution Agreement"), pursuant to the terms of
which Branch Properties, L.P. agreed to contribute certain properties and assets
to the Partnership (as hereinafter defined) in exchange for Units (as
hereinafter defined) of limited partnership interest in the Partnership which
Branch Properties, L.P. is distributing to its partners; and
WHEREAS, the Units held by Investors will be exchangeable for common
stock of the Company in accordance with the Partnership Agreement; and
WHEREAS, Branch Realty, Inc. agreed to transfer the Units it receives
pursuant to the Contribution Agreement to the general partner of the Partnership
in exchange for common stock of the Company; and
WHEREAS, the Company and Investors agreed to execute and deliver this
Agreement at the first closing pursuant to the Contribution Agreement.
NOW, THEREFORE, in consideration of the premises, TEN DOLLARS ($10.00)
in hand paid by Investors to the Company and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged by the parties, the parties intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following respective meanings:
"Affiliate" means, with regard to a Person, a Person that controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "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 "affiliated," "controlling" and "controlled" having meanings
correlative to the foregoing.
"Commission" means the Securities and Exchange Commission or any other
applicable federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Investor" means the Persons who are listed on the signature pages
hereto and their Permitted Transferees, including the Permitted Transferees
listed on Exhibit 1 but shall not include any Investor who no longer holds
Registrable Securities.
"Partnership" means Regency Retail Partnership, L.P., a Delaware
limited partnership.
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Partnership, executed of even date herewith, as the
same may be hereafter further amended.
"Permitted Transferee" means any Person to whom Investors may assign
Units in accordance with Section 11.3(a) of the Partnership Agreement.
"Person" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Registrable Security" means (i) any Shares issued to an Investor
pursuant to the Contribution Agreement, and any Shares issuable to an Investor
upon redemption of Units pursuant to the Partnership Agreement, (ii) any other
securities issued by the Company in exchange for any such Shares and (iii) any
securities issued by the Company as a dividend or distribution on account of
Registrable Securities or resulting from a subdivision of the outstanding
Registrable Securities into a greater number of Shares (by reclassification,
stock split or otherwise). As to any particular Registrable Securities, such
securities will cease to be Registrable Securities when (a) they have been
distributed to the public pursuant to an offering registered under the
Securities Act or (b) they have been sold to the public through a broker, dealer
or market-maker in compliance with Rule 144 under the Securities Act or (c) they
have been transferred pursuant to Section to any Person who is not a Permitted
Transferee or (d) one year shall have passed after the date of death of an
Investor who is a natural person, at which time the Registrable Securities held
by such Investor at the date of his or her death shall cease to be Registrable
Securities, (e) the Company has delivered a new certificate or other evidence of
ownership not bearing the legend set forth on the Shares upon the initial
issuance thereof, and, in the opinion of counsel to the Company and Investors,
the subsequent disposition of such security shall not require the registration
or qualification under the Securities Act, or (f) such security has ceased to be
outstanding.
"Resale Rules" means Rule 144 promulgated by the Commission or any
successor to such rule or any other rule or regulation of the Commission that
may at any time permit the Investor to sell its Shares to the public without
registration.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Shares" mean the Company's shares of voting Common Stock, $0.01 par
value per share.
"Shelf Prospectus" shall mean the prospectus included in the Shelf
Registration Statement, including any preliminary prospectus, and any amendment
or supplement thereto, including any
2
supplement relating to the terms of the offering of any portion of the
Registrable Securities covered by the Shelf Registration Statement, and in each
case including all material incorporated by reference therein.
"Shelf Registration Statement" shall mean a registration statement of
the Company (and any other entity required to be a registrant with respect to
such registration statement pursuant to the requirements of the Securities Act)
that covers all of the Registrable Securities to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, or any similar
rule that may be adopted by the Commission, and all amendments (including
post-effective amendments) to such registration statement, and all exhibits
thereto and materials incorporated by reference therein.
"Unit" shall have the meaning given to such term in the Partnership
Agreement.
2. SHELF REGISTRATION RIGHTS.
2.1 Shelf Registration.
2.1.1 Request. The Company shall cause to be filed on the
first business day following the 420th day after the First Closing Date
(as defined in the Contribution Agreement), or as soon as practicable
thereafter, a Shelf Registration Statement providing for the sale by
the Investors of all of the Registrable Securities in accordance with
the terms hereof and will use its reasonable efforts to cause such
Shelf Registration Statement to be declared effective by the Commission
as soon as practicable thereafter. The Company agrees to use its
reasonable efforts to keep the Shelf Registration Statement with
respect to the Registrable Securities continuously effective so long as
any Investor holds Registrable Securities; provided, however, that at
any time after the Shelf Registration Statement becomes effective the
number of Registrable Securities outstanding is less than 12,500, then
the Investors owning the remaining Registrable Securities shall be
given notice that the Shelf Registration will be permitted to lapse in
not less than 90 days, after which 90-day period, the Company's
obligations under this Section shall cease. Subject to Section and
Section , the Company further agrees to amend the Shelf Registration
Statement if and as required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by the Securities Act or any rules and
regulations thereunder; provided, however, that the Company shall not
be deemed to have used its reasonable efforts to keep the Shelf
Registration Statement effective during the applicable period if it
voluntarily takes any action that would result in the Investors not
being able to sell Registrable Securities covered thereby during that
period, unless such action is required under applicable law or the
Company has filed a post-effective amendment to the Shelf Registration
Statement and the Commission has not declared it effective or except as
otherwise permitted by the last three sentences of Section . In the
event that all the Subsequent Closings (as defined in the Contribution
Agreement) have not yet occurred at the time of the filing of a Shelf
Registration Statement hereunder, such registration statement also
shall include the maximum estimated number of Shares that Regency
reasonably anticipates could constitute Registrable Securities as a
result of the remaining Subsequent Closings, and if the number of
Registrable Securities actually issued at all Subsequent Closings
exceeds the number of shares covered by the registration statement,
Regency shall file an amendment increasing the number of Shares covered
by the Shelf Registration Statement, or shall file a new registration
statement for the additional Shares.
3
2.2 Registration Procedures. In connection with the obligations
of the Company with respect to the Shelf Registration Statement
contemplated by this Article , the Company shall:
2.2.1 prepare and file with the Commission a Shelf
Registration Statement with respect to such securities, which Shelf
Registration Statement (i) shall be available for the sale of the
Registrable Securities in accordance with the intended method or
methods of distribution by the Investors and (ii) shall comply as to
form in all material respects with the requirements of the applicable
form and include all financial statements required by the Commission to
be filed therewith;
2.2.2 subject to the last three sentences of this Section and
Section hereof, (i) prepare and file with the Commission such
amendments to such Registration Statement as may be necessary to keep
such Registration Statement effective for the applicable period; (ii)
cause the Shelf Prospectus to be amended or supplemented as required
and to be filed as required by Rule 424 or any similar rule that may be
adopted under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the Commission with respect
to the Shelf Registration Statement or any amendment thereto; and (iv)
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Shelf Registration
Statement during the applicable period in accordance with the intended
method or methods of distribution by the Investors. Notwithstanding
anything to the contrary contained herein, the Company shall not be
required to take any of the actions described in clauses (i), (ii) or
(iii) in this Section , Section or Section with respect to the
Registrable Securities (x) to the extent that the Company is in
possession of material non-public information that it deems advisable
not to disclose eg., it is engaged in active negotiations or planning
for a material merger or acquisition or disposition transaction, and it
delivers written notice to the Investors to the effect that the
Investors may not make offers or sales under the Shelf Registration
Statement for a period not to exceed ninety (90) days from the date of
such notice (but not to exceed 180 days during any twelve-month
period), and (y) unless and until the Company has received a written
notice (a "Shelf Registration Notice") from the Investors that they
intend to make offers or sales under the Shelf Registration Statement
as specified in such Shelf Registration Notice; provided, however, that
the Company shall have ten (10) business days to prepare and file any
such amendment or supplement after receipt of the Shelf Registration
Notice. Once the Investors have delivered a Shelf Registration Notice
to the Company, the Investors shall promptly provide to the Company
such information as the Company reasonably requests in order to
identify the method of distribution in a post-effective amendment to
the Shelf Registration Statement or a supplement to the Shelf
Prospectus. The Investors also shall notify the Company in writing upon
completion of such offer or sale or at such time as the Investors no
longer intend to make offers or sales under the Shelf Registration
Statement, in which case the Company's right not to take action by
reason of this clause (y) shall again apply;
2.2.3 furnish to the Investors, without charge, such numbers
of copies of the Shelf Registration Statement, the Shelf Prospectus and
such other documents, as the Investors may reasonably request in order
to facilitate the sale or other disposition of the Registrable
Securities owned by the Investors; the Company consents to the use of
the most recent Shelf Prospectus and any amendment or supplement
thereto by the Investors of Registrable Securities in connection with
the offering and sale of the Registrable Securities covered by the
Shelf Prospectus or amendment or supplement thereto;
4
2.2.4 use its reasonable efforts to register and qualify the
securities covered by the Shelf Registration Statement under all
applicable state securities or blue sky laws of such jurisdictions as
the Investors shall reasonably request, keep each such registration or
qualification effective during the period such Shelf Registration
Statement is required to be kept effective or during the period offers
or sales are being made by the Investors after they have delivered a
Shelf Registration Notice to the Company, whichever is shorter, and do
any and all other acts and things reasonably requested by the Investors
to assist the Investors to consummate the sale or other disposition in
such jurisdictions of the Registrable Securities owned by the
Investors, except that the Company shall not for any such purpose be
required to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified or to file therein any general consent
to service of process;
2.2.5 otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earning
statement covering the period of at least twelve months, beginning with
the first fiscal quarter beginning after the effective date of the
Shelf Registration Statement, which earning statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
2.2.6 use its reasonable efforts to list such securities on
any securities exchange on which any Shares are then listed, if the
listing of such securities is then permitted under the rules of such
exchange;
2.2.7 if the Investors intend to dispose of their securities
through an underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter or underwriters of such
underwritten offering provided that such underwriter(s) are reasonably
acceptable to the Company, including, without limitation, obtaining an
opinion of counsel to the Company and a "comfort letter" from the
independent public accountants to the Company in the usual and
customary form for such underwritten offering;
2.2.8 notify the Investors promptly and, if requested by the
Investors, confirm in writing, (i) when the Shelf Registration
Statement and any post-effective amendments thereto have become
effective, (ii) when any amendment or supplement to the Shelf
Prospectus has been filed with the Commission, (iii) of the issuance by
the Commission or any state securities authority of any stop order
suspending the effectiveness of the Shelf Registration Statement or any
part thereof or the initiation of any proceedings for that purpose,
(iv) if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Securities for offer
or sale in any jurisdiction or the initiation of any proceeding for
such purpose, and (v) at any time when a Shelf Prospectus is required
to be delivered under the Securities Act, of the happening of any event
of which it has knowledge as a result of which the Shelf Registration
Statement or the Shelf Prospectus, as then in effect, contains an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
2.2.9 make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration
Statement or any part thereof as promptly as possible;
5
2.2.10 furnish to the Investors after they have delivered a
Shelf Registration Notice to the Company, without charge, at least one
conformed copy of the Shelf Registration Statement and any
post-effective amendment thereto (without documents incorporated
therein by reference or exhibits thereto, unless requested);
2.2.11 cooperate with the Investors to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any Securities Act legend; and
enable certificates for such Registrable Securities to be issued for
such numbers of shares as the Investors may reasonably request at least
two business days prior to any sale of Registrable Securities;
2.2.12 subject to the last three sentences of Section hereof,
upon the occurrence of any event contemplated by clause (x) of Section
or clause (v) of Section hereof, use its reasonable efforts promptly to
prepare and file an amendment or a supplement to the Shelf Prospectus
or any document incorporated therein by reference or prepare, file and
obtain effectiveness of a post-effective amendment to the Shelf
Registration Statement, or file any other required document, in any
such case to the extent necessary so that, as thereafter delivered to
the purchasers of the Registrable Securities, such Shelf Prospectus as
then amended or supplemented will not contain any untrue statement of a
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 are made, not misleading;
2.2.13 make available for inspection by the Investors after
they have provided a Shelf Registration Notice to the Company and any
counsel, accountants or other representatives retained by the Investors
during normal business hours and upon reasonable prior notice all
financial and other records, pertinent corporate documents and
properties of the Company and cause the officers, directors and
employees of the Company to supply all such records, documents or
information reasonably requested by the Investors, counsel, accountants
or representatives in connection with the Shelf Registration Statement;
provided, however, that such records, documents or information which
the Company determines in good faith to be confidential and notifies
the Investors, counsel, accountants or representatives in writing that
such records, documents or information are confidential shall not be
disclosed by the Investors, counsel, accountants or representatives
unless (i) such disclosure is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, or (ii) such records,
documents or information become generally available to the public other
than through a breach of this Agreement;
2.2.14 a reasonable time prior to the filing of any Shelf
Registration Statement or any amendment thereto, or any Shelf
Prospectus or any amendment or supplement thereto, provide copies of
such document (not including any documents incorporated by reference
therein unless requested) to the Investors after they have provided a
Shelf Registration Notice to the Company; and
2.2.15 provide a CUSIP number for all Registrable Securities,
not later than the effective date of a Shelf Registration Statement.
6
2.3 Piggyback and Demand Registration Rights Under Certain
Circumstances.
2.3.1 Piggyback Registration. In the event that the Shelf
Registration shall not be declared effective within 60 days after the
filing thereof with the Commission, or in the event that it shall cease
to be effective during any period while it is required to be kept
effective hereunder (any such period during which the Shelf
Registration Statement is not effective is referred to as the
"Noneffective Period"), if the Company at any time during a
Noneffective Period proposes to register any of its shares of Common
Stock under the Securities Act (other than a registration on Form S-4,
Form S-8 or any successor or similar forms), and in the case of a
proposed registration for the account of any Person where the Company's
obligations as of the date of this Agreement to register the securities
held by such other Person do not prohibit the inclusion of securities
held by third parties, in such event, the Company shall give prompt,
written notice to Investors who hold a record in the Registrable
Securities. Upon the written request of any Investor made within a
reasonable period of time as specified in the Company's Notice (which
request shall specify the Registrable Securities intended to be
disposed of by the Investor and the intended method of distribution
thereof), the Company shall use its reasonable efforts to effect the
registration (the "Piggyback Registration") under the Securities Act of
all Registrable Securities which the Company has been so requested to
register by the Investors thereof, to the extent requisite to permit
the disposition of the Registrable Stock so to be registered in
accordance with the intended methods of distribution thereof specified
in such requests; provided that (i) if, at any time after giving
written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection
with such registration, the Corporation shall determine for any reason
not to register such securities, or if the Shelf Registration shall be
declared effective, the Company may, at its election, give written
notice of such determination to all such Holders who hold of record any
Registrable Stock and, thereupon, shall be relieved of its obligation
to register any Registrable Securities in connection with such
registration, and (ii) in case of a determination by the Company to
delay registration of its securities, the Corporation shall be
permitted to delay the registration of Registrable Securities for the
same period as the delay in registering such other securities. No
Piggyback Registrations effected under this Section shall relieve the
Company of its obligations to effect the Shelf Registration.
2.3.2 Priority in Piggyback Registrations. If the managing
underwriter for a Piggyback Registration which involves an underwritten
offering shall advise the Corporation in writing that, in its opinion,
the number of shares of stock of the Corporation (including Registrable
Stock) requested to be included in such registration by the holders
thereof (including the Holders) exceeds the number of shares of stock
of the Corporation (the "Sale Number") which can be sold in an orderly
manner in such offering within a price range acceptable to the
Corporation and the holders of shares of stock of the Corporation
requested to be registered in such offering, the Corporation shall
include (i) first, all shares of stock of the Corporation that the
Corporation proposes to register for its own account and (ii) second,
to the extent that the number of shares of stock of the Corporation to
be included by the Corporation is less than the Sale Number, all
Registrable Stock requested to be included by the Investors and all
other shares of stock of the Corporation requested to be included by
the holders thereof, pro rata based on the relative numbers of shares
requested to be included by each.
7
2.3.3 Demand Registrations for the Benefit of the Investors.
(a) Requests for Demand Registration. In the event
that the Company is not permitted to file the Shelf
Registration Statement in accordance with the provisions of
Section 2 hereof, the Investors during any Noneffective Period
shall additionally become entitled to the rights of this
Section 2.3.3. Accordingly, each of (i) the Investors (other
than Opportunity Capital Partners II Limited Partnership
("OCP")) (the "Non-OCP Investors") who hold in the aggregate
50% or more of such Non-OCP Investors' Registrable Securities
and (ii) OCP, by written request delivered to the Company, may
request registration under the Securities Act of all or any
portion of the Registrable Securities held by such Investor(s)
for sale in the manner specified in such request. Each initial
request for a registration pursuant to this Section 2.3.3
shall specify the number of Registrable Securities requested
to be registered and sold by such Non-OCP Investors and/or
OCP, as the case may be, and the method of disposition to be
employed. Within 10 days after receipt of any request for
registration under this Section 2.3.3, the Company shall
promptly give written notice to any other Investor from whom
notice has not been received and shall use its commercially
reasonable efforts to include in such registration (for sale
in accordance with the method of disposition specified in the
initial request) all Registrable Securities with respect to
which the Company has received written requests for inclusion
therein within 20 days after the receipt of the notice from
the Company, which written requests shall specify the number
of Registrable Securities to be included. Any request for
registration pursuant to this Section 2.3.3 shall be referred
to herein as a "Demand Registration Request" and all
registrations requested pursuant to this Section 2.3.3 are
referred to herein as "Demand Registrations."
(b) Number of Demand Registrations. The Company,
pursuant to this Section 2.3.3, shall be required to effect up
to (i) three (3) Demand Registrations for the Non-OCP
Investors, and (ii) three (3) Demand Registrations for OCP.
Notwithstanding anything to the contrary contained herein, a
registration shall count as a Demand Registration only when a
registration statement covering all Registrable Securities
covered by such Demand Registration Request shall have become
effective (except that if, after it has become effective, the
offering of Registrable Securities pursuant to such
registration statement is interfered with by any stop order,
injunction or action of the SEC not occasioned by the fault of
any Investor, such registration shall be deemed not to have
been effected unless such stop order, injunction or other
order or request shall subsequently have been vacated or
otherwise removed), and if such method of disposition is a
firm commitment underwritten public offering, all such
Registrable Securities shall have been sold pursuant thereto;
provided, however, that if a registration statement filed by
the Company pursuant to a Demand Registration Request shall be
abandoned or withdrawn at the behest of the Non-OCP Investors
or OCP, as the case may be, then, unless such Investor(s)
shall, promptly upon receipt of a request by the Company
therefor supported by an invoice setting forth the expenses in
reasonable detail, reimburse the Company for the expenses
directly attributable to the Demand Registration, the Company
shall be deemed to have effected a Demand Registration.
(c) Minimum Offering Amount. The Company shall not be
required to register Registrable Securities pursuant to this
Section 2.3.3 unless the aggregate current market price of all
Registrable Securities covered by the Demand Registration Request
8
shall be $500,000 or more (unless and to the extent the
Non-OCP Investors or OCP, as the case may be, shall hold in
the aggregate less than $500,000 of Registrable Securities, in
which case such minimum offering amount shall be equal to the
amount of Registrable Securities so held).
(d) Selection of Underwriters. If the method of
disposition specified in a Demand Registration Request shall
be an underwritten public offering, the Company may designate
the managing underwriter of such offering, subject to the
approval of the Non-OCP Investors or OCP, as the case may be,
which approval shall not be unreasonably withheld.
(e) Priority on Demand Registrations. The Company
shall be entitled to include in any registration statement
referred to in this Section 2.3.3, for sale in accordance with
the method of disposition specified in the Demand Registration
Request, shares of common stock to be sold by the Company for
its own account or by other shareholders of the Company for
their account. Nonetheless, whether or not the Company desires
to include any such additional shares in a Demand
Registration, if such method of disposition is an underwritten
public offering and the managing underwriters advise the
Company in writing that in their opinion the number of
securities requested to be included in such registration
exceeds the Sale Number (as defined in Section 2.3.2 hereof),
then the Company will limit the number of shares included in
such registration to the Sale Number, and the shares
registered shall be selected in the following order of
priority: (i) first, Registrable Securities covered by the
Demand Registration Request, pro rata among the Investors
making the Demand Registration request, based on the relative
number of Registrable Securities requested to be included by
each, (ii) second, securities the Company proposes to sell and
(iii) third, other securities requested to be included in such
registration.
2.4 Expenses.
2.4.1 Except as set forth in Section , all expense incurred in
the registration of Registrable Securities in accordance with this
Agreement shall be paid by the Company. The expenses shall include,
without limitation, printing and photocopying expenses, all
registration and filing fees under federal and state securities laws,
expenses of complying with the securities or blue sky laws of any
jurisdictions, fees and expenses of Company counsel, and the fees and
expenses of the Company's independent auditors in connection with any
comfort letter required by any underwriters.
2.4.2 The Investors shall be responsible for underwriting and
brokerage discounts and commissions, stock transfer taxes and fees and
disbursements of any counsel for the holders of Registrable Securities.
2.5 Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Section :
2.5.1 Indemnity by Company. Without limitation of any other
indemnity provided to any Investor, to the extent permitted by law, the
Company will indemnify and hold harmless each Investor and, as
applicable, its directors, officers, employees, agents and partners and
each
9
Person, if any, who controls such Investor (within the meaning of the
Securities Act), against any losses, claims, damages, liabilities and
expenses (joint or several) to which they may become subject under the
Securities Act or other federal or state law, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement (including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto), (ii) the omission or alleged omission to state
therein 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, (iii) any violation or alleged
violation by the Company of the Securities Act, any state securities
law or any rule or regulation promulgated under the Securities Act or
any state securities law, (iv) any and all loss, liability, claim,
damage and expense whatsoever, as reasonably incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or alleged untrue statement or any omission or alleged
omission, if such settlement is effected with the written consent of
the Company, or (v) subject to the limitations set forth in Section ,
any and all reasonable expense whatsoever, as incurred (including
reasonable fees and disbursements of counsel), in investigating,
preparing or defending against any litigation, or investigation or
proceeding by any governmental agency or body, commenced or threatened,
in each case whether or not a party, or any claim whatsoever based upon
any such untrue statement or alleged untrue statement or omission or
alleged omission, to the extent that any such expense is not paid under
subparagraphs (i) through (v) above, and the Company will reimburse
such Investor and its directors, officers, employees, agents and
partners, and any controlling person thereof, for any reasonable legal
or other expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, expense or action;
provided, however, that the Company shall not be liable in any such
case for any such loss, claim, damage, liability, expense or action to
the extent that it arises out of or is based upon a Violation that
occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
such Investor or controlling person thereof, and provided, further,
that the Company shall not be liable to the extent that any such loss,
claim, damage, liability, expense or action arises out of such person's
failure to send or give a copy of the final prospectus or supplement to
the persons asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation
of the sale of Registrable Securities to such person if such statement
or omission was corrected in such final prospectus or supplement. In
connection with an underwritten offering, the Company will indemnify
such underwriters and their directors, officers and each Person, if
any, who controls such underwriters (within the meaning of the
Securities Act) to the same extent as indemnification is provided to
the Investors.
2.5.2 Indemnity by Investors. In connection with any
registration statement in which an Investor is participating, each such
Investor will furnish to the Company in writing such information and
affidavits as the Company reasonably requests for use in connection
with any such registration statement or prospectus and, to the extent
permitted by law, will indemnify the Company, its trustees, officers,
employees and agents and each Person who controls the Company (within
the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any Violation which occurs
solely in reliance upon and in conformity with any information or
affidavit so furnished in writing by such Investor expressly for use in
10
connection with such registration; provided, that the obligation to
indemnify will be several and not joint and several with any other
Person and will be limited to the net amount received by such Investor
from the sale of Registrable Securities pursuant to such registration
statement.
2.5.3 Notice; Right to Defend. Promptly after receipt by an
indemnified party under this Section of notice of the commencement of
any action (including any governmental action), such indemnified party
will, if a claim in respect thereof is to be made against any
indemnifying party under this Section , deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, if the indemnifying
party agrees in writing that it will be responsible for any costs,
expenses, judgments, damages and losses incurred by the indemnified
party with respect to such claim, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with
reasonable fees and expenses to be paid by the indemnifying party, if
the indemnified party reasonably believes that representation of such
indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of
any such action shall relieve such indemnifying party of any liability
to the indemnified party under this Section only if and to the extent
that such failure is prejudicial to its ability to defend such action,
and the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any
indemnified party other than under this Section . If the indemnifying
party does not assume the defense of any such action or proceeding,
after having received the notice referred to in the first sentence of
this paragraph, the indemnifying party will pay the reasonable fees and
expenses of counsel (which shall be limited to a single law firm) for
the indemnified party. In such event, however, the indemnifying party
will be liable for any settlement effected without the written consent
of such indemnifying party. If the indemnifying party assumes the
defense of any such action or proceeding in accordance with this
paragraph, such indemnifying party shall not be liable for any fees and
expenses of counsel for the indemnified party incurred thereafter in
connection with such action or proceeding, except as set forth in the
proviso in the first sentence of this Section .
2.5.4 Contribution. If the indemnification provided for in
this Section is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and of the indemnified
party on the other hand in connection with the statements or omissions
which resulted in such loss, liability, claim, damage or expense as
well as any other relevant equitable considerations. The relevant fault
of the indemnifying party and the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, the amount any
Investor shall be obligated to contribute pursuant to this Section
shall be limited to an amount equal to the net proceeds to such
Investor of
11
the Registrable Securities sold pursuant to the registration statement
which gives rise to such obligation to contribute (less the aggregate
amount of any damages which the Investor has otherwise been required to
pay in respect of such loss, claim, damage, liability or action or any
substantially similar loss, claim, damage, liability or action arising
from the sale of such Registrable Securities). Notwithstanding the
foregoing, no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section . each person, if any,
who controls any Investor within the meaning of Section 15 of the
Securities Act and partners, directors and officers of any Investor, as
applicable, shall have the same rights to contribution as that
Investor, and each director of the Company, each officer of the Company
who signed the Shelf Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the
Securities Act shall have the same rights to contribution as the
Company.
2.5.5 Survival of Indemnity. The indemnification provided by
this Section shall be a continuing right to indemnification and shall
survive the registration and sale of any securities by any Person
entitled to indemnification hereunder and the expiration or termination
of this Agreement.
2.6 Rule 144. In order to permit the Investors to sell the Registrable
Securities they hold, if they so desire, from time to time pursuant to Rule 144
under the Securities Act, or any successor to such rule, the Company shall use
reasonable efforts to (i) make available adequate current public information and
(ii) file with the Commission in a timely manner all reports and other documents
required of the Company under the Exchange Act. In connection with any sale,
transfer or other disposition by any Investor of Registrable Securities pursuant
to Rule 144 under the Securities Act, the Company shall cooperate with such
Investor to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any Securities
Act legend, and enable certificates for such Registrable Securities to be sold
for such number of shares and registered in such names as the selling Investors
may reasonably request at least two business days prior to any sale of
Registrable Securities, provided that such Investors provide counsel to the
Company with seller's and broker's representation letters customary for Rule 144
sales.
2.7 Limitations.
2.7.1 The Investors shall not, without prior written consent
of the Company, effect any public sale or distribution (including sales pursuant
to the Resale Rules under the Securities Act) of securities of the Company
during any period commencing 15 days prior to the proposed filing date of a
preliminary prospectus supplement for a shelf registration for an underwritten
offering and ending 60 days following the date of filing of the final prospectus
supplement (or 75 days following the date of filing of the preliminary
prospectus, if sooner) filed by the Company for the benefit of Security Capital
Holdings, S.A., its assigns or pledgees (collectively, "Security Capital") (as
to which the Company shall give at least 90 days' prior written notice to the
Investors), provided, however, that the Investors' obligations under this
Section shall be limited to two occasions. The Investors shall not, without
prior written consent of the Company, effect any public sale or distribution
(including sales pursuant to the Resale Rules under the Securities Act) of
securities of the Company during any period commencing 30 days prior to the
proposed filing date of a registration statement or a preliminary prospectus
supplement for a shelf registration and ending 90 days following the effective
date of such registration statement or the date of filing of the final
prospectus supplement, in either case for an underwritten offering of equity
12
securities of the Company for the account of the Company (as to which the
Company shall give at least 90 days' prior written notice to the Investors).
2.7.2 As a condition to the inclusion of such Investor's
Registrable Securities in a registration statement hereunder, each Investor
agrees to provide written notice to the Company within ten days after the end of
any calendar quarter in which the Investor has made any transfers of Registrable
Securities, stating the number transferred during such quarter and the date and
type (e.g., open market sale) of each transfer.
3. PUT OPTION. All capitalized terms in this Section 3 not
otherwise defined in this Agreement shall have the meanings set forth in the
Partnership Agreement.
3.1 General. In the event that the Company's shareholders do not
approve the issuance of Shares pursuant to the transactions contemplated by the
Contribution Agreement in accordance with Rule 312.03 of the New York Stock
Exchange's Listed Company Manual within one year after the First Closing, the
Registrable Securities of each Investor shall be limited to the Maximum
Aggregate Shares for such Investor described on Schedule 3.1 attached hereto,
and any remaining Shares issuable to such Investor shall be deemed "Unlisted
Securities" hereunder. In such case, beginning on the first anniversary of the
First Closing each Investor shall have the right to require the Company to
purchase all or, from time to time, any portion of such Investor's Unlisted
Securities, in exchange for an amount equal to the per Share Value thereof (the
"Put Payment"), by delivering written notice to the Company. An Investor may not
exercise such put option for less than one thousand (1,000) Unlisted Securities
or if the Investor holds less than one thousand (1,000) Unlisted Securities, all
of the Unlisted Securities held by such Investor. Upon receipt of the Investor's
Put Notice, on the Put Date (as hereinafter defined), the Company shall pay the
Investor exercising the put option an amount in cash equal to the Put Payment.
3.2 Put Notice. In order to exercise the right to require the Company
to purchase all or any portion of its Unlisted Securities, the Investor
exercising its put option shall surrender any certificates representing such
Unlisted Securities, duly endorsed if the Company shall so require or
accompanied by appropriate instruments of transfer satisfactory to the Company,
at the Company's principal office, together with written notice that the
Investor irrevocably elects to sell such Unlisted Securities to the Company.
3.3 Put Date. The closing of the purchase and sale of the Unlisted
Securities put to the Company shall take place on the tenth Business Day after
the Company receives the Put Notice, or on such other day as the Investor
exercising the Put Option and the Company shall agree in writing. Upon the
payment of the Put Payment, the Company shall be treated for all purposes as the
owner of the Unlisted Securities to which the Put Option has been exercised.
4. MISCELLANEOUS.
4.1 Notices.
4.1.1 All communications under this Agreement shall be in
writing and shall be delivered by telefax (with appropriate request for
assurance of receipt, and a confirmation copy sent concurrently by
mail), reputable overnight courier or shall be mailed by registered or
certified mail, postage prepaid,
13
(a) if to the Company, at:
Regency Realty Corporation
121 W. Forsyth Street, Suite 200
Jacksonville, Florida 32202
Attention: Mr. Martin E. Stein, Jr.
or at such other address as it may have furnished in writing
to the holders of Registrable Securities at the time
outstanding, or
(b) if to any Person who is the registered holder of
Registrable Securities, to the address of such Investor as it
appears in the stock ledger of the Company or in the records
of the Partnership.
4.1.2 Any notice so addressed shall be deemed given when
received.
4.2 Notices of Sale. Investors shall, promptly upon the Company's
written request from time to time advise the Company of the number of
Registrable Securities they continue to hold.
4.3 Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the Company and each of the Investors. Without the
prior written consent of the Company, the rights of the Investors may not be
transferred other than to a Permitted Transferee.
4.4 Amendment and Waiver. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, but only with the
written consent of the Company and the Investors holding a majority of the
Registrable Securities; provided, however, that no such amendment or waiver
shall take away any registration right of any Investor or reduce the amount of
reimbursable costs to any Investor in connection with any registration hereunder
without the consent of such Investor; further provided, however, that without
the consent of any other Investor, any Investor may from time to time enter into
one or more agreements amending, modifying or waiving the provisions of this
Agreement if such action does not adversely affect the rights or interest of any
other Investor. No delay on the part of any party in the exercise of any right,
power or remedy shall operate as a waiver thereof, nor shall any single or
partial exercise by any party of any right, power or remedy preclude other or
further exercise thereof, or the exercise of any other right, power or remedy.
4.5 Counterparts. One or more counterparts of this Agreement may be
signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.
4.6 Governing Law. This Agreement shall be construed in accordance with
and governed by the internal laws of the State of Florida, which shall prevail
in all matters arising under or in connection with this Agreement.
4.7 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
14
4.8 Headings. The headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
4.9 Time of the Essence. Time is of the essence to this Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date and year first above written.
COMPANY: INVESTORS:
REGENCY REALTY CORPORATION BRANCH PROPERTIES, L.P.
By: Branch Realty, Inc., General Partner
By: /s/ Bruce M. Johnson
Bruce M. Johnson By: /s/ Richard H. Lee
Executive Vice President Name: Richard H. Lee
Title: Executive Vice President
and Secretary
INVESTORS:
BRANCH REALTY, INC.
By: /s/ Richard H. Lee
Name: Richard H. Lee
Title: Executive Vice President
and Secretary
15
ADDITIONAL INVESTOR (upon such person's execution hereof):
/s/ Arnold von Bohlen und Halbach Date: March 7, 1997
------------------------------
Arnold von Bohlen und Halbach
16
EXHIBIT 1
PERMITTED TRANSFEREES
Opportunity Capital Corporation
LaSalle Advisors Limited Partnership
The State of Oregon Public Employees' Retirement Fund
Rudolf Augstein
BAF Holding Corp.
Dr. Michael Beier
Rebie M. Benedict
Roger Biard
Hans J. Bidermann
Dr. Axel Born
Branch Investment Company, Inc.
Branch Investment Group, Inc.
Irene Graats Branch as Trustee for Christopher M. Branch
u/a James Alexander Branch dated October 13, 1987
Irene Graats Branch as Trustee for George G. Branch
u/a James Alexander Branch dated October 13, 1987
Mr. J. Alexander Branch III
Branch/InterAllianz Realty Fund, L.P.
Stephen D. Broome
G. Owen Brown
Chris A. Case
Mary S. Close
Coro, Inc.
Dal Vast B.V., Inc.
Erika Dirtl
Katja Dirtl
Willi Dirtl
Euart Investment Company., Inc.
John F. Euart, Jr.
Dr. Albert Feichtner
Fontana Insurance Brokerage, Ltd.
Frascati Im-Und Export GmbH, Inc.
The Garlington Group Profit Sharing Trust
J. Peek Garlington, Jr.
Gardiner W. Garrard
Gehrke Investments, Ltd.
German-Hope Properties, Inc.
Mark Gottlieb
Nina Gretsch
Robert S. Griffith, Jr.
Griffith & Griffith
Dr. Ulrich Guntram
Dr. Helmut Hagemann
17
Dr. rer. nat. Gert Hagen
Warren R. Hall
Gerda Holm
Werner Holm
HOP Equities, Ltd.
Volker Jakobs
JH Holdings, Ltd.
Lawrence P. Kelly
Klaus Nottbohm Investments, Ltd.
A.J. Land, Jr.
Samuel P. Latone
Richard H. Lee
Dr. Michael Lichtenauer
John W. Lundeen, III
Harry E. Morgan
Dr. Michael Muth
Henk Nieuwenhuys
Peter Nunn
Dr. Arend Oetker
Opportunity Capital Partners II Limited Partnership
Patricia L. Pearlberg
Dr. Lutz Peters
Plaza Limited Partnership
Dr. Wilhelm Rall
Hermann-Hinrich Reemtsma
R.E.N.L., Ltd.
RHL Investment Company, Inc.
Hajo Riesenbeck
Franz und Rita Rohrbach
Roland Management, Inc.
Richard H. Ross
Dr. Bernhard Schwaighofer
Dr. Gerbert Schwaighofer
SDB Investment Company, Inc.
Smith Barney, Inc.,Successor Custodian
for Robert S. Griffith, Jr.
Hans Stegmann
Nicholas B. Telesca
Armin Timmermann
Dr. Lothar Tirala
Michael Ulmer
Michaele Ulmer
Gustav Adolph von Halem
Herbert von Halem
Gundolf von Hammerstein
Philipp von Hammerstein
Sophie von Hammerstein
Valerie von Hammerstein
18
Dr. Georg von Segesser
Dr. Renate Waclawiczek
Warren Investments, Inc.
WEN Investments, Inc.
West Shaw Properties, Inc.
Marianne Wittich
Hans Wolfgang Zanders
Stanley R. Zippin
\DOCS\SOFT\4267.7|03/06/97 9:48AM|JAXC17|LYK:dkm
19
BUSINESS DEVELOPMENT AND NON-COMPETITION AGREEMENT
THIS BUSINESS DEVELOPMENT AND NON-COMPETITION AGREEMENT (the
"Agreement") is made as of the 7th day of March, 1997 by and among REGENCY
RETAIL PARTNERSHIP L.P., a Delaware limited partnership (the "Partnership"),
REGENCY REALTY GROUP II, INC., a Florida corporation (the "New Management
Company"), and J. ALEXANDER BRANCH III, an individual ("Branch"), under the
following circumstances:
A. Pursuant to the terms and conditions of that certain Contribution
Agreement and Plan of Reorganization, dated February 10, 1997 (the "Contribution
Agreement"), by and among Branch Properties, L.P., a Georgia limited partnership
("Branch Partnership") and Regency Realty Corporation, a Florida corporation
("Regency"), Branch Partnership has formed the Partnership, to which a wholly
owned subsidiary of Regency is making certain cash contributions in exchange for
the general partner interest, Branch Partnership is contributing shopping center
properties and other assets used in its real estate business, and Branch
Partnership is transferring its third party property management for transfer to
the New Management Company (collectively, the "Assets").
B. Branch is an equity holder in Branch Partnership as well as an
executive officer of Branch Partnership and is receiving limited partnership
interests in the Partnership which Branch Partnership (i) is receiving in
exchange for the Assets and (ii) is distributing to its partners.
C. To induce Regency and the Partnership to enter into the Contribution
Agreement and as a condition to closing the transfer of Assets and other
transactions contemplated thereby, Branch has agreed to enter into this
Agreement.
D. Branch will not be employed by the Partnership or New Management
Company, and the parties wish to delineate certain covenants not to compete on
the part of Branch and also to describe the terms of certain business dealings
between Branch, on the one hand, and the Partnership and the New Management
Company, on the other hand.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1: DEFINITIONS
1.1 "Affiliate" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under common control with such
Person.
1.2 "Branch Principals" means J. Alexander Branch III, Nicholas B. Telesca,
Warren R. Hall and Richard H. Lee.
1.3 "Business" means the direct or indirect acquisition, ownership,
operation, control or development of Properties.
1.4 "Employee" means an individual who works at least an average of 35
hours per week as an employee, or who performs substantially the same functions
as such an employee, whether as a direct or indirect owner, partner, director,
officer, agent, consultant, independent contractor or otherwise.
1.5 "First Refusal Notice" means the written notice to be mailed to the
Partnership by Branch which shall (i) in the case of Branch's opportunity to
acquire or develop a Property, describe in adequate detail the Property
(including, without limitation, the street address, legal description, anchor
tenants and the seller's asking price) to the extent such information is known
by Branch or (ii) in the case of Branch's opportunity to arrange for the sale to
a Person other than the Partnership, also will describe in adequate detail the
terms and conditions upon which the Property will be offered to such Person
(including, without limitation, the price and capitalization rate).
1.6 "Immediate Family" means a Person's spouse, parents, lineal
ascendants or descendants and their spouses, and trusts for the benefit of any
of the foregoing.
1.7 "In Conjunction with Another Branch Principal" means with (i) any
other Branch Principal or a member of his Immediate Family or (ii) an entity
which is an Affiliate of a Branch Principal or Principals or of any member of
his or their Immediate Family, or (iii) any combination of the foregoing.
1.8 "Indirectly" means through (i) any member of Branch's Immediate
Family or (ii) an entity in which Branch or any member of his Immediate Family
has any material direct or indirect equity interest.
1.9 "NonCompete Period" means a period of one year from the date
of this Agreement.
1.10 "Noninterference Period" means a period of three years from
the date of this Agreement.
1.11 "Person" means an individual or a corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association or other form of business or legal entity.
1.12 "Property" means a grocery-anchored shopping center or a
free-standing drugstore located in the Territory, provided a Property shall not
be deemed to include either (i) any grocery-anchored shopping center having
150,000 square feet or more of net leasable area or (ii) any portfolio of
properties if the square footage of net leasable area contained in the
grocery-anchored shopping centers included in such portfolio, each of which
would otherwise
2
be a "Property", constitutes less than fifty percent (50%) of the total square
footage of net leasable area contained in all of the properties included in such
portfolio. In addition, none of the real properties scheduled on Exhibit A,
attached hereto and incorporated herein by this reference (the "Excluded
Properties"), shall be deemed to be a "Property" for the purposes of this
Agreement.
1.13 "Territory" means Georgia.
1.14 "Third Party Business" means acting as leasing agent for and/or
managing Properties that are owned by third parties.
ARTICLE 2: BUSINESS DEVELOPMENT
2.1 New Third Party Contracts. During the Noninterference Period,
Branch agrees that he will use reasonable best efforts to facilitate new
management and leasing contracts between any Branch Partnership client or any
new client of Branch with respect to any Property located within the Territory
acquired by such client during the Noninterference Period.
2.2 Existing Relationships. To facilitate a smooth transition during
and after the transfer of the Assets to the Partnership and the New Management
Company, during the Noninterference Period, Branch agrees that he will assist
the Partnership and the New Management Company by recommending to (i) former
employees of Branch Partnership hired as employees of the Partnership and/or the
New Management Company that they remain employees of the Partnership and/or the
New Management Company, as the case may be, and (ii) former clients of Branch
Partnership having management or other contracts with the New Management Company
on or after the date of this Agreement that they remain as clients of New
Management Company and not terminate any such contracts.
2.3 Office Space. For up to twelve months following the date of this
Agreement, Branch shall be entitled to office space and secretarial assistance
at the Partnership's principal offices in Atlanta, Georgia, at no charge to
Branch (other than reimbursement at the Partnership's actual cost for postage,
long distance telephone charges, courier charges and similar third party
out-of-pocket expenses, unrelated to the Partnership or the New Management
Company or to the conduct of the business of Regency in excess of an aggregate
of $250 per month).
2.4 Director. Branch agrees to fill the newly created vacancy on
Regency's Board of Directors and to stand for re-election as a director at
Regency's 1997 annual meeting of shareholders.
3
ARTICLE 3: RIGHT OF FIRST REFUSAL
3.1 Right of First Refusal for Acquisition and Development of
Properties. If at any time during the NonCompete Period Branch has the
opportunity, directly or Indirectly, to (i) acquire or develop a Property or
(ii) arrange for the sale to any Person other than the Partnership, whether as a
broker, co-investor, developer or otherwise, of a Property, whether in a
purchase of assets or stock, merger, consolidation, exchange or similar
transaction, Branch shall give the Partnership the First Refusal Notice offering
such Property to the Partnership for purchase or development. If the
Partnership, within 10 days after the date of receipt of the First Refusal
Notice, does not express an interest, in writing, to Branch in purchasing or
developing the Property, or if the Partnership fails either to purchase or enter
into a definitive purchase and sale agreement for the Property within the time
period set forth in Section 3.2, then for a period of 90 days thereafter, Branch
may purchase, enter into a purchase and sale agreement for or arrange for the
sale of, as the case may be, the Property (or in the case of a Property to be
developed, the land therefor), provided that the terms and conditions of the
purchase, purchase and sale agreement or sale are not substantially more
favorable to Branch or the buyer than those set forth in the First Refusal
Notice. In the event that (i) Branch has not purchased, entered into a
definitive purchase and sale agreement for or arranged for the sale of the
Property within such 90 day period or (ii) the terms and conditions of a
purchase, purchase and sale agreement or sale are substantially more favorable
to Branch or the buyer than those set forth in the First Refusal Notice, then
the Property shall again become restricted as though it had never been offered
to the Partnership in accordance with the terms of this Agreement.
3.2 Exercise of Right of First Refusal. If the Partnership expresses an
interest in purchasing or developing the Property within the 10 day first
refusal period provided for in Section , the Partnership must purchase or enter
into a definitive purchase and sale agreement for the Property within 30 days
after the date of receipt of the First Refusal Notice. In such event, the
Partnership shall pay to Branch or his designee at the closing of the purchase
of the Property an acquisition fee at applicable market rates in an amount as
reasonably agreed to by the Partnership and Branch at the time of execution by
the Partnership of a definitive purchase and sale agreement. In the event the
Partnership does not purchase or enter into a purchase and sale agreement within
such relevant period, then for a period of 90 days thereafter, Branch may
purchase, enter into a purchase and sale agreement for or arrange for the sale
of, as the case may be, the Property, provided that the terms and conditions of
the purchase, purchase and sale agreement or sale are not substantially more
favorable to Branch or the buyer than those set forth in the First Refusal
Notice. In the event that (i) Branch has not purchased, entered into a
definitive purchase and sale agreement or arranged for the sale of the Property
within such 90 day period or (ii) the terms and conditions of a purchase,
purchase and sale agreement or sale are substantially more favorable to Branch
or the buyer than those set forth in the First Refusal Notice, then the Property
shall again become restricted as though it had never been offered to the
Partnership in accordance with the terms of this Agreement.
3.3 Confidentiality Covenant. The Partnership agrees that it will enter
into a confidentiality agreement on customary terms, as reasonably approved by
the Partnership and
4
Branch, with respect to any information about a Property provided to the
Partnership by Branch pursuant to this Article .
ARTICLE 4: COVENANTS NOT TO COMPETE
AND NOT TO SOLICIT
4.1 Employment Relationships. During the Noncompete Period, Branch shall
not become an Employee of any Person which is engaged as a material part of its
business in the Business in the Territory.
4.2 Duration and Geographic Scope. Except as set forth in Section ,
during the Noncompete Period, Branch hereby agrees not to directly or Indirectly
engage in the Third Party Business in the Territory, and except as set forth
below, Branch agrees that Branch shall not, in any other way, directly or
Indirectly compete, or give aid or advice to others in competing, with the New
Management Company in the conduct of Third Party Business in the Territory,
whether as a direct or indirect owner, partner, director, officer, employee,
agent, consultant, independent contractor or otherwise.
4.3 Limitations. The obligations described in Section shall not
preclude Branch from owning publicly-traded securities for investment purposes
of any entity engaged in the Third Party Business in the Territory, in an amount
not exceeding five percent of the total number of outstanding securities of the
same class.
4.4 No Solicitation. During the Noninterference Period, Branch shall
not solicit, attempt to solicit, induce, attempt to induce or assist others in
attempting to solicit (i) any employee of the Partnership, any Affiliate of the
Partnership, the New Management Company or any Affiliate of the New Management
Company for the purpose of persuading such employee to leave as an employee of
the Partnership or such Affiliate and/or the New Management Company and/or its
Affiliates or (ii) any client of the New Management Company or an Affiliate of
the Management Company for the purpose of persuading such client to leave as a
client of the Management Company or its Affiliate or terminate any management or
other contract with the New Management Company or its Affiliate..
4.5 Remedies. The parties hereby declare and agree that any breach by
Branch of this Article will cause the Partnership and/or its Affiliates and/or
the New Management Company and/or its Affiliates irreparable injury and damage,
and further agree that it would be difficult, if not impossible, to calculate
the monetary damages that might accrue to the Partnership and/or its Affiliates
and/or the New Management Company and/or its Affiliates as a result of such
breach. Accordingly, Branch agrees that in the event of any breach or
anticipated breach of the terms or provisions of this Article the Partnership
and/or its Affiliates and/or the New Management Company and/or its Affiliates
shall be entitled to injunctive or similar equitable relief to prevent a breach
of this Article, and Branch waives the claim or defense that the Partnership
and/or such Affiliates and/or the New Management Company and/or its Affiliates
5
have an adequate remedy at law. Notwithstanding the foregoing, the Partnership
and/or its Affiliates and/or the New Management Company and/or its Affiliates
also shall be entitled to obtain monetary damages to the extent calculable as a
result of the breach by Branch of the terms and provisions of this Article.
4.6 Blue Pencil. If any court of competent jurisdiction shall hold that
any restriction contained in this Article is unreasonable in duration or
geographic scope, such restriction shall be reduced to the extent necessary in
the opinion of such court to make it reasonable, the intention of the parties
being that the Partnership, the New Management Company, and their respective
Affiliates be given the broadest protection allowed by law or equity with
respect to such provision in connection with their acquisition of the Assets.
ARTICLE 5: MISCELLANEOUS
5.1 Headings. The headings contained in this Agreement are for
reference purposes only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any provision
hereof.
5.2 Pronouns and Plurals. Whenever required by the context, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
5.3 Costs of Litigation. The parties agree that the prevailing party in
any action brought with respect to or to enforce any right or remedy under this
Agreement shall be entitled to recover from the other party or parties all
reasonable costs and expenses of any nature whatsoever actually incurred by the
prevailing party in connection with such action, including, without limitation,
attorneys' fees (whether incurred before or at trial or on appeal) and
prejudgment interest.
5.4 Remedies Cumulative. The remedies provided in this Agreement shall
be cumulative and, except as otherwise expressly provided shall not preclude the
assertion or exercise of any other rights or remedies available by law, in
equity or otherwise.
5.5 Amendment and Modification. No amendment, modification or discharge
of, or supplement to, this Agreement shall be valid or binding unless set forth
in writing and duly executed and delivered by the party against whom enforcement
of the amendment, modification, or discharge is sought.
5.6 Notices. All notices, demands, requests, and other communications
which may be or are required to be given, served, or sent by any party to any
other party pursuant to this Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified U.S. mail, return receipt requested and postage prepaid, or
transmitted by facsimile, telegram, telecopy or telex, addressed as follows:
6
(i) If to the Partnership: ii) If to Branch:
c/o Regency Realty Corporation c/o Branch Properties, L.P.
121 W. Forsyth Street, Stuite 200 400 Colony Square, Suite 1600
Jacksonville, FL 32202 1201 Peachtree Street
Attn: Bruce M. Johnson Atlanta, GA 30361
Telephone: (904) 356-7000 Telephone: (404) 892-8900
Facsimile: (904) 634-3428 Facsimile: (404) 892-8898
or to such other person or address as a party shall furnish to the other parties
in writing.
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted, such communication shall be
deemed delivered the next business day after transmission (and sender shall bear
the burden of proof of delivery); if sent by overnight courier, such
communication shall be deemed delivered upon receipt; and if sent by U.S. mail,
such communication shall be deemed delivered as of the date of delivery
indicated on the receipt issued by the relevant postal service, or, if the
addressee fails or refuses to accept delivery, as of the date of such failure or
refusal. Any party to this Agreement may change its address for the purposes of
this Agreement by giving notice thereof in accordance with this Section .
5.7 Waivers. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any other
documents furnished in connection with or pursuant to this Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right,
power or privilege, or the exercise of any other right, power or privilege. No
waiver shall be valid against any party hereto unless made in writing and signed
by the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein.
5.8 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.
5.9 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claim or disputes relating thereto, shall be governed by
and construed and enforced in accordance with the laws and judicial decisions of
the State of Georgia, without regard to conflict of law principles and excluding
the choice of law rules thereof.
5.10 Assignment; Parties in Interest.
5.10.1 No party hereto shall assign its rights and/or
obligations under this Agreement, in whole or in part, whether by
operation of law or otherwise, without the prior written consent of the
other parties hereto; provided, that either the Partnership or
7
the New Management Company, without the consent of Branch, may assign
its rights and/or obligations under this Agreement, in whole or in
part, to Regency or any of its Affiliates.
5.10.2 Parties in Interest. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the respective
heirs, executors, administrators, successors, legal representatives and
permitted assigns of the parties hereto. Nothing contained herein shall
be deemed to confer upon any other person any right or remedy under or
by reason of this Agreement.
5.11 Severability. Every provision of this Agreement is intended to be
severable. If any provision or term of this Agreement, or the application of a
provision or term to any person or circumstance, shall be held invalid, illegal
or unenforceable, the validity, legality or enforceability of the other
provisions and terms hereof, or the application of such provision of such
provision or term to persons or circumstances other than those to which it is
held invalid, illegal or enforceable, shall not be affected thereby, and there
shall be deemed substituted for the provision or term at issue a valid, legal
and enforceable provision as similar as possible to the provision or term at
issue.
5.12 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT. THE PROVISIONS OF THIS SECTION SHALL SURVIVE ANY
TERMINATION OF THIS AGREEMENT.
5.13 Entire Agreement. This Agreement, including the exhibits and other
documents referred to herein or furnished pursuant hereto, constitutes the
entire understanding and agreement among the parties hereto with respect to the
transactions contemplated herein, and supersedes all prior oral or written
agreements, commitments or understandings with respect to the matters provided
for herein.
5.14 Excluded Properties and Entities. Notwithstanding anything to the
contrary contained herein, the subject matter of this Agreement and Branch's
covenants and obligations contained herein (other than Sections and hereof)
shall not be applicable to any of the Excluded Properties, nor shall Branch be
deemed to have breached any term or provision of this Agreement, including,
without limitation, Sections and hereof (even though such action otherwise would
have constituted such a breach), to the extent Branch takes any action or fails
to take any action, directly or through an Affiliate, in order to discharge the
fiduciary obligations of Branch or of any of Branch's Affiliates in the exercise
of the authority of any general partner of any of the entities identified on
Exhibit B, attached hereto and incorporated herein by this reference, as
reasonably and in good faith determined by Branch.
8
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement on the date first written above.
REGENCY RETAIL PARTNERSHIP, L.P. /s/ J. Alexander Branch III
J. ALEXANDER BRANCH III
By: Regency Atlanta, Inc.,
Its General Partner REGENCY REALTY GROUP II, INC.
By: /s/ Bruce M. Johnson By: /s/ Bruce M. Johnson
Its: Executive Vice President Its: Executive Vice President
\DOCS\SOFT\4364.3|03/05/97 10:18AM|JAXC18|GRD:dbi
9
EXHIBIT A
EXCLUDED PROPERTIES
EXHIBIT B
ENTITIES
March 7, 1997
Regency Realty Corporation
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
Re: Partnership Units
Ladies and Gentlemen:
The undersigned, Branch Properties, L.P., a Georgia limited partnership
("Branch"), Branch Realty, Inc., a Georgia corporation ("Branch Realty"), and
Regency Realty Corporation, a Florida corporation ("Regency"), have entered into
a Contribution Agreement and Plan of Reorganization, dated February 10, 1997
(the "Contribution Agreement"), regarding the formation of Regency Retail
Partnership, L.P., a Delaware limited partnership (the "Partnership"), to which
a wholly owned subsidiary of Regency is contributing cash and Branch is
contributing shopping center properties and other assets used in the real estate
business. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Contribution Agreement or the Partnership
Agreement. Pursuant to the terms of the Contribution Agreement, the undersigned
will receive (i) Reorganization Shares and (ii) Units which may be redeemed for
Shares of Common Stock pursuant to the terms of the Partnership Agreement.
In consideration of the foregoing, the undersigned hereby agrees that for
a period of one year from the First Closing Date, he will not, without the
express written consent of Regency, (i) offer for sale, sell, transfer, give,
pledge, assign, irrevocably hypothecate or otherwise dispose of, directly or
indirectly, any of the Units, or enter into any contract, option or other
agreement or understanding regarding the same (collectively, a "Transfer"), or
(ii) exercise a Redemption Right with respect to any Units. In addition, the
undersigned agrees that during any three-month period (a "Quarterly Period")
during the two years ending on the third anniversary date of the First Closing,
he will neither Transfer, nor exercise a Redemption Right with respect to, a
number of Units greater than the number arrived at by (a) multiplying 12.5%
times the Cumulative Elapsed Quarterly Periods (as defined below) times the Base
Amount (as defined below) and (b) subtracting the total number of Units and
Reorganization Shares issued to the undersigned at the First Closing and any
Subsequent Closing that the undersigned has Transferred. Base Amount equals the
sum of the total number of Units and Reorganization Shares issued to the
undersigned at the First Closing and any Subsequent Closing. Cumulative Elapsed
Quarterly Periods means the total number of Quarterly Periods that have elapsed
since the first anniversary of the First Closing, plus one.
Regency Realty Corporation
March 7, 1997
Page -2-
Nothing herein shall prevent the undersigned from making a Transfer (a
"Permitted Transfer") to a Person described in Section 11.3(a) of the
Partnership Agreement to whom a Limited Partner may transfer Units without the
consent of the General Partner, provided that such transferee agrees in writing
to be bound by the provisions of this Agreement. In order to effect any
Permitted Transfer, the undersigned must deliver to Regency a duly executed copy
of the instrument making such Permitted Transfer within 10 days after such
Permitted Transfer and such instrument must evidence the written acceptance by
the assignee of all of the terms and conditions of this Agreement and represent
that such assignment was made in accordance with all applicable laws and
regulations.
The foregoing agreements shall be binding on the undersigned and the
undersigned's respective heirs, personal representatives, successors and
permitted assigns.
Very truly yours,
/s/ J. Alexander Branch III
J. Alexander Branch III
\LYK\REGENCY\SCARLET\BRANCH.226|03/05/97 10:16AM|JAXC17|LYK:dkm
CONSENT AGREEMENT
THIS CONSENT AGREEMENT (the "Agreement") is made as of the 10th day of
February, 1997, by and between OPPORTUNITY CAPITAL PARTNERS II LIMITED
PARTNERSHIP, a Maryland limited partnership ("OCP"), and REGENCY REALTY
CORPORATION, a Florida corporation ("Regency"), under the following
circumstances:
A. Pursuant to the terms and conditions of that certain Contribution
Agreement and Plan of Reorganization, dated February 10, 1997 executed
contemporaneously herewith, by and among Branch Properties, L.P., a Georgia
limited partnership ("Branch"), Regency Realty Corporation, a Florida
corporation ("Regency") and Branch Realty, Inc. (the "Contribution Agreement"),
Branch has formed Regency Retail Partnership, L.P., a Delaware limited
partnership (the "Partnership"), to which a wholly owned subsidiary of Regency
will contribute cash and Branch will contribute shopping center properties and
other assets used in the real estate business. Except as set forth below,
capitalized terms not otherwise defined herein shall have the meanings set forth
in the Contribution Agreement.
B. OCP is the special limited partner of Branch and is receiving
Partnership Units pursuant to the Contribution Agreement that are convertible
into Shares.
C. To induce Regency to enter into the Contribution Agreement, OCP has
agreed, solely in its capacity as the special limited partner of Branch, to,
among other things, (i) approve and consent to the transactions contemplated by
the Contribution Agreement pursuant to the terms (including, without limitation,
Section 6.4) of that certain Amended and Restated Agreement of Limited
Partnership of Branch Properties, L.P. dated December 19, 1995, as amended (the
"Partnership Agreement") and (ii) approve and consent to the amendment of the
Partnership Agreement to effect the transactions contemplated by the
Contribution Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1: REPRESENTATIONS, WARRANTIES AND
COVENANTS OF REGENCY
Regency hereby represents, warrants and covenants to OCP as of the date of
this Agreement as follows:
1.1 Due Organization. Regency has been duly organized and is validly
existing and in good standing under the Laws of its jurisdiction of
organization, and is qualified to do business and is in good standing in all
jurisdictions where such qualification is necessary to carry on its business as
now conducted, except where failure to so qualify would not have an adverse
effect on the ability of Regency to perform its obligations under this
Agreement.
1.2 Due Authorization. Regency has full power and authority to enter into
this Agreement, and to consummate the transactions contemplated hereby, and the
Persons executing this Agreement have been duly authorized to do so on behalf of
Regency. The execution, delivery and performance by Regency of this Agreement
have been duly and validly approved by all necessary corporate or other
applicable action and no other actions or proceedings on the part of Regency are
necessary to authorize this Agreement and the transactions contemplated hereby.
Regency has duly and validly executed and delivered this Agreement. This
Agreement constitutes legal, valid and binding obligations of Regency,
enforceable against Regency in accordance with its respective terms.
1.3 Access to Information. At all times before the First Closing, Regency
shall provide OCP, and its respective agents, employees, consultants, and
representatives, with continuing and reasonable access to all files, books,
records and other materials in Regency's possession or control relating to the
business and operations of Regency and the right to examine, inspect and make
copies of such materials as appropriate. No investigation made by OCP shall
limit, qualify or modify any representations, warranties, covenants made by
Regency in the Contribution Agreement, irrespective of the knowledge and
information obtained as a result of any such investigation.
1.4 OCP Representation on Regency's Board of Directors. Regency's Board of
Directors has created a vacancy on its Board of Directors, subject to
consummation of the First Closing, and shall elect a nominee selected by OCP and
reasonably acceptable to Regency's Board of Directors, who shall not be an
officer or employee of OCP's Affiliate, LaSalle Advisors Limited Partnership
("OCP Nominee"), to fill the vacancy immediately following the First Closing.
Thereafter, so long as OCP continues to beneficially own, or has the right to
acquire through the exercise of Redemption Rights not less than the number of
Shares equal to the number of units issued to OCP at the First Closing (after
making appropriate adjustments for any stock splits, stock dividends and similar
events taking place after the First Closing), OCP shall have the right to
nominate an OCP Nominee to stand for election at any annual or special meeting
of shareholders at which directors are to be elected, or in connection with the
taking of written consent in lieu thereof, if no OCP Nominee will continue to
serve on Regency's Board of Directors without regard to the results of such
meeting or consent. In addition, Regency's Board of Directors agrees to elect an
OCP Nominee to fill any mid-term vacancy created by the resignation or other
early termination of the term of an OCP Nominee prior to its scheduled
expiration.
1.5 Waiver of Related Tenant Limit. Regency covenants to use reasonable
best efforts to obtain the waiver by its Board of Directors, as promptly as
practical after the date hereof, of the Related Tenant Limit under Article 5 of
Regency's Articles of Incorporation to permit OCP to receive Units pursuant to
the Contribution Agreement and redeem such Units pursuant to the Partnership
Agreement even though OPERF (as defined in Section 2.3) is a Related Tenant
Owner (as defined in Article 5.1 of Regency's Articles of Incorporation) with
respect to Bruno's as described in Exhibit A.
2
ARTICLE 2: REPRESENTATIONS, WARRANTIES AND
COVENANTS OF OCP
OCP hereby represents, warrants and covenants to Regency as of the date of
this Agreement as follows:
2.1 Due Organization. OCP has been duly organized and is validly existing
and in good standing under the Laws of its jurisdiction of organization, and is
qualified to do business and is in good standing in all jurisdictions where such
qualification is necessary to carry on its business as now conducted, except
where failure to so qualify would not have an adverse effect on the ability of
OCP to perform its obligations under this Agreement.
2.2 Due Authorization. OCP has full power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby, and the
Persons executing this Agreement have been duly authorized to do so on behalf of
OCP. The execution, delivery and performance by OCP of this Agreement have been
duly and validly approved by all necessary partnership or other applicable
action and no other actions or proceedings on the part of OCP are necessary to
authorize this Agreement and the transactions contemplated hereby. OCP has duly
and validly executed and delivered this Agreement. This Agreement constitutes
the legal, valid and binding obligation of OCP, enforceable against OCP in
accordance with its respective terms.
2.3 OPERF. The income of Oregon Public Employees' Retirement Fund
("OPERF"), the sole limited partner of OCP, is exempt from tax under Section 115
of the Code.
2.4 U.S. Person Status. The execution, delivery and performance by OCP of
the transactions contemplated by the Contribution Agreement and the exercise by
OCP of a Redemption Right or Redemption Rights with respect to all Units
issuable to it will not result in the Shares received by OCP as a result thereof
being directly or indirectly owned by any Non-U.S. Person (other than indirect
ownership by retired OPERF participants residing outside the United States, who,
to OCP's knowledge, have no more than a one percent interest in OCP).
2.5 Consent. OCP hereby consents to the execution, delivery and
performance by Branch of the Contribution Agreement and consents to amending the
Partnership Agreement to effectuate the transactions contemplated by the
Contribution Agreement; provided, however, that such consents shall be null and
void if the waiver referred to in Section 1.5 is not in effect as of the date of
the First Closing.
2.6 Redemption of Units. OCP hereby irrevocably elects, for the benefit of
the Non-U.S. Persons who will hold Units, to exercise a Redemption Right under
Section 8.6 of the Partnership Agreement effective as of the First Redemption
Date with respect to all Units received by OCP at the First Closing and
consequently shall be deemed also to have elected to exercise a Redemption Right
effective as of the date of the applicable Subsequent Closing with respect to
any and all Units issuable to OCP at any Subsequent Closing, provided, however,
in
3
either case that such election is effective only to the extent that the
Redemption Amount is paid in the form of the Share Amount, it being the intent
of OCP that such exercise of a Redemption Right shall not be effective if as a
result thereof OCP would receive the Cash Amount with respect to any such Units.
OCP hereby appoints J. Alexander Branch III, Richard H. Lee and Nicholas B.
Telesca, and each or either of them, each with full power of substitution, as
its attorney-in-fact for the purpose of executing a Notice of Redemption and
such other documents as the General Partner may reasonably require in connection
with such exercise by OCP of its Redemption Right, and OCP agrees to deposit no
later than 15 days prior to the First Redemption Date with such
attorneys-in-fact, or such other person as they may designate, any and all
certificates for Units to be redeemed pursuant to such exercise by OCP of its
Redemption Right, for the purpose of effectuating such redemption simultaneously
with the exercise of a Redemption Right by Persons who are Non-U.S. Persons (as
defined in the Partnership Agreement).
2.7 Standstill. During the Standstill Period, if any, and any Standstill
Extension Term, OCP will not, and neither OCP nor ABKB/LaSalle Securities
Limited ("ABKB/LaSalle") will cause OPERF to, directly or indirectly, purchase
or otherwise acquire one or more Shares (or options, rights or warrants or other
commitments to purchase and securities convertible into (or exchangeable or
redeemable for) one or more Shares) until such time as OCP and OPERF accounts
directed by OCP or ABKB/LaSalle ("OPERF Accounts") Beneficially Own a number of
Shares equal to or less than 9.8% of the outstanding shares of Common Stock, on
a fully diluted basis, and thereafter will not purchase or otherwise acquire one
or more Shares (or options, rights or warrants or other commitments to purchase)
and securities convertible into (or exchangeable or redeemable for) one or more
Shares as a result of which, after giving effect to such purchase or
acquisition, OCP and OPERF Accounts will Beneficially Own more than 9.8% of the
outstanding shares of Company Common Stock, on a fully diluted basis. All
capitalized terms not otherwise defined in the Contribution Agreement or in this
Agreement have the meanings ascribed to them in that certain Stockholders
Agreement by and among Regency, Security Capital, and The Regency Group, Inc.
dated as of July 10, 1996.
2.8 Matters Relating to OCP. Neither Branch Realty nor any other Branch
Affiliate is in default under the Branch Partnership Agreement such that OCP has
the right, nor to OCP's knowledge has any event or omission occurred which
through the passage of time or the giving of notice, or both, would entitle OCP
(i) to exercise any remedy with respect to the Assets or (ii) to avoid making
the capital contributions described in Section 10.1.5 of the Contribution
Agreement.
2.9 Ownership of Tenants. To the best of OCP's knowledge, except as set
forth on Exhibit A with respect to Bruno's, OCP does not own, directly or
indirectly, an interest in a tenant listed on Exhibit A, which interest is equal
to or greater than (i) 10% of the combined voting power of all classes of stock
of such tenant, (ii) 10% of the total number of shares in all classes of stock
of such tenant, or (iii) if such tenant is not a corporation, 10% of the assets
or net profits of such tenant. For purposes of this Section 2.9, the rules
prescribed by Section 318(a) of the Code for determining the ownership of stock,
as modified by Section 856(d)(5) of
4
the Code, shall apply in determining direct and indirect ownership of stock,
assets or net profits. Regency shall advise OCP within a reasonable period of
time before the First Closing of any material changes to Exhibit A (including
changes resulting from the proposed investments in neighborhood and community
shopping centers contemplated herein).
2.10 Information in Connection with Preserving REIT Status. From and after
the First Closing, OCP will provide Regency with such information as Regency may
reasonably request from time to time regarding OCP in order to allow Regency to
determine its status as a real estate investment trust under the Code, including
with respect to OCP's ownership of a tenant in a leasing transaction which
Regency proposes to enter into that could have a material effect on Regency's
income. Regency shall provide OCP, in accordance with the notice provisions
contained in Section 0 hereof, with an annual list of tenants in a form
substantially similar to Exhibit A attached hereto, asking OCP to verify that it
is not a Related Tenant Owner (as defined in Article 5 of Regency's Articles of
Incorporation) as to the tenants listed thereon, or shall make a comparable
request for information, and OCP shall use reasonable best efforts to reply
within 30 days after the receipt of the request.
ARTICLE 3: MISCELLANEOUS
3.1 Headings. The headings contained in this Agreement are for reference
purposes only and are in no way intended to describe, interpret, define or limit
the scope, extent or intent of this Agreement or any provision hereof.
3.2 Pronouns and Plurals. Whenever required by the context, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
3.3 Survival. The representations and warranties contained in this
Agreement and the provisions of this Agreement that contemplate performance
after the First Closing shall survive the First Closing and shall not be deemed
to be merged into or waived by the instruments of such First Closing.
3.4 Costs of Litigation. The parties agree that the prevailing party in
any action brought with respect to or to enforce any right or remedy under this
Agreement shall be entitled to recover from the other party or parties all
reasonable costs and expenses of any nature whatsoever incurred by the
prevailing party in connection with such action, including, without limitation,
attorneys' fees and prejudgment interest.
3.5 Additional Actions and Documents. Each party hereto hereby agrees to
take or cause to be taken such further actions, to execute, deliver and file or
cause to be executed, delivered and filed such further documents, and to obtain
such consents, as may be necessary or as may be reasonably requested on or after
the Closing Date in order to fully effectuate the purposes, terms and conditions
of this Agreement, including, without limitation, the transfer and assignment to
the Partnership of, and the vesting in the Partnership title to, the Assets.
5
3.6 Remedies Cumulative. The remedies provided in this Agreement shall be
cumulative and, except as otherwise expressly provided shall not preclude the
assertion or exercise of any other rights or remedies available by Law, in
equity or otherwise.
3.7 Entire Agreement; Amendment and Modification. This Agreement,
including the exhibits and other documents referred to herein or furnished
pursuant hereto, constitutes the entire understanding and agreement among the
parties hereto with respect to the transactions contemplated herein, and
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein. No amendment, modification or
discharge of, or supplement to, this Agreement shall be valid or binding unless
set forth in writing and duly executed and delivered by the party against whom
enforcement of the amendment, modification, or discharge is sought.
3.8 Notices. All notices, demands, requests, and other communications
which may be or are required to be given, served, or sent by any party to any
other party pursuant to this Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified U.S. mail, return receipt requested and postage prepaid, or
transmitted by facsimile, telegram, telecopy or telex, addressed as follows:
(i) If to OCP: (ii) If to Regency:
c/o LaSalle Advisors Limited 121 W. Forsyth St., Suite 200
100 E. Pratt St., 20th Fl. Jacksonville, Florida 32202
Baltimore, Maryland 21202 Telephone: (904) 356-7000
Telephone: (410) 347-0600 Facsimile: (904) 634-3428
Facsimile: (410) 528-8129 Attention: Martin E. Stein, Jr.,
Attention: Stanley J. Kraska, Jr. President
with copies to: with copies to:
Elizabeth Grieb, Esq. Charles E. Commander, Esq.
Piper & Marbury LLP Foley & Lardner
36 South Carles Street Green Leaf Building
Baltimore, Maryland 21201 200 Laura Street
Jacksonville, Florida 32202
If personally delivered, such communication shall be deemed delivered upon
actual receipt; if electronically transmitted pursuant to this paragraph, such
communication shall be deemed delivered the next business day after transmission
(and sender shall bear the burden of proof of delivery); if sent by overnight
courier pursuant to this paragraph, such communication shall be deemed delivered
upon receipt; and if sent by U.S. mail pursuant to this paragraph, such
communication shall be deemed delivered as of the date of delivery indicated on
the receipt issued by the relevant postal service, or, if the addressee fails or
refuses to accept delivery, as of the date of such failure or refusal. Any party
to this Agreement may change its address for the purposes of this Agreement by
giving notice thereof in accordance with this Section 0.
6
3.9 Waivers. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any other
documents furnished in connection with or pursuant to this Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right,
power or privilege, or the exercise of any other right, power or privilege. No
waiver shall be valid against any party hereto unless made in writing and signed
by the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein.
3.10 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.
3.11 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claim or disputes relating thereto, shall be governed by
and construed and enforced in accordance with the Laws and judicial decisions of
the State of Florida, without regard to conflict of Law principles, except for
actions affecting title to real property, in which case the Laws of the State in
which the real property is located shall apply.
3.12 Assignment; Parties in Interest. No party hereto shall assign its
rights and/or obligations under this Agreement, in whole or in part, whether by
operation of Law or otherwise, without the prior written consent of the other
parties hereto. This Agreement shall be binding upon, inure to the benefit of,
and be enforceable by the respective heirs, executors, administrators,
successors, legal representatives and permitted assigns of the parties hereto.
Nothing contained herein shall be deemed to confer upon any other Person any
right or remedy under or by reason of this Agreement.
3.13 No Third Party Beneficiaries. This Agreement is solely for the benefit
of the parties hereto, and no provision of this Agreement shall be deemed to
confer any third party benefit.
3.14 Severability. Every provision of this Agreement is intended to be
severable. If any provision or term of this Agreement, or the application of a
provision or term to any Person or circumstance, shall be held invalid, illegal
or unenforceable, the validity, legality or enforceability of the other
provisions and terms hereof, or the application of such provision or term to
Persons or circumstances other than those to which it is held invalid, illegal
or enforceable, shall not be affected thereby, and there shall be deemed
substituted for the provision or term at issue a valid, legal and enforceable
provision as similar as possible to the provision or term at issue.
3.15 Limitation of Liability. Any obligation or liability whatsoever of
Regency which may arise at any time under this Agreement or any obligation or
liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be satisfied, if at all,
out of Regency's assets only. No such obligation or liability shall be
7
personally binding upon, nor shall resort for the enforcement thereof be had to,
the property of any of its shareholders, trustees, officers, employees or
agents, regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.
3.16 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE CONTRIBUTION
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE PROVISIONS OF
THIS SECTION 0 SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT.
REGENCY REALTY CORPORATION
By: /s/ Martin E. Stein, Jr.
Martin E. Stein, Jr., President
OPPORTUNITY CAPITAL PARTNERS
II LIMITED PARTNERSHIP
By: /s/ Stanley J. Kraska, Jr.
Opportunity Capital Corporation,
General Partner
By: /s/ Stanley J. Kraska, Jr.
Stanley J. Kraska, Jr.
Vice President
ABKB/LASALLE SECURITIES
LIMITED, as to Sections 2.7 and Article
3 only
By: /s/ Stanley J. Kraska, Jr.
Name: Stanley J. Kraska, Jr.
Title: Vice President
8
EXHIBIT A
Tenant List
9
AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT
THIS AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT (the "Amendment"),
dated as of February 10, 1997, is made by and among Regency Realty Corporation,
a Florida corporation (the "Company"), Security Capital U.S. Realty, a
Luxembourg corporation, and Security Capital Holdings S.A., a Luxembourg
corporation (together with Security Capital U.S. Realty and others specified in
the Stockholders Agreement, "Investor"). Capitalized terms used and not defined
herein shall have the meanings ascribed to them in the Stockholders Agreement.
RECITALS:
WHEREAS, the parties hereto and The Regency Group, Inc. entered into
a Stockholders Agreement, dated as of July 10, 1996 (the "Stockholders
Agreement"); and
WHEREAS, simultaneously with the execution hereof, the Company has
entered into a Contribution Agreement and Plan of Reorganization (the
"Contribution Agreement"), of even date herewith, by and among Branch
Properties, L.P., Branch Realty, Inc. and the Company; and
WHEREAS, pursuant to Section 4.2 of the Stockholders Agreement, the
transactions contemplated by the Contribution Agreement would, if consummated,
trigger a participation right of Investor to purchase or subscribe for up to
2,743,545 shares of Company Common Stock with respect to the First Closing (as
such term is defined in the Contribution Agreement) and up to 156,876 shares of
Company Common Stock with respect to Class A Units (as such term is defined in
the Contribution Agreement) to be issued within six months of the First Closing,
in each case, at a purchase price of $22 1/8 per share; and
WHEREAS, the Company and Investor desire to modify Investor's
participation right which would be triggered by the transactions contemplated by
the Contribution Agreement in the manner set forth herein; and
WHEREAS, Section 5.1 of the Stockholders Agreement provides, subject
to certain limitations set forth therein, for the termination of the Standstill
Period upon, among other things, the acquisition by any person or Group other
than Investor, its Affiliates or any person or Group acting in concert with or
at the direction of Investor or its Affiliates of more than 9.8% of the voting
power of the outstanding shares of Voting Securities; and
WHEREAS, the transactions contemplated by the Contribution Agreement
provide for the issuance of up to approximately 2,027,848 Units (as such term is
defined in the Contribution Agreement) convertible into shares of Company Common
Stock on a one-for-one basis to Opportunity Capital Partners II Limited Partners
("OCP") (the "OCP Shares"), or approximately up to 10.91% of the voting power of
the outstanding shares of Voting Securities; and
WHEREAS, subject to the terms hereof, Investor agrees that OCP's
ownership of the OCP Shares shall not give rise to a termination of the
Standstill Period; and
WHEREAS, pursuant to, and in accordance with, Section 7.8 of the
Stockholders Agreement, the parties wish to amend the Stockholders Agreement on
the terms contained herein to reflect the foregoing and as otherwise set forth
below.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Amendment and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Special Purchase Right. (a) Investor hereby waives its
participation rights under Section 4.2 of the Stockholders Agreement with
respect to the initial issuance at or within six months of the First Closing (as
defined in the Contribution Agreement) by the Company of up to an aggregate of
3,771,622 shares of Company Common Stock, including securities exchangeable,
convertible or redeemable on a one-for-one basis into shares of Company Common
Stock (the latter being referred to herein as the "Convertible Securities"), and
in lieu thereof, Investor and the Company hereby agree that (i) Investor shall
have the right to purchase (the "Special Purchase Right"), and the Company shall
be obligated to offer Investor the right to purchase up to (x) the Initial
Number of Shares (as defined below) on or prior to August 31, 1997, and (y) the
Subsequent Number of Shares (as defined below), if such number is greater than
zero, after August 31, 1997, in each case at a purchase price of $22 1/8 per
share, and (ii) prior to such time as all of the Applicable Number of Shares (as
defined below) shall have been offered to Investor in accordance with the terms
hereof and Investor shall have either purchased or declined to purchase all of
such shares, the Company shall in no event issue or sell any capital stock other
than (A) to the Company or any of its Subsidiaries, (B) pursuant to options,
rights or warrants or other commitments or securities which were in effect or
outstanding on the date of the Stock Purchase Agreement or, in the case of the
Long-Term Omnibus Plan, the Dividend Reinvestment Plan, the Company's 401(k)
Plan and the Employee Stock Grant Plan, collectively, which are granted from
time to time in the ordinary course, (C) pursuant to the Contribution Agreement,
or (D) to the extent that an issuance of shares of capital stock solely to
Investor would cause the Company to cease being a "domestically-controlled" REIT
within the meaning of Section 897(h)(4)(B) of the Code
("domestically-controlled"), to persons other than Non-U.S. Persons (as such
term is defined in the Articles of Incorporation of the Company), provided that
such shares of capital stock issued or sold to such persons may only be issued
or sold simultaneously with an equal number of shares of capital stock issued or
sold to Investor. The "Initial Number of Shares" means the lesser of (x)
1,750,000 shares of Company Common Stock or (y) the maximum number of shares of
Company Common Stock, as reasonably determined by Investor, the purchase of
which by Investor will not result in the Company ceasing to be
domestically-controlled, but in no event less than 850,000 shares of Company
Common Stock, and the "Subsequent Number of Shares" means the excess, if any, of
1,050,000 shares of Company Common Stock over the Initial Number of Shares. The
"Applicable Number of Shares" shall be 1,750,000 on or prior to August 31, 1997
and 1,050,000 after August 31, 1997. Notwithstanding the above, nothing in this
Section 1 shall be deemed to alter, in any way, Investor's participation right
with respect to (x) the exchange, conversion or redemption of any Convertible
Securities, (y) any additional shares of Company Common Stock or other
securities issued pursuant to the Contribution Agreement, or (z) any other sale
or issuance of securities with respect to which Investor would otherwise have
participation rights. Notwithstanding the foregoing or any other contrary
agreement or understanding, the Company agrees that it will not issue any shares
of Company Common Stock or Convertible Securities to any partner of Roswell
Village, Ltd. (the partners of Roswell Village Ltd. being shown as having
approximately 103,400 shares of Common Stock or Convertible Securities on
Schedule 1 to that certain Waiver and Consent Agreement attached as Exhibit C to
the Partnership Agreement (as defined in the Contribution Agreement)) unless any
Company Common Stock to be issued to any such person (including upon the
redemption, conversion or exchange of Convertible Securities) will not (and by
the terms of any relevant Convertible Securities cannot) be issued until the
first anniversary of the First Closing (the "First Anniversary").
(b) The Special Purchase Right shall become exercisable from time to
time by Investor upon receipt by Investor of a written notice from the Company
(a "Special Purchase Notice"), which Special Purchase Notice shall set forth the
number of shares of Company Common Stock that the Company offers Investor at
such time, and the Company's intended use of the proceeds of such proposed
issuance; provided, however, that (i) the Company may only request Investor to
purchase shares of Company Common Stock in one or more installments of not less
than $15,000,000 per installment, (ii) the Company shall provide Investor a
Special Purchase Notice with respect to a sufficient number of shares such that
Investor maintains, by March 31, 1997 and at each quarter end thereafter,
ownership (within the meaning of Section 1296(c) of the Code) of at least 27.5%
by value of the stock of the Company, (iii) the Company shall provide Investor a
Special Purchase Notice with respect to all of the Initial Number of Shares on
or before August 31, 1997, and if and to the extent one or more Special Purchase
Notices shall not have been provided to Investor with respect to all of the
Initial Number of Shares prior to August 31, 1997, then a Special Purchase
Notice shall be deemed to have been provided on August 31, 1997 so that
Investor's Special Purchase Right shall have become exercisable on or before
such date with respect to all of the Initial Number of Shares, and (iv) the
Company shall provide Investor a Special Purchase Notice with respect to all of
the Subsequent Number of Shares, if any, on or before the First Anniversary, and
if and to the extent one or more Special Purchase Notices shall not have been
provided to Investor with respect to all of the Subsequent Number of Shares, if
any, prior to the First Anniversary, then a Special Purchase Notice shall be
deemed to have been provided on the day after the First Anniversary so that
Investor's Special Purchase Right shall have become exercisable on or before
such date with respect to all of the Subsequent Number of Shares, if any.
Subject to the Company's compliance with the immediately preceding sentence and
with clause (ii) of the first sentence of the foregoing paragraph (a), the
Company shall be under no obligation to provide Investor with any Special
Purchase Notice or to include any number of shares of Company Common Stock in
any Special Purchase Notice.
(c) At any time within 20 days after its receipt of a Special
Purchase Notice, Investor may, but shall have no obligation to, exercise the
Special Purchase Right with respect to up to the number of shares of Company
Common Stock offered by the Company in such Special Purchase Notice by informing
the Company in writing of such exercise (a "Special Exercise Notice"). Each
Special Exercise Notice shall state the number of shares of Company Common Stock
that Investor elects to purchase, which number shall be no greater than the
number of shares specified by the Company in the Special Purchase Notice, and
shall be irrevocable. The closing of the Special Purchase Right, or any part
thereof, shall be subject to the conditions set forth in Sections 7.2 and 7.3 of
the Stock Purchase Agreement. Investor may choose to exercise any Special
Purchase Right or any part thereof in its sole and absolute discretion.
2. Ownership by OCP and its Affiliates of greater than 9.8% of the
Voting Securities. Notwithstanding clause (ii) of Section 5.1(a), the Standstill
Period shall not terminate as a result of the acquisition of the OCP Shares by
OCP and for so long as the OCP Shares are held directly and beneficially by OCP
(it being understood and agreed that this waiver (x) shall cease to be effective
in the event of any direct or indirect transfer of any Beneficial Ownership of
any of the OCP Shares, if after giving effect to such transfer the Standstill
Period would otherwise have terminated other than as a result of the Beneficial
Ownership of the OCP Shares by OCP, and (y) shall not in any event apply to any
additional Voting Securities that might be Beneficially Owned by OCP or any
Affiliate or Group of which OCP is a member, other than 223,750 shares of Common
Stock held of record on the date hereof by the parties listed on a schedule
delivered to Security Capital by the Company on the date hereof entitled
"Holdings in Regency," dated 2/7/97, which 223,750 shares are beneficially owned
by ABKB/La Salle Securities Limited, including 32,300 shares of Common Stock
held of record by the Oregon Public Employees Retirement Fund ("OPERF"), the
limited partner of OCP (collectively, the "Existing Shares") and only for so
long as the Existing Shares are held continuously of record and beneficially by
such listed parties and ABKB/LaSalle Securities Limited, respectively, it being
further understood that in the event OCP or any such Affiliate or Group should
acquire Beneficial Ownership of any such additional Voting Securities (other
than Beneficial Ownership by LaSalle Advisors Limited Partnership of up to 4.9%
of Company Common Stock as a result of the conversion of Class B Common Stock
outstanding as of the date hereof (the "LaSalle Shares")), all Voting Securities
Beneficially Owned by OCP or any such Affiliate or Group (including the OCP
Shares, the Existing Shares and the LaSalle Shares) shall be considered
together, without regard to the provisions of this Amendment, for the purposes
of the Stockholders Agreement).
3. Other Branch-Related Matters. Regency hereby agrees to maintain,
at all times after the Shareholder Approval Date (as such term is defined in the
Partnership Agreement set forth on Exhibit A to the Contribution Agreement (the
"Partnership Agreement")), a general partnership interest equal and entitled to
at least 75% of the capital or profits interest in the Partnership (as defined
in the Contribution Agreement) and to manage the assets and employees of the
Partnership in accordance with the terms of the Partnership Agreement, as such
Partnership Agreement and Contribution Agreement exist, respectively, on the
date hereof. In addition, pursuant to Section 6.2 of the Stockholders Agreement,
the Company shall provide to Investor within 45 days after the close of each
fiscal quarter of the Company a quarterly report of the Company's and its
Subsidiaries' (including the Partnership) assets and income during the preceding
fiscal quarter sufficient in each case to enable Investor to monitor compliance
with the Corporate Action Covenants during such fiscal quarter.
4. Amendment of Partnership Agreement. Regency hereby agrees that it
will not agree to any amendment or modification to the Partnership Agreement,
and the Partnership Agreement shall not be amended, modified or supplemented, in
any such case, without the prior written consent of Security Capital.
5. No Effect on Consistent Terms. All terms of the Stockholders
Agreement not inconsistent with this Amendment shall remain in place and in full
force and effect and shall be unaffected by this Amendment, and shall continue
to apply to the Stockholders Agreement as amended hereby and to this amendment.
From and after the date hereof, each reference to the Stockholders Agreement in
any other instrument or document shall be deemed a reference to the Stockholders
Agreement as amended hereby, unless the context otherwise requires.
6. Headings. The headings contained in this Amendment are
inserted for convenience of reference only and shall not affect the
meaning or interpretation of this Amendment.
7. Counterparts. This Amendment 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 party hereto and delivered to the other party.
IN WITNESS WHEREOF, this Amendment has been signed by or on behalf
of each of the parties hereto as of the day first above written.
REGENCY REALTY CORPORATION
By:
Name: Martin E. Stein, Jr.
Title: President
SECURITY CAPITAL HOLDINGS S.A.
By:
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL U.S. REALTY
By:
Name: Paul E. Szurek
Title: Managing Director